Capital insurance vs ISK

Both ISK and KF use flat-rate tax based on the account's value, but they are legally different constructions. The ISK is a bank account with securities, while KF is an insurance where you own rights but not the securities directly.

The ISK is limited to stocks, funds and certain certificates listed on regulated markets in the EEA. KF has a broader asset spectrum — you can have options, commodities, crypto and foreign securities outside the EEA. This makes KF necessary for advanced strategies.

The flat-rate tax is calculated similarly for both: the government borrowing rate (November of the previous year) + 0,5 percentage units for ISK, + 0,75 for KF (the difference is KF's insurance fee). The tax is 30% of this capital base.

The ISK calculates the capital base as the average of the account's value at four quarterly dates (1 Jan, 1 April, 1 July, 1 October). KF uses a similar system but may have different calculation methods depending on the insurance provider.

An important difference: the ISK is personal and cannot have beneficiaries. KF is an insurance and can designate beneficiaries on death, which simplifies inheritance and avoids division of property. For families with larger assets, this is an advantage of KF.

For the ISK in 2024, the flat-rate tax is 1,51% of the capital base (30% of 5,08% where 5,08% = government borrowing rate 3,58% + 1,5 percentage units). A portfolio of 1 million kr gives 15 100 kr in tax. This is lower than 30% of a normally returning portfolio (7% return = 21 000 kr in K10 tax).

KF has a higher flat rate — about 1,77% for 2024 (30% of 5,91% where 5,91% = 3,58% + 2,33%). The difference of 0,26% annually seems small, but over 30 years with 1 million kr it becomes 78 000 kr in extra tax. KF is compensated by broader investment opportunities, however.

The break-even point is the turnover ratio. If you turn over the portfolio less than 1 time per year, the ISK wins. At 2+ turnovers per year, K10 (securities account) becomes better than both ISK and KF, because you can then deduct losses.

For those who simply buy and hold Swedish index funds, the ISK is enough. For those trading options or foreign small caps, KF or a securities account is required. The choice should be governed by strategy, not by tax alone.