Capital Gains Tax (CGT) is applied to profit you make on the sale of assets. Depending on circumstances, you may have to pay tax on profits you make on selling personal possessions including investments, property that isn't your main home, jewellery, or art.
As an example, if you purchase a share for €1,000 and sell it for €1,200, you may have to pay CGT on the €200 gain.
Although you'd only have to pay CGT after selling an asset, knowing how much you may be liable for can help you plan ahead. So, read on to find out how CGT rates compare in Europe.
A number of European countries don’t tax capital gains
Nine European countries that don't levy CGT are Belgium, the Czech Republic, Georgia, Luxembourg, Malta, Slovakia, Slovenia, Switzerland, and Turkey.
The effects of having to pay CGT could significantly affect your net return on investments. Yet, if you live in one of these zero-CGT countries, you could benefit from keeping more of your profits – allowing you to either reinvest for greater potential gains or create another source of income.
You may benefit from living in a country with a low Capital Gains Tax rate
The average CGT rate charged across Europe is 17.9%. Across EU Member States, the average is 18.6%. However, there are a handful of countries that charge significantly less than this:
- Croatia: 12%
- Bulgaria: 10% – Capital gains are subject to flat Personal Income Tax (PIT) rate at 10%.
- Romania: 10%
- Moldova: 6% – Capital gains are taxed at 50% of the PIT rate.
European countries charging the highest rates of Capital Gains Tax
According to the 2024 Capital Gains Tax report from the Tax Foundation, Denmark has the highest rate of CGT at 42%. Norway follows close behind at 37.8%, Finland and France are next in line, charging 34% each, and Ireland takes fifth position, at 33%.
You may be wondering why Denmark and Norway have such high rates of CGT. Although they both apply some adjustments, both countries tie tax on capital gains to the personal Income Tax rates. The rate of CGT may be higher to try and dissuade people from attempting to disguise working income as capital income.
Taxing capital gains could create an unhelpful bias against saving
One problem with taxing capital gains is that, because it adds another layer of taxation to people's net income, it could create a bias against saving.
This is why countries like Belgium – the OECD country with the highest level of Income Tax – doesn't charge CGT on savings or investment income.
Finland and France both have relatively high tax on capital gains too, but, as with so many taxes, the devil is in the detail.
Finland taxes capital and earned income separately
Finland taxes capital income under €30,000 at a 30% rate. Anything above €30,000 is taxed at 34%.
“Capital income” refers to income such as entrepreneurial income, or activities, profit-sharing and capital gains, and dividend income. Rental income, income from extractable land resources, and specific types of interest income are also included.
France applies a flat 30% rate on capital gains, though high-income earners pay an additional 4%
When it comes to investments, if you’re a lower income taxpayer in France, you could opt to have your capital gains taxed at the progressive Income Tax rates. In this case, you may receive a rebate for the amount of time you have held the investment, but this rule only applies to shares or securities purchased before 1 January 2018.
If you have shares that you’ve held for between two and eight years, you could apply for a 50% rebate. For shares you’ve held for more than eight years, the potential rebate rises to 65%.
Remember, it’s typically advised to invest for the long term. That’s because the longer you invest, the more likely it is that you’ll make a profit. In an ideal world, you should only invest if you're comfortable to tie your money up for five years or more.
As a result, if you live in France, and sell shares you’ve held over the long term, you may end up paying less CGT than the headline figure suggests.
Top tips to reduce a potential charge on capital gains
While you may be liable to pay CGT, you might be able to mitigate the amount you have to pay. The options available to you will depend on your circumstances, and where you are living, but you could, potentially:
- Make the most of any annual CGT exemptions that may apply
- Use any CGT losses to offset the amount of CGT owed
- Plan as a couple and transfer assets to your spouse or civil partner
- Invest in an ISA (if you live in the UK)
- Contribute to your pension
- Gift shares to charity
- Talk to a financial planner.
Get in touch
CGT can be complicated. And, because tax rules vary from country to country, it’s difficult for anyone to be an expert in all of them. The good news is that Alexander Peter have several experts that will be able to help you, regardless of where you live.
We will make sure you’re maximising all your tax reliefs, allowances, and exemptions, explain your options, and help you understand the best course of action for your individual circumstances.
Whether you want to understand more about how CGT may affect you, or simply want to ensure that your financial plan remains as tax-efficient as possible, we can help.
Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
