Capital Gains Tax (CGT) is a tax on the profit realised from the sale of a non-inventory asset that was bought at a cost lower than the amount of the sale. Capital gains are most commonly realised from the sale of stocks, bonds, precious metals and property.
Not all countries implement a Capital Gains Tax and there are different rates of taxation for individuals and corporations throughout Europe. Taxes that are charged by the state usually concern the transactions, dividends and capital gains on the stock market.
The rate of Capital Gains Tax, exemptions, and qualification for payment in each European country is detailed below:
Austria generally taxes capital gains at 25%, except gains from the sale of share of foreign entities if the participation exceeds 10%. Shares are held of over one year.
Capital gains realised by a Belgian resident company are fully exempt from Corporate Income Tax, provided that the dividends on the share qualify for the participation exemption. For participation exemption on capital gains, the minimum participation test is not required. Unrealised capital gains on shares that are recognised in the financial statements are taxable. Roll-over relief is granted if the gain is booked in a separate reserve account on the balance sheet.
Other capital gains are taxed at the ordinary rate. If the total amount of sales is used for the purchase of depreciable fixed assets within three years, the taxation of the capital gains will be spread over the depreciable period of these assets.
There is no Capital Gains Tax on equity instruments in Bulgaria, as long as they are traded on regulated markets within the European Union.
Capital gains are taxed as income for companies and individuals in the Czech Republic. The Czech income tax rate for an individual’s income is a flat rate of 15%. Capital gains from the sale of shares by a company owning 10% or more are entitled to participation exemption under certain terms.
Share dividends and realised capital gains on shares, and gains up to DKK 48,300 are charged at 28% to individuals, and at 42% for gains above that. The carrying forward of realised losses on shares is permitted.
Individuals’ interest income from bank deposits and bonds realised gains on property and other capital gains is taxed by up to 59%. There are some exemptions however, such as on the sale of a principal private residence or on gains from selling bonds. Companies are taxed at 25% and share dividends are taxed at 28%.
There is no separate Capital Gains Tax in Estonia. For residents all capital gains are taxed the same as regular income, presently 21%. Residents with investment accounts can realise capital gains on some classes of assets tax free, although this only applies until the funds are withdrawn from the investment account. For resident legal persons (which includes partnerships), tax is payable on the payment of dividend, from capital and payments not related to business, but not for realising capital gains.
The Capital Gains Tax in Finland is 30% on realised capital income and 32% if the capital exceeds €50,000. This has increased by 2% and 4% respectively since 2011. The carrying forward of realised losses is permitted for up to three years.
For residents Capital Gains Tax on the sale of shares and bonds is a flat 34.5%. This includes 15.5% of social security taxes and 19% taxes. The gain realised on the sale of a principal residence is not taxable. The sale of other real estate held for at least 30 years is not taxable but is subject to 12.1% social security taxes.
Germany has introduced a very strict Capital Gains Tax called Abgeltungsteuer which applies to shares, funds, and certificates. The German Capital Gains Tax rate is 28%.
Financial instruments that have been bought after 31 December 2008 only qualify.
Real estate continues to be exempt from Capital Gains Tax in Germany if it has been held for more than ten years.
There is just one flat tax rate of 16% on capital income in Hungary, which includes selling stocks, bonds, mutual funds, shares and also interests from bank deposits.
There is a 30% tax on capital gains in Ireland. However, there are several exclusions and deductions available, such as agricultural land, primary residence, and transfers between spouses. Every Irish resident has an exempt band of €1,270 per year. The tax rate is 23% on certain investment policies and this rises to 40% for certain offshore gains when they are not declared in time.
Capital Gains Tax of Corporate Income Tax is 27.5% on gains from disposals of participations and extraordinary capital gains. For individuals, a capital gain incurs a 20% tax.
In Latvia capital gains are taxed at a rate of 15% and dividends are taxed at 10%.
Capital Gains Tax from the disposal of securities and from sale of real estate is 15%.
There is no Capital Gains Tax in the Netherlands but a theoretical capital yield of 4% is taxed at a rate of 30%.
There is one flat tax rate of 19% on capital income in Poland which includes selling stocks, bonds, mutual funds, and shares.
There is a Capital Gains Tax on the sale of homes and property in Portugal, as well as any capital gain arising as taxable income. For non-residents, the rate of Capital Gains Tax is 25%.
The Portuguese government set up a large number of tax incentives to promote equity capital. For residents all capital gains of stock over €500 is taxable by 20%. Investment funds, banks and corporations are exempt from Capital Gains Tax over stock.
In Romania there is a 16% flat Capital Gains Tax.
In Spain the first €6,000 of a capital gain is taxed at 21%, gains from €6,000 to €24,000 will be taxed at 25% and above this at 27%. For companies capital gains are taxed like any other income gain at 25% to 30% depending on the size of the company.
Capital Gains Tax in Sweden is 30% on realised capital income.
UK residents are subject to a rate of 18% Capital Gains Tax. Exceptions apply to principal private residences, and holdings in ISAs or gilts. Investments in some start up enterprises are also exempt from Capital Gains Tax and entrepreneurs’ relief allows a lower rate of 10% for anyone involved for a year with a company and has 5% or more shareholding.
Individuals have an annual CGT allowance and gains below this allowance are exempt from tax. Capital losses can be set against capital gains in other holdings before taxation. All individuals are exempt from tax up to £10,600 (2011/12 tax year).
Companies are subject to corporation tax on their chargeable gains. Companies can claim an indexation allowance to offset the effect of inflation. A corporate substantial shareholdings exemption came into being in 2002 for holdings of 10% or more of the share in another company.