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Comparing Capital Gains Tax Regimes in Popular European Expat Destinations

Capital gains tax can be a significant consideration for any foreign national who may need to assess their potential tax liabilities against gains made on sales of property, investment shares, stocks and bonds and other capital assets – from artwork to fine wines, antiques to boats.

The  taxation specialists at Chase Buchanan Wealth Management look at several countries within the EU that attract the highest proportions of British expatriates and analyses the capital gains tax schemes in each.

Understanding the Relevance of Capital Gains Tax

Many expats appreciate why a destination with a low-tax regime or appealing tax-friendly regulations for foreign nationals may make a big difference to their expendable income, long-term tax obligations, and overall wealth.

However, capital gains tax tends to be overlooked. Foreign nationals with an investment portfolio, high-value assets or several properties may be exposed to substantial taxation against profits made when they sell, transfer or exchange these assets.

Taking the time to evaluate your future tax exposure and include this in your relocation and financial planning is essential to your financial future.

Spanish Capital Gains Tax

  •   Standard capital gains tax rate: 26% for tax residents, 19% for non-resident

Spain offers a capital gains exemption for taxpayers over 65, where the gain is deposited into a life annuity product within six months. The exemption applies to gains valued up to €240,000 – any difference between the gain realised and reinvested will remain taxable.

Property sales are exempt, provided the property is the person’s main residential home, and they reinvest the gain into a new property within two years.

Non-residents who sell a Spanish property must apply a 3% withholding tax, calculated against the value of the sale. That percentage is then transferred to the local tax authority and is treated as an advance remittance of capital gains.

Capital Gains Tax in Cyprus

  •   Standard capital gains tax rate: 20%

Cyprus applies tax to gains that arise against the sale of a property where the sale is not otherwise exposed to income tax. Other asset disposals, such as the sale of company shares where the business owns Cypriot property, are subject to a 20% tax charge.

Some expenses linked to the sale or transfer of property can be deducted from the gain, including loan interest, legal fees and transfer charges, subject to conditions.

The Cypriot tax office provides a lifetime exemption allowance for individuals, which taxpayers can deduct before calculating capital gains tax. Currently, those allowances are €85,430 for the sale of private residences, €25,620 for agricultural land sales, and €17,086 for other asset disposals.

Portuguese Capital Gains Tax Charges

  •   Standard capital gains tax rate: 28%

Portugal has a flat rate capital gains tax but only 50% of the profit on some disposals is taxable, such as the sale of shares held in small companies that aren’t listed on the stock exchange. If a taxpayer has gains and losses in the same year, these are combined wherever the assets were owned for less than one year or where the taxpayer has a total income of €81,199 or above.

Non-residents only pay capital gains tax against 50% of the profit from selling real estate assets. However, the gain is taxed based on the marginal tax rates between 13.25% and 48%. When calculating the tax bracket a non-resident falls into, the Portuguese tax office will consider all worldwide income – even if some income does not arise and is not taxed within Portugal.

Tax residents can claim some exemptions, including where the gain arises from the sale of a primary residence. Capital gains tax is waived if the gain is reinvested in another home anywhere within Portugal or the EU within 24 months before or 36 months after the sale.

Paying Capital Gains Tax in Belgium

  •   Standard capital gains tax rate: 0%

Belgium is a good example of a tax regime where most capital gains are not subject to any taxation. Individuals rarely pay capital gains, provided profits are generated from their private estate. The only typical scenario where a person may need to pay capital gains is if they sell shares in a Belgian company to a non-EEA buyer.

However, Belgium does have a stock exchange tax, which applies to all sales, purchases and redemptions of stocks or bonds, with a tax of between 0.12% and 1.32%.

The French Capital Gains Tax System

  •   Standard capital gains tax rate: 30% plus 4% uplift for higher earners

France’s capital gains tax system is complex. Normally, capital gains related to the sale of securities are taxed at 30%, split between 12.8% income tax and 17.2% social charges – plus a supplementary 4% where applicable.

Lower-income taxpayers can decide whether to pay tax based on flat-rate capital gains or the progressive income tax bands. If they opt for the latter, they can claim a rebate based on the time the shares were held, based on 50% for holdings of two to eight years and 65% for longer periods.

Capital gains tax charges linked to property sales can vary, although sales of primary residences are not usually exposed to a tax charge. Non-residents who sell a French property can claim an exemption of up to €150,000 if they were previously a tax resident for two years or more and sell the home within ten years of their departure.

Real estate capital gains over €50,000 may attract an additional tax surcharge of between 2% and 6%, and sellers are obligated to consult a notary or legal professional who must declare the gain made, withhold the tax payable and manage the payment to the tax authorities.

Calculating Capital Gains Tax in Malta

  •   Standard capital gains tax rate: Based on marginal tax rate

Our final destination is Malta, where capital gains tax applies to the sales of shares, securities, properties, businesses, intellectual property and other assets. Some gains are exempt, such as share transfers where the shares are listed in stock exchanges approved by the Maltese Commissioner for Tax and Customs. Investments with a fixed return rate do not attract a tax charge.

Malta does not have a standard capital gains tax; instead, it refers to the taxpayers’ marginal tax rate. Property sales are exempt up to €750,000 provided the property was built at least 20 years before the sale, is within an Urban Conservation Area, has been vacant for seven years, and remains empty at the transfer date.

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