If you invest your money and intend to sell your investments at one point, you might be confronted with capital gains tax. In order to optimize your tax liability we’ll have a look at countries with no capital gain tax.
Essential Considerations about Countries with No Capital Gain Tax
Before diving into the countries with no capital gain tax, we need to discuss some essential considerations.
What is a Capital Gain?
From a tax perspective, we divide income into different categories.
The most common one is professional income like wages or profit from a trade.
Another category is rental income.
Then there is also investment income. Investment income, we mostly divide up in two more subcategories with recurrent income (e.g. dividends) on the one hand and one off income (capital gains) on the other hand.
Many countries also apply different tax rates to these different categories of income. Therefore, it’s interesting to distinguish between them.
In this article, we’re focusing on capital gains. You make a capital gain when you sell an asset (e.g. shares) for a higher value than you bought it.
However, in some cases, the line between a capital gain and a professional income can be thin. This is the case if you trade very actively or when it is your main source of income.
The opposite of a capital gain is a capital loss. By now, you’ll know we speak about a capital loss when you sell an asset for less than you bought it. Some countries might allow you to offset capital losses against capital gains for tax purposes while others might not.
Furthermore, some countries can apply different rates depending on whether or not it’s a long term capital gain. In the US, for example, lower rates apply if you held the assets longer than one year.
In Portugal a similar rule applies to capital gains on cryptocurrencies. If you hold the cryptos less than one year the tax rate is 28%. However, if you hold it longer than one year, the crypto gain is tax free. You can check out my dedicated article if you want to learn more about crypto tax free countries.
The Importance of Tax Residency for Taxes on Capital Gains
You need to understand that you have to pay your capital gains tax in the country where you are a tax resident. Where your assets are located or held thus have no importance.
This is a misconception I notice many nomads make mistakes about.
Let’s say you are a tax resident of Portugal but you invest in American stocks, you’ll have to pay your capital gains tax or CGT in Portugal and not in the US.
There is one exception to this rule though. If you own real estate in a certain country but you are a tax resident in another country, it will still be the first country who will tax you on this.
Nevertheless, depending on the provisions of the applicable double tax treaty, also your country of tax residency might ask some taxes from you.
Accordingly, we need to make a distinction between movable and immovable assets. You will pay your capital gain tax on your movable assets in the country where you are a tax resident.
For immovable assets, you in principle pay in the country where the asset is situated but also some tax liability in your home country could come up.
Capital Gains Tax for Individuals and Companies
Capital gains taxes can apply both to individuals and to companies. However, each jhave their own rules.
If an individual receives income, personal income tax rules will apply to this income. For companies, corporate tax rules will apply.
So, it’s important to understand that the tax treatment of a capital gain can differ a lot depending on whether it was made by an individual or by a company.
In this article, we mainly focus on capital gains for private individuals who are subject to personal income tax.
Best Countries with No Capital Gain Tax
Let’s now dive into the list of countries with no capital gain tax.
We will focus on the countries who don’t have a CGT for movable assets. The reason is that these are due in your country of tax residency.
Accordingly, this allows you to plan for the tax consequences. This is less the case for capital gains on immovable property for reasons mentioned earlier.
Belgium
The first country of the list might be a surprise. Belgium is generally a high tax country.
However, the one thing that they have going for them is that they don’t have a capital gains tax.
The condition is that you should not be trading professionally and your trading can’t be highly speculative.
Yet, if you’re planning to move to Belgium for this reason you better watch out. For a few year now, different political parties have proposed to introduce a capital gains tax.
Bulgaria
Bulgaria also offers the possibility to receive a capital gain tax free.
However, this is more of an exemption as the standard rule is that capital gains are subject to the normal tax rate of 10%.
Yet, Bulgaria provides for an exemption for capital gains on financial assets which are traded on a EU/EEA stock exchange.
Therefore, you can basically exempt most of your capital gains from taxes with the right planning. This is even the case if you want to invest in financial assets from outside the EU. You just need to find the right funds or trackers who invest in the underlying region you want to invest in.
You can, for example, invest in a tracker registered on the Irish Stock Exchange which invests in US stocks.
You can read my article about becoming a tax resident in Bulgaria to learn more about there tax rates.
Croatia
Capital assets can be exempt from CGT if you held them for at least two years.
Cyprus
Cyprus only applies a CGT if you sell shares of companies that (indirectly) invest in real estate in Cyprus.
The applicable rate is 20%.
However, there is even an exemption if the shares are traded on a recognized stock exchange.
You can read more about tax residency in Cyprus in my dedicated article.
Czech Republic
The Czech Republic provides for an exemption of tax on capital gains if you held the securities for more than three years.
Furthermore, the Czech Republic offers tax incentives for freelancers.
Hong Kong
Hong Kong does not have a capital gains tax.
Therefore, the situation is rather straightforward. Any capital gain will be exempt from personal income tax.
Luxembourg
Capital gains on financial assets in Luxembourg are free from taxes on two conditions.
First, you can’t own more than 10% of the company.
Second, you need to hold the assets for more than six months. If held less than six months, the progressive tax rates apply.
Malta
Apart from tax residency, Malta applies the concept of domicile. This is important because taxpayers who also have their domicile in Malta generally have to pay higher taxes.
Most people moving to Malta later in life won’t (immediately) qualify as having their domicile there. Yet, if you want to learn more about the concept you can read my guide on tax residency in Malta.
Accordingly, you will qualify as an ordinarily tax resident. Hence, you’ll only pay taxes on local source income and income remitted back into the country.
If you keep your investments outside of Malta, they will not be subject to capital gains tax in Malta.
In many cases, the exemption can even still apply if you bring the money back into the country afterwards.
Monaco
Monaco doesn’t levy any personal income tax. Therefore, you also don’t have to pay any tax on capital gains.
Please note that if you would be a French citizen, the above doesn’t apply because of the bilateral agreement between Monaco and France.
New Zealand
Just like Belgium, New Zealand is a strange country to have in this list. In general, taxes in New Zealand rather high.
However, it only levies capital gains tax on immovable property. Hence, movable property is exempted from CGT.
Qatar
Qatar is one of those countries in the Middle East which only levy very limited taxes.
This also means that they don’t levy any capital gains tax on financial assets as long as you’re not considered a trader.
Singapore
Singapore applies a territorial tax regime.
Accordingly, any income brought into the country from abroad is normally exempt from income tax.
Furthermore, Singapore also exempts capital gains from taxes unless you are trading professionally.
Slovakia
You don’t pay CGT on securities traded on regulated markets on the condition you held the securities for at least one year.
Switzerland
Switzerland attracts many wealthy individuals.
One of the reasons for this is that they don’t levy any capital gains tax on movable assets made by private investors.
Thailand
Just like Singapore, Thailand applies a territorial tax regime. However, in Thailand you’ll have to pay tax on any income you bring into the country.
You can find out what this exactly means in my guide on tax residency in Thailand.
Moreover, capital gains on shares listed on the Stock Exchange of Thailand are also exempt from personal income tax in Thailand.
United Arab Emirates
The United Arab Emirates or UAE don’t levy any personal income tax. Therefore, there is also no capital gains tax.
So, unlike with some other countries, there are not complicated conditions linked to this.
FAQ on Capital Gain Tax and Countries
Let’s have a look at some frequently asked questions about countries with no capital gain tax.
Which European Countries do Not Have Capital Gains Tax?
Hereby a list of European countries which do not have capital gains tax:
- Belgium
- Bulgaria
- Croatia
- Cyprus
- Czech Republic
- Luxembourg
- Malta
- Monaco
- Slovakia
- Switzerland
Some countries provide an exemption without any questions asked while in other countries you need to meet certain requirements.
You can find the details in the previous sections of the article.
Where is the Best Place to Live to Avoid Capital Gains Tax?
The best place to live to avoid capital gains tax are countries with no capital gains. Once you had a look at the list we shared above, you can determine which country meets your personal requirements.
Monaco or Switzerland do not levy capital gains tax but these countries are not attainable for everyone. So, you need to check which country suits you. Not only from a financial point of view but also which countries can offer you a good quality of life.
Does Dubai have Capital Gains Tax?
Dubai is one of the emirates of the United Arab Emirates. This was one of the countries we mentioned in our list of countries with no capital gain tax.
The UAE simply doesn’t have a personal income tax. Thus, also no capital gains tax applies to private investors.
What are Unrealized Gains?
Unrealized gains are also called paper gains. On paper your asset is worth more than for what you bought it.
However, this could change again at anytime. The more volatile the asset class, the quicker this could change.
So, as long as you keep the actual asset it remains an unrealized gain. From the point in time you actually decide to sell the asset, you will realize the gain. Only then will you know what your actual gain is.
Is Unrealized Profit Taxable?
Unrealized profit is normally not taxable. You will only pay taxes on gains you actually realize and unrealized gains should remain untaxed.
However, some countries might have specific exemptions to this baseline rule. The most common is probably that some countries apply an exit tax.
This means that if you end being a tax resident of the country, you’ll have also have to pay capital gains tax on the unrealized gains you made while being a tax resident there.
Let Me Help You Save Money On Taxes
If your main source of income comes from investing, looking for a country without a capital gains tax might be worth it. However, in most cases you’ll have to take many elements into account to optimize your tax setup.
If you want to make sure you have the optimal setup for your particular circumstances, you can reach out to discuss your situation.
Over the years I have assisted hundreds of nomads with optimizing their tax setup so they don’t need to worry about it anymore and they can start building financial wealth.
