- Capital Gains Tax Variability: Capital gains taxes in Europe vary significantly, with Denmark having the highest rate at 42%, while several countries, including Belgium, Cyprus, and Luxembourg, impose no tax on long-held shares. The average capital gains tax across the covered European countries is 16.4%, compared to an average of 25.4% in the US.
- Impact on Investment Behavior: High capital gains tax rates discourage saving and investment by biasing individuals towards immediate consumption, leading to lower national income and reduced asset turnover due to the realization or lock-in effect, where investors hold onto assets to avoid taxes.
- Recent Changes and Trends: In 2025, various European countries have adjusted their capital gains tax rates, with notable increases in Latvia, Spain, and the UK, while Portugal introduced a long-term capital gains tax exemption. Estonia is set to raise its capital gains tax rate in 2026 due to a new defense tax.
Source 2025 Capital Gains Tax Rates in Europe | Tax Foundation Europe
