EU Tax Advantaged Accounts (401k for Europeans & Pension Investing)

Unlike the US with its IRA/401k, Europe’s tax-advantaged accounts differ per country.

As such, we’ll need to explore the tax advantaged accounts in every country separately to understand their unique benefits, rules, and limitations.

This post is an extension to my Investment Taxes in ALL EU Countries and focuses on tax optimization for investments:

ASK (Aktiesparekonto) – Denmark

• 17% on capital gains tax rate (vs. 27/42% in normal accounts)
• Flexible withdrawals
• Around DKK166k per year (~€22k) – carries over with gains, so can be lower in subsequent years
• No percentage-based taxes (wealth tax)

In general, index investors residing in Denmark should make use of it.

Investeerimiskonto – Estonia

• 20% capital gains tax (levied when cash is withdrawn not when selling)
• No contribution limits
• No wealth tax (percentage based tax)

Great for long-term index investors in Estonia.

OST (Osakesäästötili) – Finland

• 0% capital gains tax if held >=3 years (otherwise the standard rates of 30-34%)
• Annual deposit limit of €50k
• Dividends can be reinvested automatically tax free
• No percentage-based taxation

As usual, Finish index investors should make use of it.

PEA (Plan d’Épargne en Actions) – France

• 0% capital gains tax if held >=5 years (vs. ~30% in general)
• 0% dividend tax if held >=5 years (vs. ~30% in general)
• Max €150k total deposits per life, no annual limits besides that
• No wealth tax (IFI) on assets in this account

Investors in France should consider a PEA account.

TBSZ (Kötvényes Befektetési Számla) – Hungary

• 0% tax rate if held >=5 years, 10% if held >=3 years (vs. 15% capital gains tax in general), levied when withdrawing from the account, not when trading
• 0% dividend tax from Hungarian companies
• No yearly contribution limits

Excellent opportunity for Hungarian residents.

PIR (Piani Individuali di Risparmio) – Italy

• 0% capital gains tax after 5 years (vs. ~26% in general)
• 0% inheritance tax on assets in PIR accounts
• Restrictions on asset allocation (need to be 70% EU based and some more rules)
• Lifetime limit of €200k

Good for Italians to keep their EU exposure in this account.

Ieguldījumu Konts – Latvia

• 0% capital gains tax if held >=3 years (vs. 20% in general)
• 0% dividend tax if automatically reinvested (vs. 20% in general)
• No contribution limits

Amazing for ETF investors residing in Latvia.

Investicinė Sąskaita – Lithuania

• 0% capital gains tax if held >=1 year (vs. 15% in general)
• 0% dividend tax if reinvested within 3 months (vs. 15% in general)
• No contribution limits
• Allows trading more than just UCITS ETFs (unlike most other accounts)

Great choice for Lithuanian investors.

ASK (Aksjesparekonto) – Norway

• 17% on capital gains and dividends (vs. 22% in general)
• Not time bound
• Annual contribution limit of NOK40k (~€3.5k)

There’s no reason to not use it, but €3,500 per year is really low.

ISK (Investeringssparkonto) – Sweden

• Flat ~0.37% tax on the whole portfolio (the rate is based on the yield of government bonds)
• 0% capital gains and dividend taxes (vs. ~30% in general)
• Deposit and withdraw freely, no contribution limits

Swedes need to run the numbers whether 0.xx% wealth tax is better than eventual 30% capital gains tax but 0% ongoing expenses.

Great for more active traders.

ISA (Individual Savings Account) – United Kingdom

• 0% capital gains tax (vs. 10-20% in general)
• 0% dividend tax (vs. ~9-39% in general)
• Maximum contribution of £20k per year
• Flexible, penalty-free withdrawals

A must use for UK residents.

Bonus: Third Pillar Pension

Almost all European countries have a 3 pillar pension system.

The first pillar is the government pension, the second pillar is employer-related pension, and the third pillar is “private” pension.

Investors can fund this account, usually with some yearly limit, and trade tax free within it. Also, there are tax deductions based on the contributed amount. But withdrawals before pension age incur fees and tax penalties.

The third pillar pension accounts have different names per countries, but their benefits and restrictions are very similar to each other.

I bundled them all together in this bonus section so I don’t write the same thing (with minor differences) for each country.

Afterword

Hope I gave you sufficient insights into your possibilities for tax-advantaged investing. In most cases, if you’re a long-term index investor, it’s probably worth it to have one.

In case you’re not tied to your current country of residence, check if you can keep the account open after you move. Some may have financial consequences of closing it.

Remember: use this as a starting point but verify the information yourself.

The numbers and rules may change year over year, so consider this general overview without any guarantees for correctness or completeness.

Until next time, don’t forget to subscribe below.

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