How to Cash Out Millions in the EU Tax Free

--- by D. Petkovski ---

EU has a reputation of imposing oppressive tax rates.

While this is true in general, investors can make use of the different treatments of investment profits to significantly lower or even fully avoid paying capital gains taxes.

If you’ve made significant profits in the past years, this post will save you a lot of money.

Table of Contents

Step by Step Guide: Avoid Capital Gains Tax in EU

You were smart. You accumulated during the bear market and now you’re sitting on a couple of millions of unrealized gains.

But if you sell, your country might hit you with a 30%+ capital gains tax rate on the profits…

This is how you can minimize your taxes legally:

1) Pick a Country With 0% Capital Gains Tax

I’ve already covered all such countries in my post EU Countries Without Capital Gains Tax.

I won’t list them all here because different countries have different rules & conditions. So check the post to see which one is most suitable for your circumstances and preferences.

An example is Luxembourg – 0% capital gains tax rate on investments held for more than 6 months. Or Croatia – no CGT if held for >2 years. Or Monaco – no CGT, period.

PS If you already live in one of the countries from the list, it’s a matter of satisfying the conditions for the 0% tax rate. No need to do the next steps.

2) Move to the Country For 6 Months

The next step is becoming a tax resident in the country without capital gains taxes.

As an EU citizen, you have the right to move to any country in the union without needing a visa/job/reason. So simply find a suitable place to live in and register yourself at that address.

This is not much different than how you’d do it in your home country – visit the municipality with your passport and rental contract (or the person hosting you).

Don’t forget to deregister from your original country! If you don’t, you might end up paying regardless or endure a slow correspondence with bureaucrats.

PS The reason you should move for 6 months is because some countries don’t consider you a tax resident if you stay for less. So to be on the safe side, remain a resident for at least half a year. See 183 day rule for details.

3) Sell All Your Investments

Once you settled in your new home, sell everything.

This is your opportunity to execute a big tax free rebalancing besides taking profits.

Of course, large buy/sell transactions will incur some fees, but losing (up to) 1% today will save you a lot more in taxes in the future. Since you’d buy back the investments you plan to hold at a higher price, this increases your tax base for future capital gains taxes.

4) Move Back Home

If you don’t want to stay in the country you’ve registered at, do step 1 in reverse.

Go to your original country, register yourself at your former address, and deregister from Luxembourg/Croatia/Monaco.

Congratulations!

You realized massive gains with paying 0% in taxes.

FAQs and Further Considerations

For most cases and places, this will work effortlessly.

However, I’d mention a few things that should be considered with this strategy:

Exit Taxes

Exit tax is a tax on your investments when you leave the country as if you’ve sold them.

Most countries don’t have an exit tax, and those that do don’t necessarily impose it as long as you move within the European Union. So make sure to confirm this before committing to this strategy.

I cover exit taxes in my post on investment taxes in all EU countries.

Work and Change of Residence

In some cases, you won’t be able to remain employed if you change your country of residence.

I’d say that if you’re still working, doing a complex tax avoidance setup is not the right move. Up to you, but ask yourself if you really need that much extra cash if you’re still employed.

If you want to cash out a relatively smaller amount, I’d say just accept paying CGT on that amount in your country.

Wealth Taxes

There are a few countries that don’t impose capital gains taxes, but instead tax residents as a percentage of their net-worth. A few examples include: Netherlands, Liechtenstein, and Switzerland.

Paying wealth tax once will be more profitable than paying capital gains tax. But don’t stay registered in such a country for long because you’ll be taxed on your net-worth year over year, even if you don’t realize any profits.

I cover all EU countries with wealth taxes in Net-Worth Taxation in Europe.

Is This Legal?

Yes.

Tax avoidance is not tax evasion.

Tax avoidance is minimizing your taxes by utilizing the tax code. Tax evasion is deliberate lying to pay less tax.

As a law-abiding citizen, I’d never cover or support illegal or immoral activities.

Always play by the rules. Never withhold information from the tax authorities. Minimize your taxes legally.

I’m not your tax advisor, so consider this post a starting point for your further research, without any guarantees for correctness or completeness.

For more posts covering specific European investing and taxation topics, visit the EU Investors’ Handbook.

Author

D. Petkovski

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