Capital Gains Taxes Around the Globe: What Diversified Investors Should Know
Mark Henricks
6 min read
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Currently, the top U.S. capital gains tax rate applied to assets held more a year is 20%. This is well below the world’s highest capital gains tax rate of 42% levied by Norway, but somewhat above the average of European countries. China’s maximum long-term capital gains tax on individuals is the same as the U.S rate, while India’s ranges from 10% to 20%. Many countries levy no tax on capital gains, while others tax them at the same rate as ordinary income. When investing abroad, you may be subject to the tax laws of not only the U.S. but also the country you are investing in.
Talk to a financial advisor to get answers to your questions about capital gains taxes and international investment strategies.
Capital Gains Tax Concepts
If you sell an asset such as a share of stock, real estate property or other asset for more than you paid, you may owe a capital gains tax on the difference. Capital gains tax rates are generally lower than tax rates for ordinary income, which helps encourage investment. A 2023 study by British researchers suggested higher capital gains taxes reduce innovation. Looking at how state capital gains tax increases and decreases affected venture capital, the researchers found venture-funded companies filed fewer patents after capital gains were increased.
Capital gains taxes are part of the tax system in countries around the world. In the United States, the capital gains tax began in 1922 and has been in place since. However, while the tax has been present for over 100 years, according to an accounting of its history by consulting firm Wolters Kluwer, the maximum rate has varied widely.
The initial U.S. capital gains tax rate in 1922 was 12.5% for both corporations and individuals. This was gradually raised over the decades until in 1979 it reached 35% for individuals and 30% for corporations.
Since the 1970s, the maximum rate has changed many times but generally trended down for individuals while the corporate rate increased to 35%. In 2017, the corporate rate was cut to 21% while the individual rate held at 20%. Over the century of capital gains taxes changes in the United States, the average has been approximately 26% for both individuals and corporations.
Compared to similar countries, the U.S. currently has a mid-level capital gains tax rate. Denmark has the world’s highest rate at 42%. Other European countries also have significantly high rates, including Norway at 37.8% and France at 34%. A number of European Union nations, including Belgium, Czech Republic, Switzerland and Turkey, have no capital gains tax. Overall, European countries average 17.9%, according to a 2024 Tax Foundation analysis.
Elsewhere, many large economies have similar rates to the U.S., according to a worldwide survey by consulting firm PwC. For instance, China taxes individual capital gains at a maximum of 20%. India’s top individual rates range from 10% to 20%. Among leading South American economies, Brazil levies a top rate of 22.5% on individuals and Argentina collects 15%.
A financial advisor can help you devise an effective tax strategy for your goals. Use this free tool to get matched.
Economic Effects of Capital Gains Tax Hikes
Many countries also impose capital gains taxes on income earned within their borders, even if the investor is not a resident. If the country where the investment is located taxes capital gains, U.S. investors may owe capital gains taxes there as well.
To help reduce the burden of double taxation, the U.S. offers a Foreign Tax Credit. This allows U.S. taxpayers to offset their U.S. tax liability by the amount of taxes paid to a foreign government, up to a certain limit. For capital gains, however, the rules can be complex, and not all foreign taxes are eligible for a full credit.
The U.S. has tax treaties with several countries to prevent or reduce double taxation, which might affect capital gains. These treaties may allow for reduced tax rates or exemptions in certain situations, but capital gains are not always covered by these treaties.
Because international tax issues can be complex, it’s often beneficial for U.S. investors to consult a professional financial advisor to ensure compliance with both U.S. and foreign tax obligations and to make the most of any credits or deductions.
Bottom Line
Capital gains tax rates around the world vary from zero to a high of 42% in Denmark. Several other European countries also have high capital gains tax rates, but the European average is less than the current U.S. top capital gains tax rate of 20%. Proposals to raise capital gains tax rates by presidential candidate Kamala Harris would put the top rate closer to its historical norm in the U.S. but above the rates charged by many other large and economically advanced countries. Higher capital gains taxes may inhibit saving, reduce overall economic activity and also discourage innovation.
Tips
A financial advisor can help you devise a plan for efficiently managing capital gains taxes on your investments. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Don’t just guess how much you may owe in capital gains taxes. Use SmartAsset’s Capital Gains Tax Calculator to see how much you’ll pay based on the size of your gain, time of ownership, income, location and filing status.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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