Last month, the European Union published a report on wealth taxation, a topic that has been front and center not only in Europe but in the United States. One portion of the discussion concerns how exit taxes could affect decisions to vote with your feet and flee a jurisdiction that proposes or imposes new taxes on wealth or capital gains.
While most European countries have repealed wealth taxes due to capital flight and low revenue, three countries still maintain them. These include Switzerland, Norway, and Spain. Within these three countries, the report states that revenues remain low and have declined.
Regarding taxes on unrealized capital gains, no European country has implemented such a reoccuring tax.
Exit taxes are used to deter revenue loss, but challenges are prevalent, including transgressing EU/EEA free movement rules. Currently, 8 of 27 EU member states have explicit individual exit taxes. These countries are:
- Austria
- Denmark
- France
- Germany
- Netherlands
- Poland
- Spain
- Sweden
While these countries use an exit tax, each approaches the policy differently. Broken out by country below are the policies:
Austria: Exit tax applies when an individual transfers their tax residence abroad. It taxes unrealized capital gains on certain assets (mainly shares, bonds, and other securities) at 27.5% (aligned with the regular capital-gains tax rate). The tax can also be triggered if Austria loses taxing rights for other reasons (e.g., inheritance by a non-resident). Deferral is available if the individual moves to another EU/EEA country; the tax becomes due if the assets are later sold or the person moves to a third country.
Denmark: Exit tax (fraflytterskat) applies to individuals leaving Denmark who hold a wide range of assets (shares, bonds, options, certain pensions, financial contracts, and some foreign property). Assets still taxable in Denmark (Danish real estate) are excluded. The general rate is 27% (aligned with the capital gains tax). For shares, bonds, and financial contracts, the tax only applies if the individual was fully tax-resident (or treaty-resident) in Denmark for at least 7 of the previous 10 years. Deferral is possible, subject to security and ongoing compliance obligations.
France: Exit tax applies to French tax residents who have lived in France for at least 6 of the previous 10 years and who hold either:
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- 50% of a company’s share capital, or
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- securities worth more than €800,000.
It taxes unrealized capital gains on shares, equity rights, investment fund units, and certain earn-outs at a flat rate of 30% (12.8% income tax + 17.2% social charges). Real estate and assets held through life-insurance policies or PEAs are excluded. Deferral is granted automatically for moves within the EU/EEA; outside the EU, it usually requires guarantees. The tax normally expires after 2–5 years.
Germany: Exit tax applies to individuals who have been unlimited tax residents in Germany for at least 7 of the previous 12 years and who hold at least 1% of a corporation as a private asset. It taxes the deemed disposal of those shares. Gains are taxed under the partial-income method (60% taxable) at up to 45%, plus the solidarity surcharge and the possible church tax. Commercial partnerships are also covered. Deferral in up to 7 interest-free annual installments (with security) is available; the tax can be waived retroactively if the person returns within 7 years.
Netherlands: No general exit tax, but a specific regime applies to individuals who own a substantial interest (≥5% of shares, voting rights, or profit rights) in a Dutch company. Upon emigration, a deemed disposal of those shares triggers tax on unrealized gains. The Netherlands issues a protective assessment. Deferral until actual realization is possible (no security required for EU/EEA moves). The deferral ends on sale, gift, or certain other events.
Poland: Exit tax (introduced in 2019 to implement ATAD) applies when an individual changes tax residence or transfers assets abroad, thereby losing Poland’s taxing rights. It covers shares, company rights, derivative instruments, and participation units in capital funds with a value exceeding PLN 4 million. Rates are 19% (if market value can be determined) or 3% (if value cannot be precisely determined). No deferral option is available.
Spain: Exit tax applies to individuals who have been Spanish tax residents for at least 10 of the previous 15 years and who own shares or interests in collective investment institutions with assets exceeding €4 million (or ≥25% ownership with assets exceeding €1 million). It taxes unrealized capital gains on the final personal income tax return. Deferral is available for temporary work-related moves to non-blacklisted countries or to countries with a DTT that contains an information-exchange clause. If the person returns to Spain within 5 years (or 10 years for work moves) without selling the assets, the tax is waived.
Sweden: Sweden does not impose an immediate exit tax on unrealized gains. Instead, it uses the “ten-year rule”: individuals who leave Sweden remain subject to Swedish capital-gains tax (30%) on assets acquired while they were residents if those assets are sold within 10 years of departure. A 2017 proposal to introduce a true unrealized-gains exit tax was ultimately suspended.
The report notes that studies regarding individual reactions to exit taxes are sparse. At least anecdotally, Sweden’s 2007 wealth-tax repeal reduced out-migration among the wealthy by around 30%. But other factors besides taxes play a role, such as family and local ties and professional needs.
In the US, the differences have become more stark as the affluent have fled high-tax states like California and New York to states with lower taxes and better business climates. Florida and Texas are both at the top of the list as each jurisdiction holds no state income tax.