This chapter investigates how countries tax household savings. Broad trends in design approaches are identified and a summary of the key design features adopted by countries is provided. The chapter finds wide variation in approaches to taxing household savings both across and within countries, and across different asset types.
Taxation of Household Savings
Report
OECD Tax Policy Studies
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Chapter 2. How countries tax savings
Abstract
2.1. Introduction
Countries adopt a range of approaches to taxing household savings. This chapter provides a summary of the general design features adopted by the 40 countries covered in this study. The magnitude of taxes that are imposed is not discussed in this chapter; this is the focus of Chapter 3, which combines the impact of the various features of savings taxation to calculate marginal effective tax rates.
This chapter focuses on the following assets / savings vehicles, which can be expected to cover the majority of household savings in most countries:
Bank deposits
Corporate and government bonds
Equities (purchase of corporate shares)
Investment fund assets (marketable collective investment vehicles)
Private pensions
Deposits in individual tax-favoured savings accounts
Residential property
The chapter proceeds as follows: 2.2 first frames the discussion by presenting, in a stylised manner, the types of approaches that countries take to taxing household savings; 2.3 then summarises the broad trends in the approaches that countries take, before 2.4 examines the taxation of each asset / savings vehicle individually.
2.2. Approaches taken to taxing household savings
Based on current capital income tax systems in OECD countries, it is possible to distinguish several “stylised approaches” to taxing savings that are useful in comparing and contrasting the ways different countries tax household savings, both in a broad sense and with regard to specific assets / savings vehicles. The list below focuses is on taxation at the individual level and does not, for example, consider the integration of personal and corporate level taxation (which is however briefly discussed in Chapter 3).
We distinguish seven broad approaches: a comprehensive income tax, a flat rate capital income tax; an expenditure tax, a tax exempt savings approach; a tax deferral approach; a rate of return allowance approach; and a deemed return approach. Most countries implement a combination of these approaches.
Under a comprehensive income tax (CT) approach, labour and capital income are taxed together at progressive rates. No tax relief is provided when the saving is made. A pure CT system is based on the Schanz-Haig-Simons comprehensive definition of income, and would require all income and gains to be taxed on an accrual basis. However, in practice this is extremely rare with capital gains being taxed instead on realisation. As such we refer to such systems, where they are in place, as “broadly comprehensive”.
Under a flat rate capital income tax approach, labour and capital income are taxed separately, with capital taxed at a flat rate. Like a CT system, no tax relief is provided when the saving is made. Two subsets of this system are a dual income tax system and a final withholding tax system.
A dual income tax system taxes labour under a progressive rate schedule and capital income at a proportional rate. In its original form, labour and capital income are taxed together at a flat rate, and then a separate progressive tax is applied on labour income only.
A final withholding tax system applies (typically) progressive rates on labour income, and a flat rate on capital income which is withheld at source to minimise compliance costs.
Under an expenditure tax approach, taxation only occurs when income is spent.1 An expenditure tax approach is often taken in relation to private pensions within a system that taxes labour income. In such a case, upfront tax relief tax is given for amounts saved, returns from savings are untaxed as they accrue, but both savings and returns are taxed when a pension is paid.
Under a tax exempt savings approach, no relief is provided when savings are made. However, returns are untaxed as they accrue, and both savings and accrued returns are untaxed on distribution.
Under a tax deferral approach, no tax relief is provided when the saving is made, returns from savings are untaxed as they accrue, but the accrued returns are taxed on distribution (either at flat rates, or together with labour income at progressive rates). This approach is typically applied when intermediaries manage the household savings on behalf of the individual.
Under a rate of return allowance (RRA) approach, taxation occurs as with a CT or a flat rate capital income tax system except that an allowance is provided for the normal return on savings. As such, only economic rents from savings are taxed at the individual level. Any unutilised allowance amount would be carried forward to future years.
Under a deemed return approach, the actual return on savings is not taxed but a presumptive return is taxed instead. No tax relief is provided when the saving is made, and there is also no taxation on distribution or when capital gains are realised. A single or multiple deemed return can be applied and can be taxed at a flat or progressive rates.
In practice, no country implements any one of these approaches consistently across all potential assets / savings vehicles. Furthermore, the exact implementation of each stylised approach tends to vary across countries. For example, two countries can apply a broadly similar approach but with significantly different magnitudes of taxation.
Tax systems also get more complicated in practice due to the cumulative impact of additional taxes on different bases. For example, in addition to taxes on income and capital gains, transaction taxes, net wealth taxes, and recurrent property taxes may apply to certain assets. These additional taxes may also be contingent on income/wealth levels. The next section summarises the approaches to taxing savings that have been taken in the 40 countries considered in this study, drawing on the above classifications.
2.3. Overall trends in countries’ approaches to taxing savings
Most countries tax the majority of savings vehicles broadly following either a comprehensive income tax or flat rate capital income tax approach. However, even within these two broad approaches there can be significant differences in taxation, particularly in relation to the size of statutory tax rates on income and the tax treatment of capital gains (which are often taxed at concessionary rates, potentially subject to a holding period requirement).
The greatest degree of consistency in approach is across savings in bank accounts, bonds and shares. Residential rental property is typically also taxed consistently with other assets on a comprehensive basis or flat rate capital tax basis, but is generally also subject to recurrent property taxes, and often transaction taxes.
Irrespective of the broad approach applied to most assets / savings vehicles, private pensions and owner-occupied residential property are typically taxed very differently. Private pensions are almost always taxed following an expenditure tax approach, with the degree of concessionary treatment relative to other assets varying depending on the country. Meanwhile, capital income from owner-occupied residential property is typically exempt but, as with rental property, recurrent property taxes and in many cases transaction taxes are applied. Unlike other savings vehicles, tax relief is often also provided for interest expenses incurred in relation to residential property.
There is less consistency across countries with respect to tax-favoured savings accounts and investment funds. 17 of the 40 countries considered in this study provide some type of tax-favoured savings account. Tax treatment varies from a tax exempt approach (but with a limit on contributions), to a comprehensive income tax approach with concessionary rates, to an expenditure tax approach in a small number of countries. There is no clear link between the general approach to savings taxation that a county applies and the approach applied to tax-favoured savings accounts.
Regarding investment funds, in some countries there is consistency with the broader approach taken – e.g. some countries that apply broadly comprehensive approaches for other assets do so also for investment funds. However, in many cases there is less consistency across assets. For example, a tax deferral approach is often adopted for investment funds when a comprehensive or flat rate capital tax approach is taken for other assets. A tax exempt approach is also sometimes followed for investment funds.
Broad trends in approaches across the majority of assets / savings vehicles are highlighted in Table 2.1. Broadly comprehensive approaches with progressive rates applying to capital income, though not necessarily to capital gains, are applied in 11 countries. In another 21 countries, flat rates are applied to capital income either as part of a dual income tax or a final withholding tax system. In these countries, tax rates are almost always at a significantly lower level than the top marginal rate applying to labour income.
Table 2.1. Broad approaches to taxation of savings
(as at 1 July 2016)
|
Broadly comprehensive / progressive rate approach |
Flat-rate approach |
Mixed flat-rate/progressive |
Deemed-return approach |
Rate of return allowance |
|---|---|---|---|---|
|
Australia |
Austria |
Finland |
Argentina |
Norway (shares) |
|
Canada |
Belgium |
Korea |
Netherlands |
|
|
Chile |
Bulgaria |
Mexico |
||
|
France |
Colombia |
|||
|
Ireland |
Czech Republic |
|||
|
New Zealand |
Denmark |
|||
|
South Africa |
Estonia1 |
|||
|
Spain |
Germany |
|||
|
Switzerland |
Greece |
|||
|
United Kingdom |
Hungary1 |
|||
|
United States |
Iceland |
|||
|
Israel |
||||
|
Italy |
||||
|
Japan |
||||
|
Latvia |
||||
|
Lithuania1 |
||||
|
Luxembourg |
||||
|
Poland |
||||
|
Portugal |
||||
|
Slovak Republic |
||||
|
Slovenia |
||||
|
Sweden |
||||
|
Turkey |
1. A flat-rate personal income tax applies to both labour and capital income.
Source: Country responses to Taxation of Household Savings questionnaire
In three countries, a mixed approach is broadly adopted – with low income taxpayers subject to flat final withholding taxes on most capital income, but higher income taxpayers subject to progressive rates.
Finally, there are a range of less common approaches. The Netherlands applies a deemed return approach to most assets / savings vehicles (excluding private pensions and owner-occupied residential property). In Argentina, only a net wealth tax (which implicitly taxes a deemed return on savings) is applied to most savings. Norway applies a dual income tax system, but for equity investment a rate of return allowance is applied. In Estonia and Hungary, personal income tax rates are broadly applied, but as they have flat rate personal income tax systems, the impact on capital income is the same as if a flat rate capital income tax approach was applied.
Again, for each of these groupings in Table 2.1, private pensions tend to follow an expenditure tax approach; owner –occupied property tends to be only subject to recurrent property and transaction taxes; while the tax treatment of investment funds and tax-favoured savings accounts varies considerably.
Regarding the application of specific taxes a number of common themes are also apparent. As already noted, income taxes are applied on either a progressive or flat rate basis depending on the broad approach adopted to taxing savings. That said, a degree of progressivity is also applied in several countries through the application of basic allowances or exempt amounts for a specified level of savings income (typically interest or dividend income).
Capital gains are more commonly taxed at flat rates, even in broadly comprehensive systems. Furthermore, countries often provide concessionary treatment for capital gains that have been held longer than a specified minimum holding period. Capital gains are almost universally taxed on a realisation rather than an accrual basis.2
Transaction taxes are applied almost exclusively to residential property, though a small number of countries apply them to bank accounts, bonds and shares. They are generally applied at flat rates, but occasionally can depend on the value of the asset.
Recurrent taxes on immovable property, by definition apply only to immovable property. They are typically implemented at a sub-central level and can consequently vary substantially within a country. In the majority of countries they are levied on a tax base closely linked to the value of the property, though in many cases these valuations lag behind the real value of the property and often remain significantly out of date. Meanwhile the tax base in a small number of countries is based on characteristics of the property, such as size of property or location, rather than value.
Net wealth taxes are rare, being applied in only six countries. In general they exclude private pensions, and have a considerable minimum wealth threshold before a positive rate or rates apply.
2.4. Results across asset types
This section examines the taxation of each asset type in more detail. Table 2.2 Table 2.9 present key features of the tax treatment of each asset across the three broad stages at which savings may be taxed: acquisition; holding; and disposal. Categories are signified as Y for yes; N for no; or NA if not applicable. Additional details are provided in footnotes where relevant. The tables reflect the rules in place in each country as of 1 July 2016.
Bank accounts
As noted above, most countries tax bank accounts following either a broadly comprehensive or flat rate capital income tax approach. Table 2.2 provides further detail on the design features across the 40 countries covered in this report.
Table 2.2. Tax treatment of different forms of saving: bank accounts
(as at 1 July 2016)
|
Country |
Acquisition of asset |
Holding of asset |
Disposal of asset |
||||||
|---|---|---|---|---|---|---|---|---|---|
|
PIT treatment |
Transaction tax |
PIT |
Other taxes |
PIT or CGT |
|||||
|
Interest expense deductible |
Amount of acquisition deductible |
Income from asset |
Income from asset |
Value of asset |
Realised income from asset |
Original value of asset |
Capital gains |
||
|
Australia |
N |
N |
N |
Y |
N |
N |
N |
N |
NA |
|
Austria |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Belgium |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Canada |
N |
N |
N |
Y |
N |
N |
N |
N |
NA |
|
Chile |
N |
N |
N |
Y2 |
N |
N |
N |
N |
NA |
|
Czech Republic |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Denmark |
N |
N |
N |
N |
Y3 |
N |
N |
N |
NA |
|
Estonia |
N |
N |
N |
N |
N |
N |
N |
N |
NA |
|
Finland |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
France |
N |
N |
N |
Y |
N |
Y4 |
N |
N |
NA |
|
Germany |
N |
N |
N |
N |
N |
N |
N |
NA |
|
|
Greece |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Hungary |
N |
N |
N |
Y |
N |
N |
N |
N |
NA |
|
Iceland |
N |
N |
N |
N |
Y6 |
N |
N |
N |
NA |
|
Ireland |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Israel |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Italy |
N |
N |
N |
N |
Y1 |
Y7 |
N |
N |
NA |
|
Japan |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Korea |
N |
N |
N |
Y8 |
Y8 |
N |
N |
N |
NA |
|
Latvia |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Luxembourg |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Mexico |
N |
N |
N |
N |
Y9 |
N |
N |
N |
NA |
|
Netherlands |
N |
N |
N |
N |
Y10 |
N |
N |
N |
NA |
|
New Zealand |
N |
N |
N |
Y |
N |
N |
N |
N |
NA |
|
Norway |
N |
N |
N |
Y |
N |
Y11 |
N |
N |
NA |
|
Poland |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Portugal |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Slovak Republic |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Slovenia |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Spain |
N |
N |
N |
Y |
N |
Y12 |
N |
N |
NA |
|
Sweden |
N |
N |
N |
N |
Y |
N |
N |
N |
NA |
|
Switzerland |
N |
N |
N |
Y |
N |
Y13 |
N |
N |
NA |
|
Turkey |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
United Kingdom |
N |
N |
N |
Y14 |
N |
N |
N |
N |
NA |
|
United States |
N |
N |
N |
Y |
N |
N |
N |
N |
NA |
|
Argentina |
N |
N |
N |
N |
N |
N |
N |
N |
NA |
|
Bulgaria |
N |
N |
N |
N |
Y1 |
N |
N |
N |
NA |
|
Colombia |
N |
N |
N |
N |
Y1 |
Y15 |
N |
N |
NA |
|
Lithuania |
N |
N |
N |
Y16 |
N |
N |
N |
N |
NA |
|
South Africa |
N |
N |
N |
Y17 |
N |
N |
N |
N |
NA |
Notes:
1. Final withholding tax.
2. Interest income is exempt for “small taxpayers” or taxpayers whose only other income is from employment and pensions, and where interest income is less than CLP 923 660 (in 2016).
3. Taxed at flat rate as “net capital income” under semi-dual system.
4. Net wealth tax. The taxable threshold is set at EUR 1.3 million, but once this threshold has been achieved, the assets are taxed as of EUR 800 000.
5. EUR 801 tax-free allowance for interest and dividend income.
6. Flat capital income tax rate. The first ISK 125 000 of interest income is exempt from taxation.
7. Retail bank deposits and deposit passbooks in excess of EUR 5 000 are subject to a fixed stamp duty tax of EUR 34.20 per year. Custody or holding accounts are charged a proportional stamp duty tax: 0.2% tax rate on deposits in excess of EUR 5 000.
8. Final withholding tax if interest and dividend income less than 20 million won. Otherwise marginal PIT rates apply.
9. Provisional withholding tax of 0.50%. Final for individuals who have no other income (or other income less than MXN 400 000 per year) and interest income does not exceed MXN 100 000. Interest paid on bank accounts where individuals received their salary, savings, and pensions are not taxed whenever the average balance does not exceed five times the annual minimum wage (MXN 133 298 in 2016). Interest from other types of bank accounts (certificates of deposit, money market accounts, etc.) and government bonds are not eligible for this exemption.
10. Deemed return on asset value is taxed. The first EUR 24 437 (in 2016) of total assets excluding pensions and owner-occupied housing is exempt.
11. Net wealth tax. The tax-free allowance is NOK 1 400 000.
12. Net wealth tax. Each resident taxpayer is entitled to a general exemption of EUR 700 000.
13. Net wealth tax applied at the cantonal level.
14. GBP 1 000 savings allowance; otherwise progressive PIT rates.
15. Net wealth tax.
16. First EUR 500 of interest per year is exempt.
17. Exempt if interest income of less than SAR 28 300.
Tax treatment on acquisition (i.e. on deposit of savings in a bank account) is very simple: in no country is the amount of any deposit deductible, and no country imposes a transaction tax.
At the holding stage, marginal personal income tax rates are applied to interest income as it is earned in 13 countries. In three of these countries (Chile, South Africa and the United Kingdom) an allowance or exemption is first applied to a specified amount of interest income. In 25 countries, a flat withholding tax rate applies to interest income. In three of these countries (Germany, Iceland, Lithuania) an allowance or exemption is similarly applied to a specified amount on interest income. Uniquely amongst the 40 countries, Colombia provides relief for the inflationary component of bank interest. Interest earned on bank account deposits is untaxed in Argentina and Estonia.
In Korea, a final withholding tax is applied if combined interest and dividend income is less than KRW 20 million. Otherwise marginal personal income tax rates apply. Similarly, in Mexico, the withholding tax is final if the taxpayer has other income less than MXN 400 000 and interest income less than MXN 100 000. Furthermore, if the average account balance does not exceed five times the minimum average wage (MXN 133 298 in 2016) then no tax will be applied. Otherwise, the withholding tax is provisional and personal income tax rates will be applied at the end of the year.
The Netherlands exempts the first EUR 24 437 (in 2016) of savings from tax. Beyond this amount, a 30% tax rate is applied on a deemed return of 4% of the bank balance (under the deemed return approach).3
Colombia, France, Norway, Spain and Switzerland apply net wealth taxes on bank account holdings, but with large exempt amounts or allowances so that only high wealth taxpayers are subject to them.4 Argentina has a wealth tax but does not apply it to bank account balances.
Bonds
Most countries also tax corporate and government bonds following either a broadly comprehensive or flat rate capital income tax approach. Table 2.3 provides further detail on the design features across the 40 countries covered in this report.
Table 2.3. Tax treatment of different forms of saving: bonds
(as at 1 July 2016)
|
Country |
Acquisition of asset |
Holding of asset |
Disposal of asset |
||||||
|---|---|---|---|---|---|---|---|---|---|
|
PIT treatment |
Transaction tax |
PIT |
Other taxes |
PIT or CGT |
|||||
|
Interest expense deductible |
Amount of acquisition deductible |
Income from asset |
Income from asset |
Value of asset |
Realised income from asset |
Original value of asset |
Capital gains |
||
|
Australia |
Y |
N |
N |
Y |
N |
N |
N |
N |
Y |
|
Austria |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y1 |
|
Belgium |
N |
N |
Y |
N |
Y1 |
N |
N |
N |
Y1 |
|
Canada |
N |
N |
N |
Y |
N |
N |
N |
N |
Y |
|
Chile |
N |
N |
N |
Y2 |
N |
N |
N |
N |
Y3 |
|
Czech Republic |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y4 |
|
Denmark |
N |
N |
N |
N |
Y4 |
N |
N |
N |
Y5 |
|
Estonia |
N |
N |
N |
Y |
N |
N |
N |
N |
Y |
|
Finland |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y |
|
France |
N |
N |
N |
Y |
N |
Y6 |
N |
N |
Y |
|
Germany |
N |
N |
N |
N |
N |
N |
N |
Y1 |
|
|
Greece |
N |
N |
N |
N |
N |
N |
N |
Y8 |
|
|
Hungary |
N |
N |
N |
Y |
N |
N |
N |
N |
Y9 |
|
Iceland |
N |
N |
N |
N |
Y10 |
N |
N |
N |
Y10 |
|
Ireland |
N |
N |
N |
Y |
N |
N |
N |
N |
Y8 |
|
Israel |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y |
|
Italy |
N |
N |
Y |
N |
Y1 |
N |
N |
N |
Y11 |
|
Japan |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y1 |
|
Korea |
N |
N |
N |
Y12 |
Y12 |
N |
N |
N |
Y12 |
|
Latvia |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y |
|
Luxembourg |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y13 |
|
Mexico |
N |
N |
N |
N |
Y14 |
N |
N |
N |
Y |
|
Netherlands |
N |
N |
N |
N |
Y15 |
N |
N |
N |
N |
|
New Zealand |
Y |
N |
N |
Y |
N |
N |
N |
N |
Y16 |
|
Norway |
Y |
N |
N |
Y |
N |
Y17 |
N |
N |
Y |
|
Poland |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y |
|
Portugal |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y |
|
Slovak Republic |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y |
|
Slovenia |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y1 |
|
Spain |
N |
N |
N |
Y |
N |
Y18 |
N |
N |
Y |
|
Sweden |
N |
N |
N |
N |
Y |
N |
N |
N |
Y |
|
Switzerland |
N |
N |
N |
Y |
N |
Y19 |
N |
N |
Y |
|
Turkey |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y |
|
United Kingdom |
N |
N |
N |
Y20 |
N |
N |
N |
N |
Y21 |
|
United States |
Y22 |
N |
N |
Y |
N |
N |
N |
N |
Y |
|
Argentina |
N |
N |
N |
N |
N |
Y23 |
N |
N |
N |
|
Bulgaria |
N |
N |
N |
N |
N |
N |
N |
N |
N |
|
Colombia |
N |
N |
N |
N |
Y1 |
Y24 |
N |
N |
Y25 |
|
Lithuania |
N |
N |
N |
Y26 |
N |
N |
N |
N |
Y27 |
|
South Africa |
N |
N |
N |
Y28 |
N |
N |
N |
N |
Y29 |
Notes:
1. Final withholding tax
2. Interest income is exempt for “small taxpayers” or taxpayers whose only other income is from employment and pensions, and where interest income is less than CLP 923 660 (in 2016).
3. Capital gains are exempt if not “habitual in the trade of bonds” and if capital gain is less than CLP 5 541 960 (in 2016). Otherwise “business profits” tax rate is applied. Capital gains on “public offer debt instruments” from Central Bank of Chile or General Treasury of Republic of Chile are exempt.
4. Subject to flat rate cap gains tax if gain greater than CZK 100 000 and held for three years or less.
5. Taxed at flat rate as “net capital income” under semi-dual system
6. Net wealth tax. The taxable threshold is set at EUR 1.3 million, but once this threshold has been achieved, the assets are taxed as of EUR 800 000.
7. EUR 801 tax-free allowance for interest and dividend income.
8. Government bonds are exempt from all taxation in Greece, and from capital gains tax in Ireland.
9. Treated as interest. Preferential capital income tax rate of 10% and healthcare rate of 6% if held 3+ years; Exempt from capital income tax if held 5+ years. Healthcare tax only applies if income above HUF 450 000.
10. Flat capital income tax rate. The first ISK 125 000 of interest income is exempt from taxation
11. Government bonds subject to 12.5% rate instead of 26% on capital gains
12. Final withholding tax if interest and dividend income less than 20 million won. Otherwise marginal PIT rates apply. Capital gains treated as interest income.
13. If the asset is sold more than 6 months after purchase there is no capital gains taxation applicable
14. Provisional withholding tax of 0.50%. Final for individuals who have no other income (or other income less than MXN 400 000 per year) and interest income does not exceed MXN 100 000. Interest paid on bank accounts where individuals received their salary, savings, and pensions are not taxed whenever the average balance does not exceed five times the annual minimum wage (MXN 133 298 in 2016). Interests from other types of bank accounts (certificates of deposit, money market accounts, etc.) and government bonds are not eligible for this exemption.
15. Deemed return on asset value is taxed. The first EUR 24 437 (in 2016) of total assets excluding pensions and owner-occupied housing is exempt.
16. Taxed under the financial arrangements rules at marginal PIT rates on a realisation basis if less than NZD 100 000 of income from financial arrangements or NZD 1 million in value held in financial arrangements, otherwise on an accrual basis.
17. Net wealth tax. The tax-free allowance is NOK 1 400 000.
18. Net wealth tax. Each resident taxpayer is entitled to a general exemption of EUR 700 000.
19. Net wealth tax applied at the cantonal level.
20. GBP 1 000 savings allowance; otherwise progressive PIT rates
21. GBP 11 100 capital gain “annual exempt amount”
22. Interest expense is generally deductible up to the amount of investment income.
23. Corporate bonds subject to wealth tax (not Government bonds).
24. Net wealth tax
25. Capital gain taxed as interest income (final withholding tax) on realisation
26. First EUR 500 of interest per year is exempt.
27. Exempt if less than EUR 500 of capital gain.
28. Exempt if interest income of less than SAR 28 300
29. Exempt if capital gain of less than SAR 40 000. Otherwise subject to marginal rates after 40% exclusion.
Tax treatment on acquisition (i.e. purchase of a bond) is again very simple: in no country is the amount of any deposit deductible, while only in Belgium and Italy are transaction taxes payable. Meanwhile, if saving is debt-financed, the interest is deductible in Australia, New Zealand, Norway and the United States.
At the holding stage, marginal personal income tax rates are applied to interest income on bonds as it is earned in 15 countries. In two of these countries (South Africa and the United Kingdom) an allowance or exemption is first applied to a specified amount of interest income. In 22 countries, a flat withholding tax rate applies to interest income. In three countries (Germany, Iceland, Lithuania) an allowance or exemption is similarly applied to a specified amount of interest income.
As with bank interest, in Mexico the withholding tax is only final if the taxpayer has other income less than MXN 400 000 and interest income less than MXN 100 000. As with bank interest, the Netherlands exempts the first EUR 24 437 (in 2016) of savings from tax, and beyond this amount the deemed return approach applies.
Argentina, Colombia, France, Norway, Spain and Switzerland apply net wealth taxes on bonds, but typically with large exempt amounts or allowances so that only high wealth taxpayers are subject to them.
On disposal, capital gains (derived when bonds have been issued below par) are taxed in 36 of 40 countries. However, in Chile, the Czech Republic, Hungary and Luxembourg, concessionary rates (or even exemptions) apply for bonds held longer than a minimum period or for capital gains of less than a specified amount. In Iceland, Lithuania, South Africa and the United Kingdom, an allowance or exempt amount applies to both interest and capital gains.
In a number of countries (e.g. Belgium, Korea, Mexico, Slovenia), capital gains on bonds are taxed on realisation as interest income, rather than being subject to a separate capital gains tax. In Belgium, while accrued interest is subject to taxation, there is no other taxation of capital gains. In Korea, as with bank interest, a final withholding tax is applied if combined interest and dividend income is less than KRW 20 million. Otherwise marginal personal income tax rates apply.
In New Zealand, capital gains on bonds are also taxed as interest income on a realisation basis as long as the difference in the person’s annual income on a cash basis and on an accrual basis does not exceed NZD 40 000, and either the taxpayer has less than NZD 100 000 of income from financial arrangements or less than NZD 1 million held in financial arrangements. Otherwise they are taxed on an accrual basis.
Differential treatment is applied for government bonds in five countries. In Greece both interest and capital gains from government bonds are exempt. Capital gains on government bonds are exempt in Chile and Ireland, and subject to a reduced rate in Italy. Government bonds are not subject to the wealth tax in Argentina.
Equities (purchase of corporate shares)
Shares are also taxed following either a broadly comprehensive or flat rate capital income tax approach in most countries. Table 2.4 provides further detail on the design features across the 40 countries covered in this report.
Table 2.4. Tax treatment of different forms of saving: shares
(as at 1 July 2016)
|
Country |
Acquisition of asset |
Holding of asset |
Disposal of asset |
||||||
|---|---|---|---|---|---|---|---|---|---|
|
PIT treatment |
Transaction tax |
PIT |
Other taxes |
PIT or CGT |
|||||
|
Interest expense deductible |
Amount of acquisition deductible |
Income from asset |
Income from asset |
Value of asset |
Realised income from asset |
Original value of asset |
Capital gains |
||
|
Australia |
Y |
N |
N |
Y |
N |
N |
N |
N |
Y |
|
Austria |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y1 |
|
Belgium |
N |
N |
Y |
N |
Y1 |
N |
N |
N |
N2 |
|
Canada |
N |
N |
N |
Y |
N |
N |
N |
N |
Y |
|
Chile |
N |
N |
N |
Y3 |
N |
N |
N |
N |
Y4 |
|
Czech Republic |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y5 |
|
Denmark |
N |
N |
N |
N |
Y6 |
N |
N |
N |
Y6 |
|
Estonia |
N |
N |
N |
N |
N |
N |
N |
N |
Y |
|
Finland |
N |
N |
N |
Y7 |
N |
N |
N |
N |
Y |
|
France |
N |
N |
N |
Y |
N |
Y8 |
N |
N |
Y |
|
Germany |
N |
N |
N |
N |
N |
N |
N |
Y1 |
|
|
Greece |
N |
N |
Y |
N |
Y1 |
N |
Y10 |
Y10 |
Y |
|
Hungary |
N |
N |
N |
Y |
N |
N |
N |
N |
Y11 |
|
Iceland |
N |
N |
N |
N |
Y12 |
N |
N |
N |
Y12 |
|
Ireland |
N |
N |
Y |
Y |
N |
N |
N |
N |
Y |
|
Israel |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y13 |
|
Italy |
N |
N |
Y |
N |
Y1 |
N |
N |
N |
Y |
|
Japan |
N |
N |
N |
Y14 |
Y14 |
N |
N |
N |
Y1 |
|
Korea |
N |
N |
Y |
Y15 |
Y15 |
N |
N |
N |
Y16 |
|
Latvia |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y |
|
Luxembourg |
N |
N |
N |
Y17 |
N |
N |
N |
N |
Y18 |
|
Mexico |
N |
N |
N |
Y |
N |
N |
N |
N |
Y1 |
|
Netherlands |
N |
N |
N |
N |
Y19 |
N |
N |
N |
N |
|
New Zealand |
Y |
N |
N |
Y |
N |
N |
N |
N |
N |
|
Norway |
N |
N |
N |
Y20 |
N |
Y21 |
N |
N |
Y |
|
Poland |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y |
|
Portugal |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y |
|
Slovak Republic |
N |
N |
N |
N |
N |
N |
N |
N |
Y22 |
|
Slovenia |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y23 |
|
Spain |
N |
N |
N |
Y |
N |
Y24 |
N |
N |
Y |
|
Sweden |
N |
N |
N |
N |
Y |
N |
N |
N |
Y |
|
Switzerland |
N |
N |
N |
Y25 |
N |
Y26 |
N |
N |
Y |
|
Turkey |
N |
N |
N |
N |
Y27 |
N |
N |
N |
N28 |
|
United Kingdom |
N |
N |
N |
Y29 |
N |
N |
N |
N |
Y30 |
|
United States |
Y31 |
N |
N |
Y |
N |
N |
N |
N |
Y31 |
|
Argentina |
N |
N |
N |
N |
N |
Y32 |
N |
N |
N |
|
Bulgaria |
N |
N |
N |
N |
Y |
N |
N |
N |
N |
|
Colombia |
N |
N |
N |
N |
N |
Y32 |
N |
N |
N |
|
Lithuania |
N |
N |
N |
Y |
N |
N |
N |
N |
Y33 |
|
South Africa |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y34 |
Notes:
1. Final withholding tax.
2. Unless shares held for less than six months.
3. Dividend income is exempt for “small taxpayers” or taxpayers whose only other income is from employment and pensions, and where interest income is less than CLP 923 660 (in 2016).
4. Capital gains are exempt if not “habitual in the trade of shares”, shares are held for at least one year and if capital gain is less than CLP 5 541 960. Otherwise “business profits” tax rate is applied.
5. Subject to flat rate cap gains tax if shares held for three years or less.
6. Taxed at flat rate as “net capital income” under semi-dual system
7. 85% of dividend income is taxed as investment income. 15% of income is exempt.
8. Net wealth tax. The taxable threshold is set at EUR 1.3 million, but once this threshold has been achieved, the assets are taxed as of EUR 800 000.
9. EUR 801 tax-free allowance for interest and dividend income.
10. 2% tax on sale
11. Preferential capital income tax rate of 10% and healthcare rate of 6% if held 3+ years; Exempt from capital income tax if held 5+ years. Healthcare tax only applies if income above HUF 450 000.
12. Flat capital income tax rate.
13. Capital gains are indexed for inflation
14. Taxpayer can choose “taxation on aggregate” where taxed at marginal PIT rates, or “separate taxation”, where taxed at flat 20% rate.
15. Final withholding tax if interest and dividend income less than 20 million won. Otherwise marginal PIT rates apply.
16. Exempt from capital gains tax if listed shares held by minority (<1%) shareholder and less than KRW 250 million market capitalisation.
17. A 15% withholding tax is applied on dividend income. However, this withholding tax is imputed with other taxes in the tax return. The dividend income is included with other revenues and subject to the global personal income tax rate. 50% of distributed dividend income is included in the personal income tax base.
18. If the asset is sold more than 6 months after purchase there is no capital gains taxation applicable
19. Deemed return on asset value is taxed. The first EUR 24 437 (in 2016) of total assets excluding pensions and owner-occupied housing is exempt.
20. Only the portion of the return above the risk-free rate is taxed
21. Net wealth tax. The tax-free allowance is NOK 1 400 000.
22. Capital gains less than EUR 500 are exempt
23. The tax rate for capital gains depends on the holding period: 25% for a holding period of up to 5 years, 15% for a holding period from 5 to 10 years, 10% for a holding period from 10 to 15 years, 5% for a holding period from 15 to 20 years, resulting in non-taxation of capital gains derived after a holding period greater than 20 years.
24. Net wealth tax. Each resident taxpayer is entitled to a general exemption of EUR 700 000.
25. Only 50% of dividends are taxed
26. Net wealth tax applied at the cantonal level.
27. Dividends are subject to a 15% withholding tax and half of the dividends is exempt from tax. The remaining half is declared if it exceeds the declaration limit for that year and is subject to progressive tax rate.
28. Capital gains earned from sale of equities quoted in the ISE and held for longer than 1 year (2 years for unquoted shares) are not subject to withholding tax and are not declared
29. GBP 5 000 dividend allowance.
30. GBP 11 100 capital gain “annual exempt amount”
31. Interest expense is generally deductible up to the amount of investment income. A lower rate schedule applies for long term capital gains of more than one year. However, the taxpayer must choose between deducting the interest expense and claiming the preferential capital gains tax rate.
32. Net wealth tax
33. Exempt if less than EUR 500 of capital gain.
34. Exempt if capital gain of less than SAR 40 000. Otherwise subject to marginal rates after 40% exclusion.
Tax treatment on acquisition (i.e. purchase of a share) is very simple: in no country is the amount of any share purchase deductible, while only in Belgium, Ireland and Italy are transaction taxes payable. Meanwhile, if saving is debt-financed, the interest is deductible in Australia, New Zealand and the United States.
At the holding stage, marginal personal income tax rates are applied to dividend income in 15 countries. In two of these countries (Finland and Switzerland) only part of the dividend is exempt; while in the United Kingdom an allowance is first applied. In Norway a rate of return allowance is applied before income is subject to tax.
In 18 countries a flat withholding tax rate applies to dividend income. In Germany a tax-free allowance is first applied; while in Turkey 50% of dividends are exempt. In Japan the taxpayer has the choice whether to apply a flat rate or marginal personal income tax rates. In Korea, as with bank accounts and bonds, a final withholding tax is applied if combined interest and dividend income is less than KRW 20 million. Otherwise marginal personal income tax rates apply. Once again, the Netherlands exempts the first EUR 24 437 (in 2016) of savings from tax, and beyond this amount the deemed return approach applies.
In some cases publicly listed and non-publicly listed shares are treated differently. For example, in Argentina, dividends from publicly listed shares are exempt, but dividends from non-public offer shares are taxed.
Argentina, Colombia, France, Norway, Spain and Switzerland apply net wealth taxes on shareholdings, but typically with large exempt amounts or allowances so that only high wealth taxpayers are subject to them.
On disposal, capital gains on shares are taxed in 33 of 40 countries. However, in many countries concessionary rates (or even exemptions) apply for shares held longer than a minimum period or for capital gains of less than a specified amount. Greece applies a transaction tax on sale. In Estonia, while dividends are exempt from tax, capital gains are taxable.
Investment funds
A range of approaches are taken to the taxation of investment funds across countries. Some countries apply a broadly comprehensive approach; many apply a tax deferral approach; while a tax exempt approach is also applied in some countries. Table 2.5 provides further detail on the design features across the 40 countries covered in this report.
Table 2.5. Tax treatment of different forms of saving: investment funds
(as at 1 July 2016)
|
Country |
Acquisition of asset |
Holding of asset |
Disposal of asset |
||||||
|---|---|---|---|---|---|---|---|---|---|
|
PIT treatment |
Transaction tax |
PIT |
Other taxes |
PIT or CGT |
|||||
|
Interest expense deductible |
Amount of acquisition deductible |
Income from asset |
Income from asset |
Value of asset |
Realised income from asset |
Original value of asset |
Capital gains |
||
|
Australia |
Y |
N |
N |
Y |
N |
N |
N |
N |
N |
|
Austria |
N |
N |
N |
N |
Y1 |
Y2 |
Y1 |
N |
Y2 |
|
Belgium |
N |
N |
N |
N |
N |
N |
N |
N |
N3 |
|
Canada |
N |
N |
N |
Y4 |
N |
N |
N |
N |
Y4 |
|
Chile |
N |
N |
N |
N |
N |
N |
Y |
N |
Y5 |
|
Czech Republic |
N |
N |
N |
N |
Y1 |
N |
Y1 |
N |
Y6 |
|
Denmark |
N |
N |
N |
N |
Y7 |
N |
Y8 |
N |
N |
|
Estonia |
N |
N |
N |
N |
N |
N |
Y |
N |
Y |
|
Finland |
N |
N |
N |
N |
N |
N |
Y |
N |
Y |
|
France |
N |
Y9 |
N |
N |
N |
Y10 |
Y |
N |
N11 |
|
Germany |
N |
N |
N |
N |
N |
N |
N |
||
|
Greece |
N |
N |
N |
N |
N |
N |
Y |
N |
Y |
|
Hungary |
N |
N |
N |
N |
N |
N |
Y |
N |
Y13 |
|
Iceland |
N |
N |
N |
N |
N |
N |
Y14 |
N |
Y14 |
|
Ireland |
N |
N |
N |
N |
N |
N |
Y15 |
N |
Y15 |
|
Israel |
N |
N |
N |
N |
N |
N |
Y |
N |
Y16 |
|
Italy |
N |
N |
N |
N |
N |
N |
Y |
N |
Y |
|
Japan |
N |
N |
N |
N |
N |
N |
Y |
N |
Y |
|
Korea |
N |
N |
N |
Y17 |
N |
N |
Y18 |
N |
Y18 |
|
Latvia |
N |
N |
N |
N |
Y1 |
N |
N |
N |
Y |
|
Luxembourg |
N |
N |
N |
N |
N |
N |
Y19 |
N |
Y20 |
|
Mexico |
N |
N |
N |
N |
N |
N |
Y |
N |
Y |
|
Netherlands |
N |
N |
N |
N |
Y21 |
N |
N |
N |
N |
|
New Zealand |
Y |
N |
N |
N |
Y22 |
N |
N |
N |
N |
|
Norway |
N |
N |
N |
N |
N |
Y23 |
Y |
N |
Y |
|
Poland |
N |
N |
N |
N |
N |
N |
Y |
N |
Y |
|
Portugal |
N |
N |
N |
N |
Y1 |
N |
N |
N |
N |
|
Slovak Republic |
N |
N |
N |
N |
N |
N |
Y |
N |
Y |
|
Slovenia |
N |
N |
N |
N |
N |
N |
Y1 |
N |
Y24 |
|
Spain |
N |
N |
N |
N25 |
N |
Y26 |
Y |
N |
Y |
|
Sweden |
N |
N |
N |
N |
Y27 |
N |
Y |
N |
Y |
|
Switzerland |
N |
N |
N |
Y14 |
N |
N |
N |
N |
Y14 |
|
Turkey |
N |
N |
N |
N |
Y28 |
N |
Y28 |
N |
Y28 |
|
United Kingdom |
N |
N |
N |
Y29 |
N |
N |
N |
N |
Y29 |
|
United States |
Y30 |
N |
N |
Y |
N |
N |
N |
N |
Y30 |
|
Argentina |
N |
N |
N |
N |
N |
Y |
N |
N |
N |
|
Bulgaria |
N |
N |
N |
N |
N |
N |
N |
N |
N |
|
Colombia |
N |
N |
N |
N |
N |
Y |
N |
N |
N |
|
Lithuania |
N |
N |
N |
N |
N |
N |
Y |
N |
Y |
|
South Africa |
N |
N |
N |
Y |
N |
N |
N |
N |
Y |
Notes:
1. Final withholding tax
2. 60% of capital gains retained in a fund are taxed at 27.5%; and this is credited against capital gains tax to be paid on distribution to the investor
3. For a SICAVs/BEVEKS fund having invested at least 25% of the portfolio in interest-bearing debt securities, capital gains obtained through the repurchase of own shares or through a partial or total distribution of the social assets of the SICAV/BEVEK, are liable to the 27% withholding tax in respect of the part corresponding to, on the one hand, the interest received by the SICAV/BEVEK and, on the other hand, capital gains generated by the debt securities portfolio, after deduction of losses.
4. Flow through treatment, so taxed each year in hands of the investor
5. All distributions are treated as dividends and taxed at progressive PIT rates. Dividend income is exempt for “small taxpayers” or taxpayers whose only other income is from employment and pensions, and where interest income is less than CLP 923 660 (in 2016).
6. Subject to flat rate cap gains tax if gain greater than CZK 100 000 and held for three years or less.
7. Taxed at flat rate as “net capital income” under semi-dual system
8. Flat final withholding tax
9. For investment in innovation-focused mutual funds (FCPI) or proximity investments funds (FIP), taxpayers benefit from a reduction of their income tax equal to 18% of the cash subscriptions, up a ceiling of EUR 12 000 for single person (i.e. a EUR 2 160 reduction) and EUR 24 000 for a married couple (i.e. a EUR 4 320 reduction). The rate is increased to 38% if the investment is in Corse, and 42% if it is in overseas territories. Investment in Sofica also provides a reduction of 30% of the cash subscription on the income tax. The cash subscription eligible for the reduction is subject to a double ceiling: EUR 12 000 for single person or EUR 24 000 for a married couple and less than 25% of the global income. The rate is increased to 36% if the Sofica realizes at least 10% of the investments in production societies before December 31 of the year following the subscription.
10. Net wealth tax. The taxable threshold is set at EUR 1.3 million, but once this threshold has been achieved, the assets are taxed as of EUR 800 000.
11. No CGT if investment in innovation-focused mutual funds (FCPI) or proximity investments funds (FIP).
12. Deemed distribution annually
13. Preferential capital income tax rate of 10% and healthcare rate of 6% if held 3+ years; Exempt from capital income tax if held 5+ years. Healthcare tax only applies if income above HUF 450 000.
14. Flat capital income tax rate.
15. Flat rate exit tax on distribution
16. Capital gains are indexed for inflation
17. Non-qualified funds are treated as pass-through entities.
18. Qualified funds taxed on distribution
19. A 15% withholding tax is applied on dividend income. However, this withholding tax is imputed with other taxes in the tax return. The dividend income is included with other revenues and subject to the global personal income tax rate. 50% of distributed dividend income is included in the personal income tax base.
20. If the asset is sold more than 6 months after purchase there is no capital gains taxation applicable
21. Deemed return on asset value is taxed. The first EUR 24 437 (in 2016) of total assets excluding pensions and owner-occupied housing is exempt.
22. Portfolio investment entity (PIE) regime: income earned by the PIE is attributed to the investor each year and taxed annually at progressive “prescribed investor rates”. Final distribution to the investor is not taxed.
23. Net wealth tax. The tax-free allowance is NOK 1 400 000.
24. The tax rate for capital gains depends on the holding period: 25% for up to 5 years; 15% from 5 to 10 years; 10% from 10 to 15 years; 5% from 15 to 20 years; and non-taxation for greater than 20 years.
25. Untaxed if dividend income.
26. Net wealth tax. Each resident taxpayer is entitled to a general exemption of EUR 700 000.
27. Imputed income of the investment fund is taxed at the flat 30% tax rate for capital income
28. 10% tax applied at fund level if held <1 year. 10% withholding tax is not applied on distribution from the investment fund if held for >1 year if the equity portion of investment fund’s portfolio is at least 51% at all times. If applicable, the withholding tax is final.
29. GBP 1 000 savings allowance for interest income; GBP 5 000 dividend allowance; GBP 11 100 capital gain “annual exempt amount”.
30. Interest expense is generally deductible up to the amount of investment income. A lower rate schedule applies for long term capital gains of more than one year. However, the taxpayer must choose between deducting the interest expense and claiming the preferential capital gains tax rate.
On acquisition (i.e. purchase of a share in an investment fund), France is the only country to provide tax relief – and then only in relation to savings placed in specified funds and subject to a ceiling. No country imposes transaction taxes on investment funds. If saving is debt-financed, the interest is deductible in Australia, New Zealand and the United States.
At the holding stage, 10 countries tax income as it accrues in the investment fund. This is either achieved by treating the fund as a pass-through entity (as in Australia, Canada, the United Kingdom and the United States); by deeming a distribution to have occurred each year if income has not been actually distributed (as in Germany); or by requiring distribution each year (as in Korea). Eight of these countries impose progressive personal income tax rates and the other three impose flat rates. The Netherlands applies its exempt savings amount and deemed return method. In Argentina, no tax is imposed in the fund if returns are dividends from publicly listed companies. In contrast, tax is only imposed on the fund in Bulgaria if it receives dividend income.
Argentina, Colombia, France, Norway, Spain and Switzerland apply net wealth taxes on investment fund holdings, but with typically large exempt amounts or allowances so that only high wealth taxpayers are subject to them.
Six countries impose tax at both the fund level and on distribution. Meanwhile, 19 countries only tax income accrued in the fund upon distribution – either as interest, dividends or capital gains, depending on the fund and the form of the return. In many cases, distributions are tax preferred, especially capital gains.
Private pension funds
Private pensions are taxed following an expenditure tax approach in most countries, though the exact degree of concessionary treatment (as compared to a comprehensive or flat rate capital income tax approach) varies significantly. Exceptions include Argentina which follows a tax exempt approach; Sweden and the Slovak Republic that follow tax deferral approaches; and New Zealand and Turkey that follow broadly comprehensive approaches. Table 2.6 provides further detail on the design features across the 40 countries covered in this report.
Table 2.6. Tax treatment of different forms of saving: private pensions
(as at 1 July 2016)
|
Country |
Acquisition of asset |
Holding of asset |
Disposal of asset |
||||||
|---|---|---|---|---|---|---|---|---|---|
|
PIT treatment |
Transaction tax |
PIT |
Other taxes |
PIT or CGT |
|||||
|
Interest expense deductible |
Amount of acquisition deductible |
Income from asset |
Income from asset |
Value of asset |
Realised income from asset |
Original value of asset |
Capital gains |
||
|
Australia |
N |
Y1 |
N |
N |
Y |
N |
N2 |
N |
NA |
|
Austria |
N |
Y3 |
N |
N |
N |
N |
N4 |
N4 |
NA |
|
Belgium |
N |
Y1 |
N |
N |
N |
N |
Y5 |
Y5 |
NA |
|
Canada |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Chile |
N |
Y |
N |
N |
N |
N |
Y |
Y |
NA |
|
Czech Republic |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Denmark |
N |
Y3 |
N |
N |
Y |
N |
Y |
Y |
NA |
|
Estonia |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Finland |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
France |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Germany |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Greece |
N |
Y |
N |
N |
N |
N |
Y |
Y |
NA |
|
Hungary |
N |
Y3 |
N |
N |
N |
N |
N |
N |
NA |
|
Iceland |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Ireland |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Israel |
N |
Y1 |
N |
N |
N |
N |
N |
N |
NA |
|
Italy |
N |
Y3 |
N |
N |
Y6 |
N |
Y5 |
Y5 |
NA |
|
Japan |
N |
Y3 |
N |
N |
N |
N |
Y7 |
Y7 |
NA |
|
Korea |
N |
Y1 |
N |
N |
N |
N |
Y5 |
Y5 |
NA |
|
Latvia |
N |
Y3 |
N |
N |
Y8 |
N |
N |
N |
NA |
|
Luxembourg |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Mexico |
N |
Y3 |
N |
N |
N |
N |
Y9 |
Y9 |
NA |
|
Netherlands |
N |
Y3 |
N |
N |
N |
N |
Y10 |
Y10 |
NA |
|
New Zealand |
N |
N |
N |
Y |
N |
N |
N |
N |
NA |
|
Norway |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Poland |
N |
Y3 |
N |
N |
N |
N |
Y5 |
Y5 |
NA |
|
Portugal |
N |
Y1 |
N |
N |
N |
N |
Y5 |
Y5 |
NA |
|
Slovak Republic |
N |
N |
N |
N |
N |
N |
Y |
N |
NA |
|
Slovenia |
N |
Y3 |
N |
N |
N |
N |
Y11 |
Y11 |
NA |
|
Spain |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Sweden |
N |
N |
N |
N |
Y12 |
N |
Y |
N |
NA |
|
Switzerland |
N |
Y3 |
N |
N |
N |
N |
Y13 |
Y13 |
NA |
|
Turkey |
N |
N |
N |
N |
N |
N |
N14 |
N |
NA |
|
United Kingdom |
N |
Y3 |
N |
N |
N |
N |
Y15 |
Y15 |
NA |
|
United States |
N |
Y3 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Argentina |
N |
N |
N |
N |
N |
N |
N |
N |
NA |
|
Bulgaria |
N |
Y3 |
N |
N |
N |
N |
N16 |
N16 |
NA |
|
Colombia |
N |
Y |
N |
N |
N |
Y |
N |
N |
NA |
|
Lithuania |
N |
Y3 |
N |
N |
N |
N |
N |
N |
NA |
|
South Africa |
N |
Y3 |
N |
N |
N |
N |
Y17 |
Y17 |
NA |
Notes:
1. Tax credit, subject to limit.
2. Taxed if above threshold.
3. Deduction, subject to limit.
4. Untaxed as long as transformed into a life-long annuity.
5. Flat rate on distribution.
6. Rate is 20%; but returns from government bonds are only taxed at 12.5% (technically is a 62.5% inclusion).
7. Taxable at marginal PIT rates, but taxpayer receives a deduction (that is lower for higher income taxpayers).
8. Withholding tax on dividend and interest income earned by pension fund.
9. Exempt up to a daily amount not exceeding fifteen times the minimum wage. For the excess amount the tax is paid accordingly to the standard personal income tax rates. If paid in one lump sum, exempt for a total amount of ninety annual minimum wages for every year worked and the amount in excess is taxed according to the personal income tax table.
10. The EET-system (pension is taxed when the pension is payed) only applies if the pension savings do not exceed the allowed limit of 1.875 percent of the annual wage, above a fixed threshold. The EET-system applies as far as the maximum annual wage does not exceed the amount of EUR 103 317 per year.
11. Only 50% of pension distribution is included in the tax base.
12. Imputed income of the pension fund is taxed at a flat 15% tax rate.
13. 1/5 of rates applied to pension distributions if annuities.
14. Untaxed unless withdraw from plan early (less than 10 years), or before eligible for pension benefits.
15. 25% of distributions (up to lifetime limit of GBP1m) can be withdrawn at age 55 tax free (which the majority of people do); remainder is taxed at the taxpayer’s marginal tax rate.
16. Distributions are untaxed if reached retirement age, otherwise are taxed at 10% rate.
17. One third of pension wealth is immediately distributable as a lump sum and taxed at reduced PIT rates; two thirds is taxed at normal marginal PIT rates.
At the acquisition stage, 35 of 40 countries provide tax relief for contributions made to private pension funds. In most countries relief is provided as a deduction, although in several countries a tax credit is provided instead. Limits are placed on the size of the tax relief in all but two countries (Chile and Greece). Transaction taxes are not imposed in any country.
At the holding stage, income accruing in the pension fund is only taxed in six countries, and generally at flat rates. Colombia applies its net wealth tax to assets in pension funds, but the remaining countries with net wealth taxes do not.
On distribution, both contributions and accumulated returns are taxed in most countries, though often at concessionary rates. Distributions are exempt in countries following a comprehensive approach (New Zealand, Turkey). Additionally, several countries that provide tax relief up front also exempt distributions resulting in highly concessionary tax treatment. For example, Austria exempt distributions if an annuity is paid out; Lithuania exempt distributions if retirement age has been reached; and Argentina exempt distributions unconditionally.
Tax-favoured savings accounts
Tax-favoured savings accounts are present in 17 out of 40 countries covered in this study, with the type of concessionary treatment (as compared to a comprehensive approach) varying across countries. Some countries apply a tax exempt approach; some a broadly comprehensive approach but with concessionary rates at the holding stage, while a small number of countries apply an expenditure tax approach. Table 2.7 provides further detail on the design features across the 17 countries with such accounts.
Table 2.7. Tax treatment of different forms of saving: tax-favoured savings accounts
(as at 1 July 2016)
|
Country |
Acquisition of asset |
Holding of asset |
Disposal of asset |
||||||
|---|---|---|---|---|---|---|---|---|---|
|
PIT treatment |
Transaction tax |
PIT |
Other taxes |
PIT or CGT |
|||||
|
Interest expense deductible |
Amount of acquisition deductible |
Income from asset |
Income from asset |
Value of asset |
Realised income from asset |
Original value of asset |
Capital gains |
||
|
Australia |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Austria |
N |
Y1 |
N |
N |
Y2 |
N |
N |
N |
NA |
|
Belgium |
N |
N |
N |
N |
N |
N |
N |
NA |
|
|
Canada |
N |
N |
N |
N4 |
N |
N |
N |
N |
NA |
|
Chile |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Czech Republic |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Denmark |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Estonia |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Finland |
N |
Y5 |
N |
N |
N |
N |
Y5 |
Y5 |
NA |
|
France |
N |
N |
N |
N6 |
N |
Y7 |
N |
N |
NA |
|
Germany |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Greece |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Hungary |
N |
N |
N |
Y8 |
N |
N |
N |
N |
NA |
|
Iceland |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Ireland |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Israel |
N |
N |
N |
N |
N |
N |
Y9 |
N |
NA |
|
Italy |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Japan |
N |
N |
N |
N10 |
N |
N |
N |
N |
NA |
|
Korea |
N |
N |
N |
Y11 |
N |
N |
N |
N |
NA |
|
Latvia |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Luxembourg |
N |
Y12 |
N |
Y13 |
N |
N |
N |
N |
NA |
|
Mexico |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Netherlands |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
New Zealand |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Norway |
N |
Y14 |
N |
N |
N |
N |
Y |
Y |
NA |
|
Poland |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Portugal |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Slovak Republic |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Slovenia |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Spain |
N |
N |
N |
N15 |
N |
Y16 |
N |
N |
NA |
|
Sweden |
N |
N |
N |
N |
Y17 |
N |
N |
N |
NA |
|
Switzerland |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Turkey |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
United Kingdom |
N |
N |
N |
N18 |
N |
N |
N |
N |
NA |
|
United States |
N |
N19 |
N |
N20 |
N |
N |
N |
N |
NA |
|
Argentina |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Bulgaria |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
Colombia |
N |
Y |
N |
N |
N |
Y |
N21 |
N21 |
NA |
|
Lithuania |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
NA |
|
South Africa |
N |
N |
N |
N22 |
N |
Y |
N |
N |
NA |
Notes:
1. A refundable tax credit is given for contributions to special housing savings bank accounts where held for a minimum of six years. Contributions up to EUR 1 200 per year receive the tax credit. The tax credit rate varies with the average interest rate of Austrian government bonds.
2. Final withholding tax
3. First EUR 1 880 of interest is tax free.
4. Max contribution of CAD 5 500 per year (as of 2016), but unutilised contribution room is carried forward to future years.
5. Treated like pension income (EET, max deduction of EUR 5 000) if retained until paid out in instalments over at least 10 years following retirement age
6. Certain regulated savings income is expressly exempt from income tax: “A passbook”, people’s savings passbooks (LEP), youth passbooks, savings accounts for sustainable development (LDD), housing savings accounts (CEL). Interest on home-ownership savings plans (plans d’épargne-logement, PEL) is subject to the progressive income tax scale (or, optionally, a flat rate of 24%) for the portion of accrued interest as from the plan’s twelfth anniversary. Interest from PEL and CEL are subject to social taxes.
7. Net wealth tax. The taxable threshold is set at EUR 1.3 million, but once this threshold has been achieved, the assets are taxed as of EUR 800 000.
8. Interest income is exempt if held for 5+ years. Healthcare tax due if income above HUF 450 000.
9. Advanced-study funds (“Keren Hishtalmut”). These funds are enjoyed by around 40% of the wage earners where the employer pays 7.5% of the worker’s salary and the employee contributes 2.5% - up to a ceiling of ILS 15 712 per month. The employer contribution is tax exempt although there is no tax benefit on the employee contribution. The fund gains are tax exempt. Distributions are tax exempt after six years for any purpose. The self-employed enjoy an equivalent benefit.
10. Exempt up to JPY 5 500 000
11. Reduced rate for savings of up to KRW 20 million per year if account maintained for 5 years. Up to KRW 50 million if aged 15-29, and for business income earners whose global income is KRW 35 million or less and who maintain account for 3 years. Those aged 65 or older, disabled persons, and persons of distinguished service to the State, may invest up to KRW 50 million.
12. The contributions to building societies are deductible up to an amount of EUR 672 per year, only if the assets of this account are used to finance the construction, the purchasing or the transformation of an apartment or a dwelling for own needs.
13. Interest attributed to a building society account are exempted from taxation, however only if the assets of this account are used to finance the construction, the purchasing or the transformation of an apartment or a dwelling for own needs.
14. 20% tax credit for persons under the age of 34 for deposits in special home savings bank accounts. Maximum annual deposit is NOK 20 000 and maximum total deposit is NOK 150 000. In order to keep the tax credit the deposit must be used to acquire a dwelling or to pay instalments on loans on a dwelling that has been acquired after the home savings account was established.
15. Earnings are tax exempt as long as held for five years and then withdrawn in the form of a lump sum. Contributions cannot exceed EUR 5 000 per year.
16. Net wealth tax. Each resident taxpayer is entitled to a general exemption of EUR 700 000.
17. Imputed income of the investment savings account is taxed at a flat 30% tax rate.
18. Maximum total savings of GBP 20 000
19. However, some states have a limited deduction for contributions to tax preferred 529 plans for saving for future college expenses.
20. Some limitations depending on scheme
21. Requires a 5 year investment and then money to be used to purchase house otherwise distributions are taxable.
22. Annual contributions limited to SAR 30 000
On acquisition (i.e. deposit in a tax-favoured savings account), five countries provide tax relief. Deposits are deductible up to a specified limit in Colombia, Finland and Luxembourg, while tax credits are applied in Austria and Norway, again up to a specified limit. Transaction taxes are not imposed in any country.
At the holding stage, no tax is imposed in 12 out of the 17 countries, while the remaining five impose taxes at concessionary rates. Net wealth taxes are applied in Colombia, France and Spain. On distribution, no tax is imposed in 14 out of the 17 countries.
To receive tax relief, various requirements are often imposed (as specified in footnotes to the tables). Austria, Colombia, Finland, Hungary and Spain impose minimum holding period requirements, while distributed funds can only be used for specified purposes in Israel, Luxembourg, Norway and the United States. Meanwhile, contribution limits are applied in Canada, Japan, Korea, the United States5 , South Africa and the United Kingdom.
Owner-occupied residential property
The tax treatment of owner-occupied residential property is complicated. While capital income is typically untaxed, recurrent property taxes and in many cases transaction taxes are applied. Table 2.8 provides further detail on the design features across the 40 countries covered in this report.
Table 2.8. Tax treatment of different forms of saving: owner-occupied residential property
(as at 1 July 2016)
|
Country |
Acquisition of asset |
Holding of asset |
Disposal of asset |
||||||
|---|---|---|---|---|---|---|---|---|---|
|
PIT treatment |
Transaction tax |
PIT |
Other taxes |
PIT or CGT |
|||||
|
Interest expense deductible |
Amount of acquisition deductible |
Income from asset |
Income from asset |
Value of asset |
Realised income from asset |
Original value of asset |
Capital gains |
||
|
Australia |
N |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
Austria |
N |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
Belgium |
Y1 |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
Canada |
N |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
Chile |
Y2 |
N |
N |
N |
N |
Y3 |
N |
N |
N |
|
Czech Republic |
Y |
N |
Y |
N |
N |
Y |
N |
N |
Y4 |
|
Denmark |
Y |
N |
Y |
N |
Y5 |
Y |
N |
N |
N |
|
Estonia |
Y6 |
N |
N |
N |
N |
Y |
N |
N |
N |
|
Finland |
Y7 |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
France |
N |
N |
Y |
N |
N |
Y8 |
N |
N |
N |
|
Germany |
N |
N |
Y |
N |
N |
Y |
N |
N |
Y9 |
|
Greece |
Y |
N |
Y10 |
N |
Y5 |
Y |
N |
N |
N |
|
Hungary |
N |
N |
Y10 |
N |
N |
Y11 |
N |
N |
Y12 |
|
Iceland |
N |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
Ireland |
N |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
Israel |
N |
N |
Y |
N |
N |
Y |
N |
N |
Y13 |
|
Italy |
Y14 |
N |
Y |
N |
N |
Y15 |
N |
N |
Y16 |
|
Japan |
Y17 |
N |
N |
N |
N |
Y |
N |
N |
Y |
|
Korea |
Y18 |
N |
Y |
N |
N |
Y |
N |
N |
Y19 |
|
Latvia |
N |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
Luxembourg |
Y20 |
N |
N |
N |
N |
Y |
N |
N |
N |
|
Mexico |
Y |
N |
Y |
N |
N |
Y |
N |
N |
N21 |
|
Netherlands |
Y |
N |
Y |
Y5 |
N |
Y22 |
N |
N |
N |
|
New Zealand |
N |
N |
N |
N |
N |
Y |
N |
N |
N |
|
Norway |
Y |
N |
Y |
N |
N |
Y23 |
N |
N |
N |
|
Poland |
N |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
Portugal |
N |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
Slovak Republic |
N |
N |
N |
N |
N |
Y |
N |
N |
N |
|
Slovenia |
N |
N |
Y |
N |
N |
Y |
N |
N |
Y24 |
|
Spain |
N25 |
N |
Y |
N |
N |
Y26 |
N |
N |
Y27 |
|
Sweden |
Y |
N |
Y |
N |
N |
Y28 |
N |
N |
Y29 |
|
Switzerland |
Y |
N |
Y30 |
Y5 |
N |
N |
N |
N |
|
|
Turkey |
N |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
United Kingdom |
N |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
United States |
Y |
N |
Y |
N |
N |
Y |
N |
N |
Y32 |
|
Argentina |
Y |
N |
N |
N |
N |
Y31 |
N |
N |
N |
|
Bulgaria |
Y33 |
N |
Y |
N |
N |
Y |
N |
N |
N |
|
Colombia |
Y |
N |
N |
N |
N |
Y31 |
N |
N |
Y |
|
Lithuania |
N |
N |
N |
N |
N |
Y |
N |
N |
Y34 |
|
South Africa |
N |
N |
Y |
N |
N |
Y |
N |
N |
Y35 |
Notes:
1. Tax credit received equals EUR 0.45 for every euro of interest paid. Cap of EUR 2 300 tax credit amount.
2. Interest not deductible if taxpayer earns above CLP 83 129 400 (in 2016).
3. Recurrent property tax applies if house value of CLP 21 934 249 or greater.
4. Gains are taxable if held for five years or less; or two years or less if the taxpayer’s main residence (unless the gains are used to finance a new residence in which case not taxable even if held for two years or less).
5. Tax on imputed rental income.
6. Mortgage interest is deductible up to EUR 1 200 per year.
7. 55% of mortgage interest is deductible against capital income. Remaining interest is deductible against earned income up to EUR 1 400 per year.
8. Recurrent property tax plus net wealth tax. The taxable threshold for the net wealth tax is set at EUR 1.3 million, but once this threshold has been achieved, the assets are taxed as of EUR 800 000.
9. No CGT if held more than 10 years.
10. First-time house buyers are exempt from the transaction tax.
11. Recurrent property tax (building tax on dwellings) due in only some municipalities. In 2017 only 548 municipalities out of 3 178 levied building tax on dwellings.
12. The taxable capital gain is reduced by an increasing percentage each year and is exempt after five years.
13. CGT only applies on gains above a sale price of ILS 4.5 million.
14. A tax credit of 19% of mortgage interest is provided up to a max of EUR 4 000 of interest payment
15. Only luxury homes subject to recurrent property tax
16. Exempt from CGT if held at least five years
17. Tax credit equal to 1% of mortgage value
18. Deductible at taxpayer’s marginal rate unless house cost more than KRW 400 million, and up to a limit depending on years being paid off.
19. 40% tax rate for short term holdings of less than 1 year. No CGT if held for 2 years or more. CGT is however still applicable if house is worth more than KRW 900 million.
20. Mortgage interest is deductible below a threshold (EUR 1 500 years 1-5; EUR 1 125 years 5-10; then EUR 750).
21. Unless gain exceeds 700 thousand investment units, or have sold a house within the previous five years.
22. Recurrent property tax
23. Recurrent property tax and net wealth tax. The tax-free allowance for the net wealth tax is NOK 1 400 000.
24. The tax rate for capital gains depends on the holding period: 25% for up to 5 years; 15% from 5 to 10 years; 10% from 10 to 15 years; 5%; and non-taxation for greater than 20 years.
25. A tax credit (which covered interest and amount of acquisition) was repealed in 2013. However, it can still be applied as a temporary regime by taxpayers who were applying the credit prior to 2013. According to their legal competences the mayority of regional governments (Comunidades Autónomas) apply the tax credit.
26. Recurrent property tax and net wealth tax. For net wealth tax, an exemption threshold of EUR 300 000 applies for the main residence.
27. However, full roll-over relief applies in respect of capital gains from disposals by any taxpayer of his primary residence. The exemption requires that the entire proceeds be reinvested within a 2-year period in the acquisition of another primary residence. Full exemption applies for taxpayers over 65 years old (see above).
28. Recurrent property tax has a maximum amount of SEK 7 412 for a house and SEK 1 268 for an apartment.
29. Only a proportion (22/30) of the capital gain is taxable.
30. Transaction taxes and recurrent property taxes are applied in many, but not all cantons. Neither are applied in Zurich which is used as the representative canton in the METR modelling in Chapter 3.
31. Recurrent property tax plus net wealth tax.
32. Untaxed if capital gain of less than USD 250 000 (or USD 500 000 for married filing jointly) and held for at least 2 of the last 5 years. Otherwise taxed at marginal PIT rates for short-term gains, and at preferential long-term rates for long-term gains.
33. Mortgage interest is deductible (for a married investor only) if either the investor or the spouse was under 35 years of age (and they were already married) at the start of the mortgage.
34. Taxable unless place of residence for at least 2 years; or if less than 2 years and income is used within one year to purchase a new place of residence.
35. Exempt if capital gain of less than SAR 2 million. Otherwise subject to marginal rates after 40% exclusion.
On acquisition, while purchase costs are never deductible, 21 out of 40 countries provide tax relief (either a deduction or tax credit) for the interest expense incurred in purchasing a property with debt, though in many cases the available tax relief is capped. Meanwhile, transaction taxes are applied in 30 out of 40 countries.
At the holding stage, only four countries (Denmark, Greece, the Netherlands and Switzerland) tax imputed rental income (generally at low rates, and only when at least partially debt-financed in the case of the Netherlands). A net wealth tax is imposed on owner-occupied property in all six countries with net wealth taxes (Argentina, Colombia, France, Norway, Spain and Switzerland), but a 30% rate reduction applies in France and only 25% of the property value is subject to the tax in Norway. Spain applies a specific exemption threshold to the main residence of up to EUR 300 000, which is additional to the EUR 700 000 general exemption threshold. Meanwhile, recurrent property taxes are imposed in all 40 countries, though not all sub-central areas apply a tax in some countries (e.g. Hungary, Switzerland).
At disposal, only 14 countries tax capital gains. Furthermore, these taxes are often imposed at concessionary (or zero) rates, often subject to a minimum holding period test.
Rented residential property
A broadly comprehensive approach is typically applied to rented residential property. In addition, recurrent property taxes and in many cases transaction taxes are also applied. Table 2.9 provides further detail on the design features across the 40 countries covered in this report.
Table 2.9. Tax treatment of different forms of saving: rented residential property
(as at 1 July 2016)
|
Country |
Acquisition of asset |
Holding of asset |
Disposal of asset |
||||||
|---|---|---|---|---|---|---|---|---|---|
|
PIT treatment |
Transaction tax |
PIT |
Other taxes |
PIT or CGT |
|||||
|
Interest expense deductible |
Amount of acquisition deductible |
Income from asset |
Income from asset |
Value of asset |
Realised income from asset |
Original value of asset |
Capital gains |
||
|
Australia |
Y |
N1 |
Y |
Y |
N |
Y |
N |
N |
Y |
|
Austria |
Y |
N |
Y |
Y |
N |
Y |
N |
N |
Y |
|
Belgium |
Y2 |
N |
Y |
Y3 |
N |
Y |
N |
N |
Y4 |
|
Canada |
Y |
N |
Y |
Y |
N |
Y |
N |
N |
Y |
|
Chile |
Y5 |
N |
N |
N |
N |
Y6 |
N |
N |
N |
|
Czech Republic |
Y |
N |
Y |
Y |
N |
Y |
N |
N |
Y7 |
|
Denmark |
Y |
N |
Y |
N |
Y8 |
Y |
N |
N |
Y9 |
|
Estonia |
Y10 |
N |
N |
Y11 |
N |
Y |
N |
N |
Y |
|
Finland |
Y12 |
N |
Y |
Y13 |
N |
Y |
N |
N |
Y |
|
France |
N |
N |
Y |
Y |
N |
Y14 |
N |
N |
Y15 |
|
Germany |
Y |
N |
Y |
Y |
N |
Y |
N |
N |
Y16 |
|
Greece |
Y |
N |
Y17 |
Y |
N |
Y |
N |
N |
Y |
|
Hungary |
N |
N |
Y |
Y |
N |
Y18 |
N |
N |
Y19 |
|
Iceland |
N |
N |
Y |
N |
Y20 |
Y |
N |
N |
Y |
|
Ireland |
Y |
N |
Y |
Y |
N |
Y |
N |
N |
Y |
|
Israel |
N |
N |
Y |
Y21 |
N |
Y |
N |
N |
Y |
|
Italy |
N |
N |
Y22 |
Y23 |
Y23 |
Y |
N |
N |
Y24 |
|
Japan |
Y |
N |
N |
Y |
N |
Y |
N |
N |
Y |
|
Korea |
Y25 |
N |
Y |
Y26 |
N |
Y |
N |
N |
Y27 |
|
Latvia |
N |
N |
Y |
Y28 |
N |
Y |
N |
N |
Y |
|
Luxembourg |
Y |
N |
N |
Y |
N |
Y |
N |
N |
Y |
|
Mexico |
Y |
N |
Y |
Y |
N |
Y |
N |
N |
Y |
|
Netherlands |
N |
N |
Y |
N |
Y29 |
Y |
N |
N |
N |
|
New Zealand |
Y |
N |
N |
Y |
N |
Y |
N |
N |
N |
|
Norway |
Y |
N |
Y |
Y |
N |
Y30 |
N |
N |
Y |
|
Poland |
Y |
N |
Y |
Y |
N |
Y |
N |
N |
Y |
|
Portugal |
N |
N |
Y |
Y |
N |
Y |
N |
N |
Y31 |
|
Slovak Republic |
N |
N |
N |
Y32 |
N |
Y |
N |
N |
N |
|
Slovenia |
N |
N |
Y |
N |
Y1 |
Y |
N |
N |
Y33 |
|
Spain |
Y |
N |
Y |
Y34 |
N |
Y35 |
N |
N |
Y |
|
Sweden |
Y |
N |
Y |
Y |
N |
Y36 |
N |
N |
Y37 |
|
Switzerland |
Y |
N |
Y38 |
Y |
N |
N |
N |
Y |
|
|
Turkey |
Y |
N |
Y |
Y |
N |
Y |
N |
N |
N |
|
United Kingdom |
Y |
N |
Y |
Y |
N |
Y |
N |
N |
Y |
|
United States |
Y |
N |
Y |
Y |
N |
Y |
N |
N |
Y40 |
|
Argentina |
N |
N |
N |
Y |
N |
Y |
N |
N |
N |
|
Bulgaria |
N |
N |
Y |
Y |
N |
Y |
N |
N |
Y41 |
|
Colombia |
Y |
N |
N |
Y |
N |
Y |
N |
N |
Y |
|
Lithuania |
N |
N |
N |
Y |
N |
Y |
N |
N |
Y42 |
|
South Africa |
Y |
N |
Y |
Y |
N |
Y |
N |
N |
Y43 |
Notes:
1. No general depreciation deduction. But cost of depreciable assets in a rental property are deductible
2. While mortgage interest is not deductible, a tax credit is provided equal to EUR 0.45 for every euro of mortgage principle paid, limited to the first EUR 76 780 of the loan.
3. Imputed income is taxed at progressive PIT rates
4. If held less than five years.
5. Interest not deductible if taxpayer earns above CLP 83 129 400 (90 UTA).
6. Recurrent property tax applies if house value of CLP 21 934 249 or greater.
7. Taxable if held <5 years; or <2 years if taxpayer’s main residence (unless used to finance new residence).
8. A splitting system applies. See Chapter 3 for further detail.
9. Taxed at flat rate as “net capital income” under semi-dual system
10. Mortgage interest is deductible up to EUR 1 200 per year.
11. Income tax only applies to 80% of rental income
12. Deductible against capital income
13. Rental income is taxed as investment income, but at a flat 30% rate.
14. Recurrent property tax plus net wealth tax. The taxable threshold for the net wealth tax is set at EUR 1.3 million, but once this threshold has been achieved, the assets are taxed as of EUR 800 000.
15. Subject to flat withholding tax plus social taxes. A reduction is provided if held more than six years. Untaxed if held for more than 22 years (withholding tax) and 30 years (social taxes).
16. No CGT if held more than 10 years
17. First-time house buyers are exempt from the transaction tax.
18. Recurrent property tax (building tax on dwellings) due in only some municipalities. In 2017 only 548 municipalities of 3178 levied building tax on dwellings.
19. The taxable capital gain is reduced by an increasing percentage each year and is exempt after five years.
20. 50% of rental income is exempt and 50% is subject to a flat 20% capital income tax rate
21. Taxpayer has three options: exemption of rental income up to a ceiling of ILS 5,030; 10% tax on gross rental income, with no deductions; or marginal tax rate (30% to 48%) on rental income net of expenses
22. Higher transaction tax rate for second homes than owner-occupied home
23. Actual rental income from residential property is taxed under ordinary PIT, with 95% of the annual rent included in the tax base. Alternatively, the taxpayer can choose to pay a 21% “coupon tax” on rental income (10% in the case of pre-agreed controlled rents).
24. Exempt from CGT if held at least five years
25. 40% of interest and principle is deductible against salary and wage income.
26. Exempt if rental income does not exceed KRW 20 million income until 2016.
27. 40% tax rate if held <1 year. For 5 years, taxable but get 15% reduction; if 10 years get 38% reduction
28. Special PIT rate applied at flat concessionary rate.
29. Deemed return on net asset value (value less debt) is taxed. First EUR 24 437 of total assets excluding pensions and owner-occupied housing is exempt.
30. Recurrent property tax and net wealth tax. The tax-free allowance for the net wealth tax is NOK 1 400 000.
31. Half of capital gains are indexed.
32. Rental income less than EUR 500 is untaxed.
33. The tax rate for capital gains depends on the holding period: 25% for up to 5 years; 15% from 5 to 10 years; 10% from 10 to 15 years; 5%; and non-taxation for greater than 20 years.
34. 60% reduction in tax on rental income
35. Recurrent property tax and net wealth tax. For net wealth tax, an exemption threshold of EUR 700 000 is applied in general for all assets, including rented residential property.
36. Recurrent property tax has a maximum amount of SEK 7 412 for a house and SEK 1 268 for an apartment.
37. Only 90% of the capital gain is taxable when used mainly for business
38. Transaction taxes and recurrent property taxes are applied in many, but not all cantons. Neither are applied in Zurich which is used as the representative canton in the METR modelling in Chapter 3.
39. Recurrent property tax plus net wealth tax.
40. Lower rate schedule applies for long term gains of more than one year. Gain attributable to any accelerated depreciation is taxable at ordinary rates. Gain attributable to straight-line depreciation is taxed at ordinary rates up to 25%.
41. No CGT if held more than three years, but only for one house sold per year.
42. If held less than 10 years.
43. Subject to marginal PIT rates after 40% exclusion.
On acquisition, while purchase costs are never deductible, 27 out of 40 countries provide tax relief (either a deduction or tax credit) for the interest expense incurred in purchasing a property with debt. In many cases, though less frequently than with owner-occupied property, the available tax relief is capped. In addition, Belgium provides tax relief for mortgage principal repayments (but not for interest payments). Transaction taxes are again applied in 30 out of 40 countries.
At the holding stage, 34 out of 40 countries tax rental income, while two (Belgium and the Netherlands) apply a tax on imputed rather than actual rental income. Rental income is typically taxed at progressive rates, but at flat rates in four countries (Denmark, Iceland, Italy and Slovenia). That said, in some cases rates are applied at concessionary levels, or on a reduced base (e.g. Latvia, Spain, Iceland, Italy). There are also income-based exemptions applied to rental income in Korea and the Slovak Republic.
A net wealth tax is imposed on rented property in all six countries with net wealth taxes (Argentina, Colombia, France, Norway, Spain and Switzerland), but only 80% of the property value is subject to the tax in Norway. Recurrent property taxes are imposed in all countries, though as with owner-occupied property, not all sub-central areas apply a tax in some countries (e.g. Hungary, Switzerland).
At disposal, at least some capital gains are taxed in 34 out of 40 countries. However, concessionary (or zero) rates are often applicable, often subject to a minimum holding period test.
Notes
← 1. An expenditure tax can be implemented either by taxing consumption directly (e.g. with a VAT) or indirectly by taxing income but exempting savings from the tax base.
← 2. In the United States, capital gains in the lowest brackets (currently 10% and 15%) are taxed at a zero rate. Capital gains in the middle brackets are taxed at 15%. Capital gains of the highest income taxpayers are taxed at 20%. As of 2017, capital gains of high income taxpayers are also subject to a 3.8% tax on net investment income.
← 3. Note that, as of 2017, the deemed return applied on net assets increases with the net value of the assets. The tax rate applied continues to be 30%.
← 4. Note that exemption thresholds can vary across asset types. For instance, Spain provides a general threshold (which covers all assets, including bank account balances), and a specific threshold for the main residence. Both thresholds are compatible.
← 5. The United States has a number of limited purpose savings accounts for education and health expenses which have limits on contributions.