The concept
Capital gains tax differs from a tax on wages in one fundamental respect: it is tied to an event. While an asset sits in the portfolio, the gain exists only on paper — there is no taxable base. The liability is born at the moment of realisation: a sale, an exchange, sometimes a gift or the owner's death.
Hence the central proposition of the whole private capital practice: the owner chooses when the tax arises. Three families of strategy are built around that trigger — defer realisation (hold, borrow against collateral), erase the accumulated gain (step-up basis, long-holding reliefs) and move it to a jurisdiction with a gentler regime.
Why do legislatures tolerate unrealised gain? Three reasons. Liquidity: taxing paper profit forces sales that are destructive to markets and to control of a business. Valuation: a private company has no quoted price, and disputes over value paralyse administration. Outflow: taxing capital hard before realisation pushes residents out of the country — Norway is demonstrating this live. So almost the whole world waits for the sale. Planning is built on that pause.
The frame: what creates the tax, at what rates, and what erases it.
| Taxable event | realisation: a sale, an exchange, sometimes a gift or the owner's death; unrealised gain creates no base |
|---|---|
| United States | LTCG 0 / 15 / 20% plus NIIT 3.8% — a working 23.8%; collectibles up to 28% |
| Europe | UK 24%, Germany 26.375%, France up to 34%, Spain up to 30%, Italy 26%, Belgium 10% from 2026 |
| Russia | 13% up to RUB 2.4m a year, 15% above; ЛДВ and the cl. 17.2 art. 217 relief within RUB 50m |
| Zero regimes | Switzerland, UAE, Singapore, Hong Kong; Puerto Rico — 4% for applications from 1 January 2027 |
| Erasing basis | step-up §1014 IRC on death (US); the UK and French uplift is paid for with inheritance tax |
| Counterforce | exit tax on a change of residence; Norway taxes gain above around NOK 3m at the date of departure |
Rates in 2026: a snapshot
United States
Long-term gains (assets held for more than a year) run on a preferential scale; above roughly $200–250k of income, NIIT (net investment income tax) is added on top:
- LTCG: 0 / 15 / 20%, top rate 20%; collectibles carry their own 28% ceiling, and the divergences between countries are collected in the country map of capital gains on collectibles
- NIIT: +3.8% — a working 23.8% for large capital
- Short-term gains: taxed as ordinary income, up to 37%
- Step-up basis (§1014 IRC): on death the heir's basis is reset to market value and the accumulated gain disappears for income tax purposes
Europe
- UK: main rate CGT 24% (lower rate 18%) after the increase of 30 October 2024; residential property at the same 18/24%
- Germany: Abgeltungsteuer 25% plus Solidaritätszuschlag at 5.5% of the tax = 26.375%; churchgoers pay church tax on top
- France: PFU 30% (12.8% income tax plus 17.2% social levies), with CEHR of up to 4% for high incomes — up to 34% in total
- Spain: escala del ahorro 19 / 21 / 23 / 27 / 30%; the top band of 30% above €300,000 has applied since 1 January 2025 under disposición final séptima of Ley 7/2024 (the state half of the scale is 15%, the autonomous half mirrors it)
- Italy: imposta sostitutiva of 26% on financial assets, with no split between qualified and non-qualified holdings; crypto moves to 33% from FY 2026, while euro stablecoins stay at 26%
- Belgium: 2026 brings the first general tax on gains from financial assets, headline rate 10%
The Belgian regime deserves a look of its own: the act took effect before its own publication and is built entirely out of thresholds.
| Entry into force | passed 3 April 2026, Moniteur belge 21 April (numac 2026002780), applies to gains from 1 January 2026 |
|---|---|
| Headline rate | 10% on financial assets |
| Annual exemption | €10,000 per person; the unused balance accrues at €1,000 a year up to a €15,000 ceiling |
| Participation importante of 20% or more | a one-off €1m exemption per five-year period, then a progression of 1.25 / 2.5 / 5 / 10% |
| Plus-values internes | transfers of holdings into a controlled company — 33% with no exceptions |
| Basis measured from | 31 December 2025: anything accumulated earlier is outside the charge |
| Losses | set off within their own year and their own category, with no carry-forward |
The law is four months old and there is no administrative practice on it yet.
Russia
- From 2025 gains on securities and participations run on a two-step scale: 13% up to RUB 2.4m a year, 15% above that
- ЛДВ, the long-term holding deduction: for listed securities held more than three years, a deduction of up to RUB 3m of gain for each year of ownership
- The five-year relief (cl. 17.2 of art. 217 of the Tax Code) for shares and participations: from 2025 the exemption operates within RUB 50m a year and only for tax residents
- From 2026 (Federal Law No. 425-FZ of 28 November 2025) the relief for LLC participations requires that real estate account for no more than 50% of the company's assets — the test familiar from shares has been extended to participations
Zeroes and near-zeroes
| Jurisdiction | Gains in an individual's hands | What breaks the zero |
|---|---|---|
| Switzerland | 0% on movable Privatvermögen, Art. 16 Abs. 3 DBG | status as a gewerbsmässiger Wertschriftenhändler; real estate falls under the cantonal Grundstückgewinnsteuer, which cantons are obliged to levy under Art. 12 Abs. 1 StHG |
| UAE | 0% | an individual's Personal and Real Estate Investment are outside the charge at any amount (Cabinet Decision 49/2023); corporate perimeter 9% above AED 375,000 from AED 1m turnover |
| Singapore | 0%: "Singapore does not tax gains from the sale or disposal of assets that are capital in nature" | Section 10L ITA from 1 January 2024: a foreign-element group, a foreign asset, income received in Singapore — all three. Economic substance saves it, bar foreign IPR |
| Hong Kong | 0% | recharacterisation as trading; safe harbour from 1 January 2024 — 24 months of continuous holding and a stake of at least 15% |
| Puerto Rico | 0% under an existing decree | for applications from 1 January 2027 the zero is replaced by 4% |
The Swiss zero rests on Kreisschreiben Nr. 36 of the ESTV, 27 July 2012: five preliminary-review criteria which, met cumulatively, guarantee that the tax authority sees private wealth management. A holding period of at least six months, annual turnover no greater than five times the portfolio, gains that do not substitute for missing income, derivatives only for hedging — and a fourth criterion that shoots the borrow leg straight in the foot: "Die Anlagen sind nicht fremdfinanziert", or else the taxable income on the securities must exceed the interest on the debt attributable to them.
A lombard facility against the portfolio breaks the safe harbour whenever dividends and coupons fail to cover the interest. Failing the review turns the gain into income from self-employment under Art. 18 DBG, taxed at ordinary progressive rates. The Asian version of the boundary between investor and trader is worked through in singapore-capital-gains-vs-trading.
Puerto Rico was rewritten in March 2026. Ley Núm. 38-2026 of 10 March extended the Individual Resident Investor programme from 31 December 2035 to 31 December 2055 and removed the zero in the same breath: applications filed from 1 January 2027 attract a flat 4% on gains, interest and dividends. Existing decrees under Act 60 and its predecessor Act 22-2012 run to 31 December 2035, with a right to renegotiate.
New applicants must additionally not have been resident on the island for at least six years before moving, in place of the former 17 January 2006 – 17 January 2012 window. The text of the law and the Grant Thornton alert tie the cut-off to the date of application; part of the commentary reads it as the date the decree is granted. Anyone planning for 2026 should close that fork with a DDEC position. The map of regimes for new residents is in special-tax-regimes.
Buy-borrow-die: the anatomy
The name is crude but honest: buy, borrow, die. In the American version every leg of the structure stands on statute.
Buy
Buy and hold. Without a sale, income compounds free of tax friction. The arithmetic on $10 million at 7% a year over 20 years:
| Regime | After 20 years |
|---|---|
| Hold without realisation | $38.7 million |
| Realise the gain annually and pay 23.8% — a net 5.33% | $28.3 million |
| Hold, then sell the whole position at the end | $31.9 million |
Pure deferral earned $3.6 million: the unpaid tax behaves like an interest-free loan from the treasury and works in the market for the owner throughout those years.
Borrow
One has to live on something. Instead of selling, the owner opens a credit line against the portfolio: an SBLOC with US brokers, lombard lending at private banks. The same leg works on illiquid assets: an art collection is lent against at an LTV of around 50% — borrowing against a collection instead of selling. A loan is debt: there is no income in it, and no tax.
Compare two routes to $1 million in cash:
| Route | Price |
|---|---|
| Selling a position with a zero basis | realise $1.31 million and hand over $312,000 of tax in one go |
| A loan against the portfolio at 5.5% | $55,000 a year |
Tax is an irrecoverable withdrawal of capital, interest is rent on time: as long as the portfolio earns more than the loan costs, deferral pays for itself with room to spare, and the exact threshold is worked out in the Q/A below.
Die
The ending is what makes the scheme legendary. Under §1014 IRC the heir takes a basis equal to the asset's market value at the date of death. Gain accumulated over decades disappears for income tax purposes: the heir can sell the next day and the capital gain is nil. The debt to the bank is discharged out of the estate and the remainder passes to the family. The advanced version, which moves basis up the family tree, is covered in upstream basis step-up.
An honest caveat: the construction works in full only in the United States, and the European die leg looks like this.
| Jurisdiction | Basis on death | Inheritance tax |
|---|---|---|
| United Kingdom | basis uplifted at the date of death | inheritance tax at 40% on an estate above the threshold |
| France | the latent gain is cleared on inheritance | droits de succession in the direct line reach 45% |
| Germany | no step-up: the heir takes the historic basis | Erbschaftsteuer |
In Europe the die leg is either paid for with inheritance tax or hobbled by carried-over basis — the map is in inheritance-tax-map.
Other lawful deferrals
Exchange funds. Several owners of concentrated positions contribute their shares to a partnership under §721: the exchange of shares for units happens without realisation. After seven years each takes out a diversified basket at the old basis. Diversification has happened and the tax is deferred until the basket is sold; the price is fees and a seven-year lock-up.
QOZ rollover. Gain reinvested in a Qualified Opportunity Fund within 180 days is deferred: under the classic rules the deferred tax is recognised at the end of 2026, while the updated programme from 2027 gives a rolling five-year deferral, and the fund's own gain is wiped out entirely after ten years of holding.
Loss harvesting. Realising loss-making positions offsets realised gains; the wash sale rule requires a 30-day pause before buying back. Dull, pedantic and more reliable than anything else on this list.
Depreciation shield. Accelerated write-offs of the cost of a business asset against current income work on the same logic of moving tax through time rather than cancelling it. Permanent 100% bonus depreciation after the OBBBA, and the tests that break it, are worked through on the example of an aircraft in The Aircraft as a Tax Manoeuvre.
PPR / main home. Almost everyone spares the sale of a main residence: British private residence relief, the American §121 exclusion ($250/500k), the French exonération, the Russian three to five years of ownership.
Venture holdings have a tier of their own: the §1202 QSBS exemption and its analogues — analysed in venture-tax-benefits.
Which lot goes first
The rate accounts for half the bill. The other half is set by the basis, and that depends on which particular purchase the tax authority treats as sold.
| Jurisdiction | Rule and authority | What it gives the owner |
|---|---|---|
| United States | specific identification; FIFO operates as a presumption where the lot is not adequately identified (Treas. Reg. §1.1012-1(c)(1)) | HIFO: sell the expensive basis and keep the old cheap basis for the step-up |
| United Kingdom | a pool of averaged cost for securities of the same class (TCGA 1992 s.104); matched first against same-day acquisitions (s.105), then against acquisitions within 30 days after the disposal (s.106A) | no choice of lot; the 30-day rule does not apply to a non-resident (s.106A(5A)) |
| Germany | strict FIFO for securities in Sammelverwahrung (§ 20 Abs. 4 Satz 7 EStG) | nothing: the old cheap basis goes first |
Average basis in the United States is open by election and only for shares in a regulated investment company and securities from a dividend reinvestment plan acquired after 31 December 2010 and held with a custodian (§1.1012-1(e)). The German FIFO is reinforced by a second restriction: § 20 Abs. 6 EStG locks capital losses in their own bucket — "Verluste aus Kapitalvermögen dürfen nicht mit Einkünften aus anderen Einkunftsarten ausgeglichen werden". Carry-forward against future capital income is allowed; set-off against salary and business income is closed. Loss harvesting from the list above works at half strength in Germany.
Currency is computed separately
Gain is measured in local currency, and that creates tax where nothing has been earned in economic terms. HMRC forbids any other approach: "You should not accept a contention that the gain or loss on an asset acquired and disposed of for foreign currency should itself be computed in foreign currency" — cost and proceeds are converted into sterling at the rates for their respective dates (CG78310, resting on Bentley v Pike [1981] 53TC590 and Capcount Trading v Evans [1992] 65TC545). A dollar position that has not risen by a cent produces a taxable gain for a British holder when sterling weakens.
Debt in a foreign currency lives as a separate object. Under IRC §988(a)(1)(A) the difference on a section 988 transaction "shall be computed separately and treated as ordinary income or loss", and "becoming the obligor under a debt instrument" counts as such a transaction (§988(c)(1)(B)(i)). A lombard leg in a foreign currency carries its own tax result, which materialises on repayment or refinancing; §988(e) gives an individual a $200 de minimis on each transaction separately — cross the threshold and the whole profit is taxable. The currency risk carried by capital is broken down in multicurrency-fx.
Counterforces
States can see this machinery and build dams against it. The main one is exit tax: a charge on unrealised gain when tax residence changes; the country survey is in exit-taxes-overview. Three dams of differing height:
| Measure | How it works | Status |
|---|---|---|
| Exit tax, Norway | gain above a threshold of around NOK 3m is taxed at the date of departure | payment can be spread over up to 12 years, the liability survives even the emigrant's death; write-off only for those who return with the same assets |
| Box 3, Netherlands | a tax on the deemed yield of assets with no realisation at all | the Supreme Court has twice held it to infringe investors' rights; years of compensation payments and rewriting of the law |
| Billionaire minimum tax, United States | the 2024 proposals to charge unrealised gains | died with the election cycle; in Moore v. United States the Supreme Court sidestepped the question of constitutionality |
The Dutch model is a vivid illustration of the cost of abandoning the realisation principle, and it is already the territory of wealth-tax-map, while in the United States the realisation principle is left intact.
Step-up on arrival
Exit tax stands at the way out; at the way in, the mirror-image mechanism operates, spread unevenly across countries.
| Country | What arrival gives | Limits |
|---|---|---|
| Canada | deemed disposition and deemed acquisition at market value, ITA 128.1(1)(b) and (c) | outside the rule: taxable Canadian property, inventory of a Canadian business, Class 14.1, an excluded right or interest |
| Australia | assets are treated as acquired at market value on the date of residence, ITAA 1997 s. 855-45 | outside the rule: pre-CGT assets acquired before 20 September 1985 and taxable Australian property; temporary residents are excluded |
| Netherlands | verkrijgingsprijs at market value, art. 4.25 Wet IB 2001 | aanmerkelijk belang only; not given to those who previously lived in the Netherlands or were a buitenlands belastingplichtige in respect of the AB |
| Austria | gemeiner Wert as Anschaffungskosten, § 27a Abs. 3 Z 2 lit. b EStG 1988 | Kapitalvermögen; real estate does not fall under the rule |
| Israel | no step-up | 10 years of exemption on foreign assets, then linear apportionment |
The Israeli construction is built differently. A step-up cuts off pre-arrival gain for good; linear apportionment divides it by the calendar: "the taxable amount will be calculated on a linear basis by applying the ratio between the exempt and non-exempt periods to the total holding period of the asset". An asset that grew tenfold before the move and then stood still will, if sold in year 20, give up half of the entire gain to tax. Those who became residents after 31 December 2025 now also have to declare exempt foreign income — analysed in israel-10-year-exemption.
Hence three different answers to the question of when to sell. With a step-up — after arrival: the pre-arrival gain disappears. In Israel — inside the ten-year window, because once it closes the basis grows with the calendar. Where the country of departure has an exit tax, postponing the sale until after the move no longer saves you: the liability is charged at the date of departure, the country of arrival measures basis from the date of arrival, and one and the same amount lands in two bases.
Risks
Popular, and it ends badly
"Lombard on the whole lot." A client of the 2021 vintage: $20 million in growth stocks, a $12 million credit line at 3%, the borrowed money spent on a house and more shares. The logic looked impeccable: why hand over 23.8% now when the bank lends almost for free? The denouement came in 2022. The Nasdaq lost a third, LTV breached the covenants, the bank called for more collateral — and there was nothing to add, it was all in the same securities. The forced sale at the bottom locked in a market loss and the capital gains tax accumulated since 2015 at the same time: the price had fallen, the basis had not. The deferred tax arrived at the moment when paying it was hardest.
"Moving with an unrealised portfolio and no plan." A founder with $30 million of paper gain moves under a Puerto Rican decree — after Ley 38-2026 the zero survives only for applications made before the end of 2026, and 4% applies thereafter — and sells six months later. The outcome depends on the old country, and both versions are expensive. A jurisdiction with an exit tax — Norway, or Germany with its §6 AStG for holdings of 1% or more — has already charged the tax at the date of departure; the bill simply arrives later. Russia takes back the ЛДВ and the five-year relief on loss of residence, and the non-resident rate on Russian-source income is 30%. Sequence decides everything: what to sell before leaving, what to sell after, and where to pick up a step-up in basis on arrival — Canada and Australia give a deemed acquisition at market value, while Israel offers a ten-year exemption window instead of a step-up. The checklist for the Russian exit is in russia-tax-residency-exit.
Q/A
Does buy-borrow-die work outside the United States?
Two legs of the three travel: holding without realisation and borrowing against the portfolio work wherever private banking is developed. The leg that limps is die — the American §1014 step-up is unique. The UK and France also erase accumulated gain on death but charge inheritance tax instead: 40% IHT, up to 45% of droits de succession; Germany passes the historic basis to the heir and adds Erbschaftsteuer. The substitutes are insurance wrappers, trusts and foundations, and moving before realisation.
What does a lombard facility cost against paying 23.8% now?
The threshold takes one line. Selling a position that is entirely gain to obtain $1 of cash requires realising $1 / (1 − 0.238) = $1.31 — the portfolio shrinks by almost a third more than the sum received. The loan is worth it while its rate stays below the portfolio's return divided by 0.762: at an expected 7% that is 9.2% a year, falling to roughly 8% where gain is half the position. Below the threshold the carry is positive and the step-up is reachable; above it the lombard is an expensive instalment plan for the tax.
What about crypto?
The rules are the same: tax arises on realisation. Selling for fiat, coin-to-coin exchanges and paying for purchases count as a disposal in most jurisdictions; holding and transfers between your own wallets create no trigger. A bonus for the United States: the wash sale rule does not yet extend to crypto assets, so loss harvesting works more freely there than in shares. Rates and regimes by country are in crypto-tax-by-country.
Does a lombard facility break the Swiss zero on capital gains?
It breaks the safe harbour whenever the portfolio's own income fails to cover the interest. The zero on movable Privatvermögen under Art. 16 Abs. 3 DBG rests on Kreisschreiben Nr. 36 of the ESTV, whose fourth criterion requires that investments not be debt-financed, or else that taxable income on the securities exceed the interest attributable to that debt. Fail the review and the gain becomes income from self-employment under Art. 18 DBG, at ordinary progressive rates.
Is Puerto Rico still a zero for capital gains?
Only for existing decrees. Ley Núm. 38-2026 of 10 March extended the Individual Resident Investor programme to 31 December 2055 and removed the zero in the same breath: applications filed from 1 January 2027 attract a flat 4% on gains, interest and dividends. Decrees already granted under Act 60 and Act 22-2012 run to 31 December 2035, with a right to renegotiate. New applicants must also not have been resident on the island for at least six years before moving.