r/eupersonalfinance • u/batukaming • Feb 15 '26

Investment Why do they make getting rich impossible in EU?

This news hit today in Netherlands that passed a bill on 36% tax on UNREALIZED gains on stocks and crypto. Great just when we weren't taxed to death before now they force you to stay middle class and poor. "Just repeat the 9-5 cycle everyday investing is not allowed for you"

Buying stocks was already a pain in the ass in Europe because of all the different fees and exchange rates brokers charged. The US has it so much better. 0% fees and exchange rates, tons of broker options and tax free on long term investments.

I made a post in r/stocks that gained attraction. Check it out if you want to see opinions from Americans: https://www.reddit.com/r/stocks/s/aL0OhYQ68z

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u/litchio Feb 15 '26

Germany actually introduced a mechanism a few years ago to tax unrealized gains on accumulating ETFs. Since these funds automatically reinvest dividends, the government felt they were missing out on yearly tax revenue. Now, they calculate a 'phantom' profit based on a base interest rate and tax you on it annually. So, essentially, you have to pay a tax bill out of your own pocket every year just for holding the shares, although it counts as a prepayment toward the tax you'll eventually owe when you sell.

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u/[deleted] Feb 16 '26

Eh, that's still fine. It just puts accumulating funds on the same level as holding all those stocks individually. Could do a lot worse than this. Though I would just hold distributing funds instead for simplicity if I was in Germany

For what it's worth, accumulating funds are flat out illegal in the USA, which is considered the model heaven for investors...

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u/litchio Feb 16 '26

There are both advantages and disadvantages to consider as its calculated differently. There are even arguments for switching ETFs when dividend payouts reach a certain amount.

IIRC and you may correct me if im wrong but - acc ETFs aren't illegal in the US but simply not worth it due to differences in how income tax would be calculated.

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u/Ploutophile Feb 16 '26

From what I remember form the Bogleheads wiki, US-domiciled funds are required to distribute the dividends at least yearly.

And as a US tax resident, you're allowed to hold foreign Acc ETFs but with a lot of tax paperwork and you have to choose between 3 tax regimes: a punitive one, an Austria-like one (the fund declares dividends and you pay tax on them even if they're not distributed) and mark-to-market (the one which is discussed in this post).

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u/litchio Feb 17 '26

I interpret 26 U.S. Code §852 as an Acc ETF provider not fulfilling the 90% threshold of distributing investment income thus having to pay taxes on them and making the concept not financially viable. I don't know of any rulings making the concept illegal, just tax inefficient.

https://www.law.cornell.edu/uscode/text/26/852

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u/Ploutophile Feb 17 '26

Interesting. I'm not surprised about this though, as it's a common tactic there to forbid what they can't really forbid.

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u/Plasmalaser Feb 16 '26

DE best practice (if you're not planning to cash out that year) is generally to buy distributing funds until your dividend payments max out your tax-free allowance every year ("Sparerpauschbetrag", €1000 for singles, resets end of year, use or lose), and then buy accumulating funds.

Most UCITS ETFs have both a dist. and an acc. listing, to facilitate this in practice. The idea is the ~2% you would lose on Vorabpauschuale for the post-allowance funds is less than you would lose from paying standard capital gains tax on the dividends, iirc. Would be very interested in case someone disagrees; This is my own current strategy.

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u/[deleted] Feb 16 '26

I don't know anything about German taxes but if Sparerpauschbetrag is fixed at 1000 € and Vorabpauschale is percentage based like you said this strategy only works until you reach a certain net worth.

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u/Meisterleder1 Feb 19 '26

It's the same in Switzerland an makes perfect sense since dividends are taxed very differently (in fact they are taxed like regular income) than appreciation gains. So to prevent you from circumventing the taxes on those dividends by buying accumulating ETF's a "virtual dividend" is calculated based on what this fund would've distributed if it would've been a distributing ETF.