Moving to US soon - Sell shares now due to capital gain tax?

Hi MP community,

I am seeking for some advice from the tax experts regarding capital gain taxes:

I will move to the US in a few weeks, and I own shares of my company via ESPP. I anyway plan to sell most of them and now I am thinking if it would be smart to sell them before I move to the US, as in Switzerland there is no capital gain tax (for most private investors) and in the US you have at least 10-15% (or more) of capital gain tax.

Am I thinking correctly here?

Many thanks for you thoughts!

Maybe double check the tax treaty, depends how they tax the revenue from the transition year.

(That said for ESPP, it’s likely a good idea to sell early anyway, and move to a more diversified investment as soon as allowed).

If I were you, I’d sell. Even if you decide to buy again after moving.
I think you will have to do an ‘unterjährige Steuererklärung’ from the 1st of january until the day you move. So if you move in early 2020, you could even sell before the end of this year to keep things easier

Yes. US are dickheads and tax you on gains since date of purchase. Hence its good to sell and rebuy.

There’s no reason not to buy back immediately (as long as you aren’t yet US tax resident - because once you’re US tax resident this is likely a wash sale).

Be extra careful with figuring out what date you become US tax resident. In most cases it will be date of arrival - but there’s no point in waiting until last minute, and doing the sell/rebuy now is probably a clean way of being safe.

(But if it’s employer stock definitely don’t rebuy employer stock, you would hopefully know better than that just by reading some boglehead literature.)

Does anyone know if the US calculation of capital gains (since date of purchase) also applies to EU countries with capital gains tax?

I’m moving to Spain next month and I’m wondering whether I should be selling and repurchasing all my investments before moving.

Is there any downside to not doing it? I’d be surprised if the cost basis is somehow set when becoming resident (most tax law won’t care enough to special case new residents this way).

At least some EU countries do, yes. Although I am not sure about cases of migration and there may be, of course, exceptions due to freedom of movement between EU countries (see also the link the next paragraph).

In some (at least EU) cases they may be, according to DTA, see here for example:

“Zur Vermeidung einer Doppelbesteuerung wurde im Doppelbesteuerungsabkommen zwischen Deutschland und Österreich … geregelt, dass für deutsche Besteuerungszwecke die Anschaffungskosten eine Beteiligung mit dem in Österreich angesetzten fiktiven Veräußerungserlös gleichgesetzt werden.”

Austria taxes you upon leaving - and that value will be taken as cost basis in Germany. At least in principle and for stocks (though not investment funds) only.

Still, I can’t quite see the harm of resetting the cost basis - unless you do it in a way that tax authorities classify as abusive.

I would definitely ask your tax advisor about that

Separately in case you own any open ended investment funds I had read and had an introductory chat with a tax advisor who confirmed that some may not fully comply with Spanish tax requirements and price increases could be taxed as investment income (even without selling). In my case I own Fundsmith UK open ended fund which is something he advised would need to investigated further. The potential workaround could be to sell that and instead buy Fundsmith SICAV based in Luxembourg. To be clear I am just flagging as something you may want to check since so far I only had the introductory chat with the advisor (not paying)

Yes, for me there are a couple of downsides:

  • If I sell all my positions, total capital gains might be above 50% of my net income this year, which means that I might end up being considered a professional investor and being taxed on capital gains anyway! It’s quite borderline, so I’d have to manage it carefully and probably not sell everything to leave some margin just in case.
  • I mostly invest in individual shares via SQ (big sin, I know, but I have reasons why this is preferable to me than a UK IB account), so selling and buying all my positions will cost some money (but definitely less than paying capital gains tax!)

I don’t own any funds, but it sounds like I may need to have a specific session with my tax advisor on how different types of investments are taxed in Spain. My research so far had led me to believe that all stock market gains (capital + dividends) were taxed at 20-something % when realised, regardless of the type of investment…

I still don’t get why people care about that, it’s clearly not a professional behavior. FWIW I’ve fully rebalanced my portfolio in the past, and don’t think they’d care.

If you were to move your DIY investment to a bank managed fund they also wouldn’t care. But here you’d even re-buy the same ETF right, so I’m not even sure on which part of the tax filing it could even show up (if they cared, tho they don’t :slight_smile: )

Remember that that‘s just one of the many criteria. And unless you’re fulfilling others due to a very active trading pattern, I can‘t imagine they would.

Well, it would be realising capital gains from possibly years ago.

But I agree, I can‘t imagine they‘ll consider anyone professional unless there‘s a very substantial violation of many other criteria. If anything, even the explanation „moving abroad, will move welath to a Spanish broker“ should suffice.

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