Capital Gains Tax on Business Sales by Country

When you sell a business, the capital gains tax you owe can range from 0% in jurisdictions like Singapore and the UAE to over 40% in high-tax European countries. For search fund entrepreneurs and acquisition-driven buyers, the difference between structuring an exit in one country versus another can translate into hundreds of thousands , or millions, of dollars in after-tax proceeds. This guide breaks down the capital gains tax rates, exemptions, and planning opportunities in over 20 countries, organized by region, so you can factor tax into your exit strategy from the day you acquire.

North America: United States & Canada

United States

The US taxes long-term capital gains (assets held longer than one year) at federal rates of 0%, 15%, or 20%, depending on taxable income. Most business sellers fall into the 20% bracket. On top of that, the 3.8% Net Investment Income Tax (NIIT) applies to individuals earning above $200,000 ($250,000 for married couples filing jointly), pushing the effective federal ceiling to 23.8%, according to the IRS.

State-level taxes add another layer. California imposes up to 13.3% on capital gains (treated as ordinary income), bringing the combined rate to roughly 37%. Texas, Florida, Wyoming, and several other states levy no state income tax at all, making entity domicile a meaningful variable in exit planning.

The single most powerful tax tool for US-based searchers is the Qualified Small Business Stock (QSBS) exclusion under Section 1202. For stock issued on or before July 4, 2025, shareholders who hold C-corporation stock for at least five years can exclude up to $10 million (or 10x their cost basis, whichever is greater) of gain from federal tax entirely. For stock issued after July 4, 2025, Congress raised the gross-asset cap from $50 million to $75 million and the exclusion ceiling to $15 million, as detailed by Wilson Sonsini. This is why many ETA practitioners choose a C-Corp structure from the outset, the double-taxation drawback of C-Corps becomes irrelevant when the entire gain is excluded at exit.

Other US planning levers include installment sales under Section 453, which let sellers spread gain recognition over a multi-year payment schedule, and the step-up in basis that buyers receive in an asset purchase (a benefit for the acquirer, but it shapes negotiation dynamics for both sides). Opportunity Zone deferrals can also apply if proceeds are reinvested within 180 days into a Qualified Opportunity Fund, though this is rarely practical for operating-business exits.

Canada

Canada does not tax capital gains at a separate rate. Instead, 50% of the gain is included in the seller’s taxable income and taxed at their marginal rate (up to 33% federally plus provincial taxes). The combined top marginal rate on capital gains therefore reaches roughly 27% in most provinces. A proposed increase to a two-thirds (66.7%) inclusion rate for gains above $250,000 was deferred to 2026, according to KPMG.

The Lifetime Capital Gains Exemption (LCGE) is Canada’s equivalent of QSBS. For 2025 dispositions, the exemption stands at $1,250,000 CAD for Qualified Small Business Corporation (QSBC) shares, rising to $1,275,000 in 2026 with indexing, as reported by the Canada Revenue Agency. To qualify, at least 90% of the corporation’s assets must be used in active business in Canada at the time of sale, the shares must have been held for at least 24 months, and more than 50% of assets must have been used in active business throughout that holding period. For a married couple each holding QSBC shares, this allows up to $2.5 million in tax-free gains, a powerful incentive to structure ownership correctly at acquisition.

Western Europe: UK, France, Germany & the Netherlands

United Kingdom

The UK taxes capital gains at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers (as of the 2024/25 tax year). Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, reduces the rate on the first £1 million of qualifying business gains. However, the BADR rate is rising in stages: 10% through April 5, 2025; 14% from April 6, 2025 to April 5, 2026; and 18% from April 6, 2026 onward, per GOV.UK. Once the BADR rate reaches 18% in April 2026, basic-rate taxpayers will receive zero savings from the relief, since it will match the standard lower CGT rate.

Corporate sellers benefit from the Substantial Shareholding Exemption (SSE), which provides a full exemption on gains from disposing of shares in a trading company, provided the seller held at least 10% of the shares for a continuous 12-month period. The SSE effectively creates a 0% rate for qualifying corporate disposals, a strong reason to consider a holding company structure when acquiring in the UK.

France

France applies a flat tax (Prélèvement Forfaitaire Unique, or PFU) of 30% on capital gains from share sales: 12.8% income tax plus 17.2% social contributions, as confirmed by PwC Tax Summaries. Sellers can alternatively elect progressive income tax rates (up to 45%) if the math favors it, though the social levies still apply. Starting January 1, 2026, the social contribution component increases to 18.6%, pushing the effective flat tax to 31.4%.

Several targeted exemptions significantly lower the effective rate. Retiring business owners who are aged 60 or older and who sell a company worth under €500,000 can claim a full CGT exemption. A separate €500,000 fixed allowance applies to PME (small and medium enterprise) executives upon retirement, available for dispositions through December 31, 2031. For corporate sellers, the participation exemption renders 88% of gains from subsidiaries held for at least two years tax-free. And the Dutreil pact provides a 75% exemption for business share transfers made via donation or inheritance, a valuable tool for succession-driven acquisitions.

Germany

Germany does not have a separate capital gains tax rate for individuals. Gains from selling shares in a corporation (GmbH or AG) where the seller holds at least 1% are taxed under the Teileinkunfteverfahren (partial income procedure): only 60% of the gain is included in taxable income, with the top marginal rate around 45% plus a 5.5% solidarity surcharge. The effective maximum rate is therefore approximately 28.5%, according to Rose & Partner. Sellers aged 55 or older (or permanently disabled) can claim a one-time lifetime exemption of €45,000 under the Freibetrag provision.

Corporate sellers benefit substantially. Under Germany’s participation exemption, 95% of capital gains from the sale of qualifying subsidiaries are tax-exempt, resulting in an effective rate of roughly 1.5%. This makes a GmbH holding structure one of the most tax-efficient exit vehicles in Europe. Note that asset sales trigger tax at both the corporate and shareholder level, so share deals are strongly preferred from the seller’s perspective.

Netherlands

The Netherlands offers one of Europe’s most attractive participation exemptions: a full 100% exemption on gains from disposing of a 5% or greater subsidiary holding, provided certain conditions are met. This makes the Netherlands a favored jurisdiction for holding companies. Individual shareholders with a “substantial interest” (5% or more) in a company are taxed under Box 2 at 26.9% on realized gains. For holdings below 5%, gains are imputed under Box 3 rather than taxed on realization, a unique Dutch approach that creates planning opportunities for smaller stakes.

Southern Europe: Spain, Italy & Portugal

Spain

Spain taxes individual capital gains at progressive rates within the savings tax base (base del ahorro): 19% on the first €6,000, 21% from €6,000 to €50,000, 23% from €50,000 to €200,000, 27% from €200,000 to €300,000, and 30% on amounts exceeding €300,000 (effective 2025), per PwC Spain. These rates are uniform across all autonomous communities, unlike general income tax. Non-residents from the EU/EEA pay a flat 19%.

Corporate sellers can access a 95% participation exemption on gains from subsidiaries where they held at least 5% for 12 months or longer, reducing the effective corporate rate to approximately 1.25%. Reinvestment relief also allows deferral when proceeds are rolled into another qualifying business. Spanish rollover equity structures can be particularly effective when combining a partial exit with reinvestment in the acquiring entity.

Italy

Italy applies a flat 26% tax on individual capital gains from share sales. The Partecipation Exemption (PEX) regime, however, exempts 95% of gains for qualifying corporate sellers, bringing the effective rate down to just 1.2% (5% of the gain taxed at the 24% IRES corporate rate), as outlined by PwC Italy. PEX requires an uninterrupted 12-month holding period, classification as a financial fixed asset, tax residence of the investee in a non-blacklisted jurisdiction, and genuine commercial activity. Starting in 2026, a new threshold requires the participation to represent at least 5% of share capital or voting rights.

For individual sellers, the partial exemption (Individual PEX) means only 49.72% of the gain is taxable at marginal income tax rates, producing an effective rate of roughly 13% for higher earners. The gap between 1.2% (corporate PEX) and 26% (individual flat rate) illustrates why holding structures and tax optimization planning are essential before an Italian acquisition.

Portugal

Portuguese tax residents pay a flat 28% rate on capital gains from the sale of securities. However, a 2024 reform reduced the top rate on long-term capital gains to 19.6% for qualifying dispositions. Short-term gains (assets held under 365 days) must be aggregated with other income if total income reaches €83,696 or more, potentially pushing the effective rate to 48%.

The original Non-Habitual Resident (NHR) regime, which exempted many forms of foreign-sourced capital gains, officially closed to new applicants in March 2025. Its replacement, the IFICI regime (Tax Incentives for Scientific Research and Innovation), still offers exemptions on foreign-sourced capital gains for qualifying taxpayers, but with narrower eligibility criteria. For search fund entrepreneurs considering Portugal as a personal tax base, the window of opportunity has tightened significantly.

Latin America: Brazil, Mexico, Colombia & Chile

Brazil

Brazil taxes capital gains at progressive rates based on the size of the gain: 15% on gains up to BRL 5 million, 17.5% from BRL 5 million to BRL 10 million, 20% from BRL 10 million to BRL 30 million, and 22.5% on gains exceeding BRL 30 million, according to PwC Brazil. Non-resident sellers pay a flat 15% regardless of gain size, which can make cross-border structuring appealing. Corporate capital gains are folded into regular taxable income and taxed at the standard corporate rate of 34% (25% corporate income tax plus 9% social contribution). Learn more about structuring deals in the region in our cross-border acquisitions guide.

Mexico

In Mexico, capital gains from selling shares listed on the Mexican stock exchange are taxed at a flat 10%. For unlisted shares and private business sales, gains are treated as ordinary income and taxed at progressive rates up to 35%. Corporate sellers include capital gains in taxable income at the 30% corporate rate. Mexico has an extensive network of double tax treaties: including with the US, Canada, and most EU countries, that can reduce or eliminate withholding taxes on cross-border transactions.

Colombia

Colombia taxes capital gains on assets held for two or more years at a flat 15% rate (increased from 10% starting in fiscal year 2023). Assets held for fewer than two years generate gains taxed as ordinary income at rates up to 39%. The corporate income tax rate sits at 35%, with capital gains folded into regular corporate income. For acquisition entrepreneurs looking at Colombian targets, the two-year holding threshold is an especially important variable when planning exit timing.

Chile

Chile does not have a standalone capital gains tax. Gains are generally taxed as ordinary income at the corporate rate of 27%. Publicly traded shares held by individuals benefit from a preferential 10% rate. A temporary 12.5% rate applies for qualifying SMEs during 2025-2027, as described in the Chambers Corporate Tax Guide for Chile. Real estate held by individuals for more than one year (or four years for buildings) can qualify for a full exemption on gains up to 8,000 UF (roughly $280,000 USD).

Asia-Pacific: Australia, Singapore & Beyond

Australia

Australia taxes capital gains as part of ordinary income but provides a 50% CGT discount for individuals and trusts on assets held for 12 months or longer. A seller in the top 47% bracket therefore pays an effective rate of about 23.5% on discounted gains. Small business owners can stack additional concessions on top of the general discount, as detailed by the Australian Taxation Office.

The four small business CGT concessions, applied in statutory order, are:

1. 15-year exemption: Full exemption if the asset was held continuously for 15 years and the seller is aged 55 or older (or permanently incapacitated).
2. 50% active asset reduction: An additional 50% reduction beyond the general CGT discount, potentially reducing the taxable gain to just 25% of the original amount.
3. Retirement exemption: Up to $500,000 (lifetime cap) of gains exempt; amounts must go into superannuation if the seller is under 55.
4. Small business rollover: Defers the gain for up to two years (or longer if reinvested in a replacement active asset).

Eligibility requires either aggregated turnover under AUD 2 million or maximum net asset value under AUD 6 million. When all concessions are combined, an eligible Australian small business owner can reduce their effective CGT rate to 0%.

Singapore

Singapore imposes no capital gains tax. Profits from selling shares, businesses, or other capital assets are generally not taxable, as confirmed by the PwC Singapore Tax Summary. The one caveat is that the Inland Revenue Authority of Singapore (IRAS) may reclassify repeated transactions as trading activity, subjecting them to income tax at rates up to 22% (corporate) or 24% (individual). For a one-time business exit, however, Singapore remains one of the most tax-efficient jurisdictions globally.

Other Asia-Pacific Markets

Japan taxes individual capital gains from share sales at a flat 20.315% (15.315% national tax plus 5% local tax). South Korea applies 20% on gains from unlisted shares (or 25% if gains exceed KRW 300 million). India taxes long-term capital gains from listed equity above INR 125,000 at 12.5% and unlisted share gains at 20% with indexation benefits.

Tax-Advantaged Jurisdictions: 0% Capital Gains

Several jurisdictions levy no capital gains tax at all on business sales, making them popular for holding structures and personal residency planning:

• United Arab Emirates: No personal capital gains tax. Gains from selling shares in UAE-resident companies are exempt from the 9% corporate tax (introduced June 2023) without conditions. Free Zone companies classified as Qualifying Free Zone Persons (QFZPs) can also benefit from 0% corporate tax on qualifying income.
• Cayman Islands: No income tax, capital gains tax, or corporate tax of any kind. Widely used for fund structures but less common for operating businesses.
• Switzerland (individuals):Private investors generally pay zero CGT on share disposals. However, the Swiss tax authorities may reclassify a seller as a “professional securities trader” (gewerbsmässiger Wertschriftenhändler) if certain criteria are met , such as high trading volume, use, or short holding periods which triggers income tax at rates above 40%. Corporate sellers benefit from a participation deduction on holdings of 10% or more.
• Hong Kong: No capital gains tax. Profits from selling shares or businesses are not taxable unless the seller is deemed to be carrying on a trade of dealing in securities.
• New Zealand:No general CGT, although a “bright-line test” applies to certain property transactions and the tax authorities can tax gains on assets acquired with the intention of resale.

It is worth understanding that simply establishing a holding entity in a 0% jurisdiction does not automatically shelter gains. Most countries apply Controlled Foreign Corporation (CFC) rules, and double tax treaties typically allocate taxing rights based on where the seller resides and where the business operates, not just where the holding company sits.

Cross-Border Sales: Treaties, Credits & Withholding

When the buyer, seller, and business are in different countries, capital gains taxation becomes multi-layered. Three mechanisms prevent (or mitigate) double taxation:

1. Double tax treaties (DTTs):Most treaties follow the OECD Model Convention, which generally grants exclusive taxing rights on capital gains from shares to the seller’s country of residence, unless the shares derive more than 50% of their value from real property in the source country. The US has treaties with over 65 countries; the EU’s parent-subsidiary directive eliminates withholding on dividends and certain gains between member states.
2. Foreign tax credits:If a gain is taxed in the source country, the seller’s home country typically grants a credit for the foreign tax paid, up to the domestic tax that would be owed on the same income. In the US, unused foreign tax credits can be carried forward for 10 years or back one year.
3. Withholding taxes:Some countries impose withholding on cross-border share sales. Canada withholds 25% on gains from “taxable Canadian property” sold by non-residents (reducible by treaty). India withholds 10-20% on share transfers by non-residents. Treaty shopping, routing a transaction through a treaty-favorable jurisdiction, is increasingly scrutinized under BEPS (Base Erosion and Profit Shifting) rules.

Our cross-border acquisitions guide covers the operational and legal dimensions, while the goodwill amortization and tax article explains how purchase price allocation affects the buyer’s tax position in international deals.

Strategic Planning: Structure Drives Tax Outcomes

The capital gains tax rate you pay at exit is largely determined by decisions you make at acquisition. Three areas demand early attention:

• Entity choice: In the US, choosing a C-Corp unlocks QSBS. In Germany, acquiring through a GmbH holding company activates the 95% participation exemption. In the UK, a corporate holding structure enables the SSE. The wrong entity on day one can cost you an irrecoverable tax advantage at exit.
• Holding period discipline:Nearly every favorable regime requires a minimum holding period, 5 years for QSBS, 2 years for the French participation exemption, 12 months for Italy’s PEX and Spain’s corporate exemption, 24 months for Canada’s LCGE. Rushed exits forfeit these benefits entirely.
• Residency and domicile: Personal tax residency determines which country has primary taxing rights over your capital gains. Relocating before a sale can alter the tax equation, but most countries impose exit taxes or deem-disposition rules to capture unrealized gains at the time of departure.

Share sales are almost universally preferred over asset sales from the seller’s perspective, since they allow access to participation exemptions and avoid triggering both corporate and personal tax. From the buyer’s perspective, asset purchases offer a stepped-up tax basis and the ability to amortize goodwill creating a natural tension in negotiations that the purchase price must bridge.

Frequently Asked Questions

Which countries have no capital gains tax on business sales?

Singapore, Hong Kong, the UAE (for individuals), the Cayman Islands, and New Zealand impose no general capital gains tax. Switzerland exempts private individuals from CGT on share disposals as long as they are not classified as professional traders. However, residency and CFC rules in your home country may still trigger tax liability even when selling from a zero-CGT jurisdiction.

How does the US QSBS exclusion work for search fund exits?

Under Section 1202, a search fund entrepreneur who acquires through a C-Corp with gross assets under $50 million (or $75 million for stock issued after July 4, 2025), holds the stock for five years, and meets the active business test can exclude up to $10 million (or $15 million for post-July 2025 issuances) of gain from federal income tax. At a 23.8% combined federal rate, that exclusion is worth up to $2.38 million (or $3.57 million) in tax savings on a single exit. The corporation must use at least 80% of its assets in a qualified active trade or business, and certain industries, financial services, hospitality, farming, are excluded.

Does a double tax treaty eliminate capital gains tax on a cross-border sale?

Not always. Treaties typically allocate taxing rights rather than eliminate tax. Under most OECD-model treaties, the seller’s country of residence has exclusive taxing rights on gains from share sales, meaning the source country cannot tax the gain. But if the shares derive more than 50% of their value from real property in the source country, both countries may tax the gain, with credits to prevent full double taxation. Treaty benefits also require substance holding companies with no real economic activity may be denied treaty access under the Principal Purpose Test (PPT) or Limitation on Benefits (LOB) provisions.

What is a participation exemption and which countries offer one?

A participation exemption allows a corporate seller to exclude most or all capital gains from the sale of a subsidiary. The Netherlands offers a 100% exemption, Germany and Italy exempt 95% of gains, France exempts 88%, and Spain exempts 95% for qualifying holdings. Requirements typically include a minimum ownership threshold (5-10%), a holding period (12-24 months), and an active business test. These exemptions are one of the primary reasons search fund operators in Europe use holding company structures for their acquisitions.

Should I structure my acquisition for tax efficiency at entry or focus on operations?

Both. The entity structure and jurisdiction you choose at acquisition set the ceiling on your tax efficiency at exit, and these decisions are often irreversible or prohibitively expensive to change later. A C-Corp election in the US, a holding GmbH in Germany, or proper QSBC share structuring in Canada should be locked in before closing. Operating improvements drive enterprise value; structure determines how much of that value you keep after tax. For a framework that ties both together, see our tax optimization and exit strategies guides.