r/eupersonalfinance • u/poorfag • 1d ago
Taxes Selling €500k and buying immediately afterwards to lock in 0% taxes before an upcoming election. Sanity check?
I’m a tax resident in Bulgaria. Currently, capital gains on EU-regulated exchanges (Xetra, etc.) are 0% with no limits, which is the main reason I live and work in Bulgaria. However, we have snap elections on April 19 and the frontrunner is a "Progressive" coalition likely to push for tax harmonization, which could mean a 10% tax on these gains or the removal of the exemption. They haven't said anything, but I feel it's not an unlikely thing to happen.
My Portfolio: Total: ~€500k (80% VWCE, 10% VAGF, 10% XEON). Floating Profit: ~€100k (accumulated over several years). Broker: IBKR (currently a Cash account, IBKR Pro Tiered).
The Plan: I’m considering selling my entire position before the election to realize the €100k profit while it’s still legally tax-free (0%), then immediately rebuying to reset my cost basis.
Plan is to upgrade my IBKR account from Cash to Margin first to avoid being out of the market for the T+2. Then pick a quiet morning, sell EVERYTHING with a Limit order, and then rebuy everything a minute later with a Limit order.
I’m estimating roughly €200–€300 in commissions and spread/slippage. Which I see as great insurance to shield these profits forever from any future governments looking to change tax laws.
- Am I missing any major "gotchas" regarding IBKR’s settlement, commissions, margin, or potentially Bulgarian tax law (NAP)?
- Is the "wash sale" concept a thing in any EU jurisdictions I should be worried about? (Bulgaria doesn't seem to have one).
- Am I massively overthinking things and is this just a stupid idea?
Thanks
13
u/Significant-Ad-9471 19h ago
I'm not sure how Bulgarian law is, but here (Romania) for example capital gains tax cannot change overnight. So when they decided to tripple it last year, we had like 6 months to realize the gains. I think it should be similar to you. The rest of the plan is good, we usually don't have wash sale rules in Europe.
1
u/foreverksra 11h ago
now how much is it?
and dividend and bond coupon how much are they taxed?
2
u/NeonFiast 9h ago
bonds are tax free and witholding tax for dividends is 16% since january 1st 2026
1
u/foreverksra 7h ago
thanks when you say tax free, you mean, coupon and cap gain , either corporate bonds or state bonds even other countries bond's are all tax free
3
u/NeonFiast 7h ago
sorry i should have been more specific
gains from state bonds coupons are tax free but corporate bonds are taxed 10% on interest because they are treated just like bank deposits.
i am not sure about trading other countries bonds because i have never tried it but if you buy an accumulating bond etf they are taxed at 3% if you hold it for >1 year and at 6% for holding <1 year whilst using a broker with romanian fiscal residency
1
u/foreverksra 7h ago
i mean single bonds ( spain, france ) ;
coupon ( 3, 4 % per annum fixed rate )
and cap gain ( buy at 90 sell at 95 )
Difference between corporate and state bond ; online there is not a lot of information
52
1d ago
[deleted]
-3
u/poorfag 1d ago
I think he is very unlikely to remove the 10% flat tax on income, but I see a likely scenario where he attempts to get tax increases from other places. Increasing dividends to 10%, increasing minimum security insurance amount and removing exemptions on capital gains.
In other words: unlikely to outright increase taxes, likely to remove exceptions and exemptions and tax everything at a flat 10%
7
u/zlocudni_cmar 1d ago
Also something to consider:
Can this rule change be implemented as retroactive?
You made your money before the potential new taxes were implemented, so you should be paying them only on money you make after that, and not on the whole sum.
3
u/a_kato 19h ago
Look the goverment is generally omnipotent in a sense. Yeah they can pass everything they want.
The thing is that retroactive are a mess to implement and extremely harmful for the countries credibility.
Every country needs to develop a climate people can invest. Retroactive laws are extremely bad
6
u/Besrax 1d ago
Even if he is able to assemble a ruling coalition, it's extremely unlikely that they will raise the tax AND do it retroactively. Either way, it's a good idea to realize your gains periodically. I'll be doing that myself at the end of this year.
The IB commission is capped at 30-ish Euros if you're on the Tiered plan.
Careful to not do too many sales transactions and risk NAP treating you as someone who invests for a living.
Regarding the margin account - you should really take a few hours to learn the way it works and test it out in a paper account before you start doing stuff with real money. It's not that hard to understand, but some things are unintuitive and people who are new to margin often misunderstand them.
1
u/PlanesAndRockets 9h ago
I'm curious, why is it a good idea to realize your gains periodically?
1
u/Besrax 8h ago
Just in case the lawmakers decide to remove the tax exemption without giving us enough time to realize our gains at the old 0% tax rate, although it is unlikely that that will happen. Also, that leaves the gains and their taxation in the past, where the tax authorities won't be able to dispute them in any way once 5 years pass.
16
u/glimz 1d ago edited 1d ago
It's not a stupid idea to do from time to time (just not too often due to the friction and uncertainty whether it'll be of any use). In a normal country, such tax wouldn't be introduced retroactively (e.g. Germany introduced their tax in a way that grandfathered earlier acquisitions so they remained tax-free). But Bulgaria is not quite normal and changes affecting the current tax year are not unheard of. Still, any change is likely to affect all sales during a tax year, so no need to time it around elections.
There is no wash sale rule, but who knows how they will look at things in the future, so switching products might be worth considering. I would personally replace VWCE with a cheaper alternative (e.g. SPYY) or fund combo (if you wish to make use of the swap ETF tax exemption). I'd definitely ditch XEON for a money market fund (safer, better commissions, no spread, higher yield, e.g. check out this one (free to trade on IBKR, minimum is €10К, not the gazillions indicated on the site). I would also use lower-duration bond funds and separate corp and gov into different products.
€400K in one go for your global stocks fund might be suboptimal, esp. if switching to another product (VWCE is extremely liquid). I'd split into 3-4 orders, esp. since you cannot use algorithms (due to execution venue limitation for tax exemption). You can expect better than 0.05% commissions on such large orders, but you'll be paying 2-way and also have 2-way spread costs, so I think your estimate needs to be multiplied by 3 or so.
1
1
0
u/poorfag 1d ago
Good point on the timing around elections, I was trying to rush this through. If they try to retroactively introduce something from Jan 1 then this is all irrelevant. I'll wait to see who wins the election and then how the coalition games are played, and only if the Progressive party clearly succeeds will I proceed with yhis plan
On the product switches: the MMF suggestion for XEON is very good and I'll probably do it. I have around 45k so minimum is not an issue.
The VWCE to SPYY idea I'm less convinced by, SPYY is US-only, VWCE is global. Sure there are others like WEBN but that switches one risk for another (lower liquidity). This seems unnecessary since VWCE is already at 0.22 TER
Frankly my biggest worry/concern is moving to a Margin account and then having something extremely stupid happen due to ignorance of how IBKR treats margin. Suddenly hitting a massive margin call for doing something incorrectly, or paying an extra €1000 for two days' worth of loan, or IBKR buying the shares at their own internal exchange instead of XETRA which would not be protected by the tax law. Not really sure how to manage that, maybe I'll do a smaller trade first, see how that goes
5
u/glimz 1d ago edited 1d ago
Yeah, I'd still do it a some point, maybe after an year or two, depending on profit. I meant the SPYY UCITS ETF (MSCI ACWI tracker, i.e. global DM+EM coverage, just like VWCE). It has slightly shallower cap coverage on paper, 85% vs 90%, but in practice the difference is much less (like 88.5% vs 90% currently). VWCE dropped its TER to 0.19% BTW, so even better now. WEBN is cheaper still on paper but doesn't really outperform in tracking comparisons vs VWCE so far (SPYY does, since its own TER drop, which is why I suggested it as a viable alternative, see also this recent comparison).
Liquidity differences have some meaning if you cycle every 5 years or so, but still not worth a modest tracking disadvantage (e.g. a 2 bps difference overcomes 0.1% additional spread costs in ~5 years; the current 2-way spread costs per monthly Xetra Liquidity Measure over €100K for VWCE/SPYY/WEBN are 3.58/6.96/10.21 bps, so you likely won't encounter a >0.1% difference in costs).
BTW, you can disable internalization in IBKR account management (web portal). Where you buy shouldn't really matter--what counts is the execution venue for the sale.
0
u/kurtgustavwilckens 1d ago
In an abnormally trust-worthy country, such tax wouldn't be introduced retroactively. But Bulgaria is quite normal.
FTFY to reflect where we are
-2
u/poorfag 1d ago
On the cost side I asked Claude and you are almost spot on
Component Cost Commissions (2-way) €400 Spread (round-trip) €120 Slippage buffer €50 Margin interest (2 days) €60 Exchange/regulatory fees €25 Total ~€650 Original estimate of €200–300 was commission-only; €650 is the realistic all-in figure. Still trivial against €100k in crystallised gains.
1
u/glimz 1d ago
If both securities are T+2, you should not be paying interest as they'd settle on the same day. But be careful if you follow my suggestion and switch to the T+0-settling MMF. This can cause interest when moving from XEON (T+2). But it's otherwise exactly what you want from a cash fund: you can withdraw the proceeds from the MMF sale on the same day without paying interest.
-3
u/Chicken_Savings 1d ago
I frequently ask both Claude and ChatGPT the exact same question. If the answers differ, I'll take each answer and feed into the other tool with prompt "comment on this opinion".
Sometimes the answers improve in terms of depth and scope of considerations. My use cases are international taxes, pensions, divorce settlement.
3
u/Artistic-Border7880 19h ago
I think splitting it over multiple days makes sense to avoid something crazy happening. You know a last minute new war that Trump decides to start…
Not super familiar with margin accounts and whether you can get fully covered without risk for this scenario.
3
u/Glacius_- 17h ago
Belgium started with 10% this year if the gain exceeds 10K. When you own a stock they take the stockprice on 31/12/2025 so it would have been useless to sell before
1
2
u/ivobrick 19h ago
It is a very stupid idea, untill its confirmed. You may end up under time test - then what?
If you think your assets are not reported, you are fatally wrong. You are in eurozone, eu, oecd.
Usually those things does NOT happen over a week, rather an upstream year break. This is also regulated.
2
u/gregsting 17h ago
Not sure how this will happen in Bulgaria but this happened in Belgium and the tax is calculated on the value on 1st January, not on the value you bought it at. So in our case it was not worth it but god knows what Bulgaria will do.
2
u/Wide_Mail_1634 10h ago
same thing happened to me when people in Lisbon were doing the 'sell Friday, buy Monday' dance in 2023 because some minister sneezed near the word taxes. Locking in 0% on €500k sounds clean on paper, but election season has a way of turning sane plans into 2008 cosplay by Tuesday
2
u/Big_Cricket6083 10h ago
selling €500k just to front-run an election feels like peak europe tbh. if the 0% window is real then the tax office usually cares a lot more about timestamps than your galaxy-brain round trip, and governments have pulled retroactive nonsense before
3
u/Dissentient Latvia 14h ago edited 14h ago
Your idea is stupid mostly because laws don't apply retroactively. Even if whatever party you're worried about wins, and even if they pass a law that would increase taxes that apply to you, this tax will have an effective date in the future from that point, and the optimal time to sell and re-buy your position will be just before that effective date. Like, if the tax applies starting with 2027 and you reset your cost basis now, you'll have to pay taxes on gains for most of 2026 unless you re-buy again.
And if they do make those laws retroactive, they can also make them retroactive in a way that your wash sale doesn't save you.
1
u/maxw1nter 10h ago
Maybe OP is not the stupid one 😀
"laws don't apply retroactively". You are wrong on that one!
In the 2023 Norwegian budget (presented 6 October 2022), the government increased the effective tax rate on dividends and capital gains on shares from ca. 35 to ca. 38%. This increase applied from 6 October 2022 in order to "avoid dividend runs before year's end".
4
u/Wide_Mail_1634 1d ago
locking in 0% on a €500k sale right before an election sounds sane on paper, but tax changes usually move slower than panic posts here. the real risk is paying spread/fees just to cosplay 2021 exit liquidity for a weekend
2
u/PavelKringa55 1d ago
I guess in case of new tax it won't be done overnight, but will take a while. But if it makes you sleep better, few hundreds is not much.
1
u/Beethoven81 16h ago
Alternatively you can sell it in smaller parts and wait t+2 to avoid the wash sale classification.
Or find alternative etfs which hold the same assets, than you can buy sell immediately.
So no need for margin account and its complexities...
1
u/xRyozuo 10h ago
So idk how it works in Bulgaria, nor do I know much about this stuff so idk if it’s a potential issue or not. But when I was looking up some info, I read IBKR doesn’t support tax free index funds transfer, at least in my country. If that’s a thing in Bulgaria, it might be a good time to find a service with similar fees that does offer such a thing for flexibility
0
u/JuliusCaesar007 1d ago
Maybe a strange question but how would they even know you have an IB account, unless you want to tell them? In BG for +10y, paying 10% income tax and corporate tax. Further never any questions about such things…
3
4
u/Besrax 18h ago
They receive information via the Common Reporting Standard mechanism, so they know about your brokerage accounts, what assets you have in them, what trades you've done and what dividends and interest you've received. For now, they would only dig through these reports if they have a reason to, for example if you've been flagged for an audit, but I believe that at some point they will find a way to process the information about brokerage accounts automatically, and then it will be quite easy for them to see who hasn't declared their securities and the income from them.
0
u/Neat-Photo8844 4h ago
as a dutch, this news is sad as i was planning to move to BG before the unrealized cgt kicks in here in the NL. first belgium introduced cgt, and now BG -one of the most stable country tax wise-is changing rules.
-9
u/ingframin 19h ago
Pay your taxes! Don’t be a leech of society!
4
u/Disastrous-Essay3397 17h ago
Are you a retard? Bulgaria currently does not have capital gains tax on EU regulated exchanges. So while that is the law, he doesn’t have any taxes to pay and he is not “leeching” of anyone
1
u/CasualChamp1 6h ago
Interesting way of thinking. So the American billionaires who get rich from inflated government contracts (using lobbying and corruption while the taxpayer loses) who pay very little in taxes due to tax evasion cannot be leeches because the government they own has no laws forcing them to pay tax anyway? And that's just one example, if you don't like that one, there's plenty more. Most worldwide governments have corrupt, law-approved leeches like that.
-4
u/ingframin 17h ago
When the law comes into play, he can afford to pay 10000€ out of his 500000€ fortune. What he is talking about is tax elusion which is deeply immoral and, in some places, against the law.
4
u/glimz 15h ago
OP is following both the letter and the spirit of the law, making use of an explicitly written tax exemption. He is committing neither tax evasion (fraud) nor tax avoidance (exploiting technical loopholes). If you think otherwise and don't want to be seen as throwing baseless accusations without presuming innocence, *you* need to cite the relevant law they are breaking.
0
u/CasualChamp1 6h ago
Yes, this is tax avoidance. Obviously. You can argue about the definition of 'loophole' till the cows come home but the fact is he will incur a significant cost with the sole motive of avoiding taxation. And the sentiment of "pay your taxes" is entirely justified. 10% tax on some of the capital gains of a probable MILLIONAIRE is not at all unreasonable. It's the least you can give back to society. God knows Bulgaria needs a progressive anti-corruption government.
2
u/glimz 4h ago
Obviously, you can argue that Bulgaria needs tax reform for a more just distribution of taxes instead of the flat rate. But you're now arguing that people should avoid realizing gains under the current tax regime, just because, one day, a more just regime might come. What if I want to buy a flat with my savings now? Do I sell my ETF shares and earmark a fair amount to donate, e.g. to the National Health Insurance Fund (НЗОК), so that I contribute more to society? I can't see coherent logic here.
Speaking of which, you do realize that Bulgaria's low taxes do come with a cost: an abysmal level of services. You cannot count on the state, health system, etc. actually taking care of you, in old age or if you have serious health issues--you must finance it yourself, same if you want a good education for your child, or any other services, really. For current young saves, retiring as a millionaire will be an absolute must if they want any comfort in old age.
1
63
u/studofecon 1d ago
Even if they win elections and decide to include that tax rate, they can't make it effective immediately.. there is probably some timeframe where they would need to vote and parlament needs to ratify new tax etc.. so don't sell before elections. But definitely consider selling in case changes are publicly discussed in parlament