Charticle: Budget 2018: Capital gains on equities across the globe

Foreign institutional investors (FIIs) have voiced their concern on reintroduction of long-term capital gains tax on equities in the upcoming Union Budget to be announced on February 1.

Currently, long term capital gains (LTCG) on sale of listed securities is exempt from tax. Simply put, LTCG is profit on sale of shares listed on a stock exchange platform after a holding period of one year or more. On the other hand, short term capital gains (STCG), is the profit on sale of shares held for less than 12 months, and is taxed at a flat rate of 15 per cent. Besides, these all stock market transactions also attract securities transaction tax (STT) in a range between 0.017 per cent and 0.125 per cent.

Most analysts believe that though LTCG in some form will be introduced eventually, given that the government is grappling with larger issues like revival of growth, job creation, and rural stress, it is unlikely that a measure which dampens investor sentiment will be implemented in budget 2018.

Here is a quick look at how capital gains on equities is taxed across the globe.

 

Country	Tax on Capital gains on Equity
USA	For long term capital gains (Assets held for >12 months), the rate is 0% for taxpayers in 10% and 15% slabs, 20% for taxpayers in the highest slab, and 15% for the rest. Short term gains are taxed at slabs for ordinary income (10% to 39.6%). Short term capital losses can be set off against long term gains
Canada	50% deduction on all capital gains. Rates are separate for federal tax and province. The federal taxes range from 15% to 33%, while the maximum rates by the provinces range from 22 to 27%. Tax slabs are inflation indexed annually
Australia	Individuals with over 1-year holding - 50% deduction on Capital Gains net of losses while short term transactions are taxed fully. Tax rates range from 19% to 45%
UK	No difference between long term and short term, 10% rate for basic income tax limit
Germany	Gains from sale of shares purchased before 1 Jan 2009 are exempt, and gains on shares purchased since then are fully taxable and subject to withholding tax of 25%
EMERGING MARKETS
China	Temporarily exempt from capital gains, but they have been there for individuals in some form since 1998. Exemption on HKSE listed stocks for a period of three years till 4 December 2019
Brazil	Progressive taxation on capital gains ranging from 15% to 22.5% on sales above $6000
Indonesia	Withholding tax of 0.1% on every sale of shares while the WHT is 0.5% for 'founder shares' in a public offering. Capital gains are taxed progressively at the same rate as other income taxes (from 5% to 30%)
Singapore	Capital gains are not taxable. However, gains from trades are taxable. Income from a trade is taxed at 22%
Thailand	Gains from share transactions at Stock Exchange of Thailand are exempt, rest are taxed
Source: ICICI Securities report