Stock trading is a practice where one buys and sells equities in a company for short-term gains. While traditional investors in the stock market were in it for the long run, the modern stock trader is always looking to make a quick gain according to the daily changes in price.

Dealing with the trades of individual stocks can lead to quick profits and considerable losses. You need to read the rise and fall of prices in the market with a keen eye. Timing your trade is the most important when it comes to stock markets.

In this article, we will discuss the taxes levied on stock trades in Europe.

Tax Rates in Europe

The tax rates on profits procured through stock trading are different throughout the world. The US and UK have their system of taxing the income on stock exchange profits, such as dividends and capital gains.

They are not taxed the same as net wage income. If you buy shares in a company for a low price and gain profit on its sale, a tax rate will be levied on that profit.

Suppose you bought a percentage of a company for 200 Euros and sold it for 250 Euros, according to the inflation in the market. You will have to pay a certain tax rateon that 50-Euro income, depending on your country.

Denmark

In the case of Denmark, you are supposed to pay 27% in tax if your capital gain through stock trading is around 57,200 Danish Krone. This tax is levied on the initial income from the shares you sold.

If your capital gain is above the figure mentioned earlier, you must pay a heavy tax of 42% on your income from stock trading. The income here includes the increment received from the company where you have shares, and the profit garnered from the sale of the shares.

The amount is double 57,200 Danish Krone if you are married. The income is taken together and should be two times 57,200 for the tax rates to apply (still 27% for the initial income and 42% for more than the average income).

For example, if you have invested in a company to rely on their dividends for your income, and BNP Paribas is about to go ex-dividend in a few days, you should not miss the date. If you miss it, you will not receive the dividend.

The tax rates in Poland are levied on your income from sales of your company shares and also the dividends you receive from them in a long-term investment.

Poland

In Poland, the tax rates are based on your residential status in the country. If you are a non-resident, you are supposed to pay a limited percentage of tax to the government through the sale of your shares in Polish companies.

For permanent or local residents, their total worldwide income is taxable. In other words, it means that they are subject to unlimited tax liability.

For non-residents, let us take an example of a company in Polish real estate. If a non-resident has a share in that company and has at least 50% of its asset value, they are liable to pay 19% of their income tax rate.

This is applicable only to non-residents with a 50% share in Polish companies that are directly or indirectly connected to Polish real estate.

Spain

In Spain, the dividends and other income that are acquired through the sales of shares in companies are included in PIT saving income. They are taxed at a 19% tax rate in the initial income of 6000 Euros.

The increase from 6000 Euros to 50000 Euros will see an increase in the tax rates up to 21%, which will go up to 23% if the income crosses from 50000 to 200000 Euros. Any income above 200000 Euros through company shares sold in Spain will be taxed at 26%.

For non-resident persons in Spain, the tax rate is flat at 19%.

Short-Term Capital Gains vs. Long-Term Capital Gains

For freshers looking to invest in stocks, you need to understand the basics first. To make you understand stock trading, we will discuss the difference between short-term and long-term capital gains.

In simple terms, a capital gain is a profit you receive from selling an asset. The difference between short-term and long-term is the period of time you invest in assets like bonds, stocks, real estate, etc.

·        Short-term Capital Gains

Short-term stock trading refers to the purchase and sale of stock shares in an asset within a single trading day. Short-term stock traders use high amounts of leverage and trading tactics to gain ground on minute price movements in the market.

However, you should understand the market’s fundamentals before you decide to trade in stocks for short-term profits. If you do so without adequate knowledge, you can stand to lose a lot of money.

Even if you invest in assets to gain quick profit, you should do it using the money you can afford to lose. To deal with short-term trades, you must have access to a considerable amount of capital with you, as any sudden shift in the market may require big-margin calls on short notice.

·        Long-term Capital Gains

Long-term capital gains refer to the profit from selling an asset that is a year or older. People that invest in long-term assets do so because the tax rates are much lower than short-term capital gains.

In long-term capital gains, you purchase an asset for the current price, and you wait for a year or two till you sell it off for a higher price. However, the extra income you procure from the sale (selling price minus the purchasing cost) is not how you calculate profit in long-term gains.

To determine the capital gains, you should consider the cost of buying the asset, the selling price, and the cost inflation index. One key advantage of long-term capital gains is that the tax rates are slightly lower than short-term gains.