Several countries tax unrealized capital gains, but none applies a blanket annual tax on all paper profits. Instead, governments reach unrealized appreciation through targeted mechanisms: exit taxes when someone leaves the country, deemed dispositions triggered by events like death or emigration, mark-to-market rules that revalue certain assets each year, and annual wealth taxes that indirectly capture gains by taxing total asset value. The United States, Canada, Norway, Denmark, Germany, the Netherlands, Switzerland, and Spain each use one or more of these tools.
How Governments Reach Unrealized Gains
In most countries, capital gains tax is owed only when you actually sell. That realization principle is simple to administer, but it lets someone accumulate large gains in a high-tax country, move to a low-tax jurisdiction, sell there, and pay little. The mechanisms below are how governments close that gap.
An exit tax fires once, at departure. A deemed disposition fires on a specific life event, treating an asset as sold at fair market value even though nothing changed hands. A mark-to-market system revalues assets every year and taxes the annual increase. A wealth tax doesn’t target the gain directly, but by taxing the total value each year it captures appreciation the owner hasn’t cashed in.
Exit Taxes When You Leave
United States
The U.S. exit tax under Internal Revenue Code Section 877A treats giving up citizenship or long-term permanent residency as a sale of every asset you own at fair market value the day before departure. It applies only to “covered expatriates,” a status you hit by meeting any one of three tests.1Office of the Law Revision Counsel. 26 USC 877A – Expatriation to Avoid Tax
- Worldwide net worth of $2 million or more on the expatriation date.
- Average annual net income tax above $211,000 for the five prior years (the 2026 threshold, adjusted annually).
- Inability to certify five years of federal tax compliance.
A covered expatriate excludes $910,000 of the deemed-sale gain for tax years beginning in 2026.2Internal Revenue Service. Revenue Procedure 2025-32 Gains above that are taxed at regular capital gains rates plus the 3.8% Net Investment Income Tax, and the calculation is reported on Form 8854. For hard-to-liquidate assets, the code allows deferral if you post a bond or other security with the IRS.1Office of the Law Revision Counsel. 26 USC 877A – Expatriation to Avoid Tax
The tax reaches green card holders as well as citizens. A “long-term resident” for this purpose is someone who held a green card in at least 8 of the 15 tax years ending with the year they gave it up.3Internal Revenue Service. Expatriation On or After June 17, 2008 – Mark-to-Market Tax Regime
Norway
Norway’s exit tax covers unrealized gains on shares, ownership interests, equity certificates in Norwegian and foreign companies, share savings accounts, stock options, equity funds, and financial instruments where those assets are the underlying object.4Regjeringen.no. Response to the Request for Information Concerning Norwegian Exit Tax Rules for Natural Persons Norway tightened the regime in 2024 and 2025 to stop departing taxpayers from stripping value through post-exit dividends. Exit tax is now payable as dividends are distributed, shares can serve as collateral for the claim, and heirs living abroad who inherit the deferral must move back to Norway within 12 years to have the tax waived.5Regjeringen.no. Closing Tax Loopholes by Amending the Exit Tax Rules
Denmark
Denmark taxes unrealized gains on shares and securities when a resident leaves, provided the combined market value of shares, investment fund units, and other securities covered by Danish capital gains rules reaches DKK 100,000 or more at departure. All such holdings must be reported when you go.6Skat.dk. Tax on Shares If You Leave Denmark
Germany
Germany’s Wegzugsbesteuerung applies to individuals holding at least a 1% stake in any corporation, domestic or foreign. When the taxpayer moves abroad, the unrealized gain on those shares becomes taxable income. From 2025, the rule extends to investment fund units, catching stakes of 1% or more in a fund or investments with a cost of at least €500,000.
Canada’s Deemed Dispositions
Canada runs the most systematic deemed-disposition regime. Rather than firing only on expatriation, it fires on multiple events so that unrealized gains are captured before the taxing jurisdiction loses its claim.
At Death
When a Canadian resident dies, they are treated as having sold all capital property immediately before death at fair market value, and the resulting gain is reported on the final tax return even though nothing was sold. Beneficiaries then take the asset with a cost basis equal to that fair market value. Transfers to a surviving spouse or a qualifying spousal trust defer the deemed disposition until the surviving spouse dies or the asset is actually sold.7Canada Revenue Agency (CRA). Prepare Tax Returns for Someone Who Died – Taxable Capital Gains on Property, Investments, and Belongings
On Emigration
When you stop being a Canadian tax resident, the CRA treats you as having sold most capital property at fair market value on your departure date. Registered retirement plans, personal-use property, and Canadian real property are excluded (Canadian real property stays taxable by Canada whenever you eventually sell). You can elect to defer payment on the departure gain regardless of amount, but if the federal tax owed exceeds $16,500, you must post adequate security such as a letter of credit.8Canada Revenue Agency. Dispositions of Property by an Emigrant of Canada If the total fair market value of everything you owned at departure exceeds $25,000, you also have to file Form T1161 listing all your properties.9Canada Revenue Agency (CRA). Leaving Canada (Emigrants)
Canada also applies a deemed disposition to most trusts on their 21st anniversary, forcing recognition of accrued gains inside trust structures even when the assets are still held.
Mark-to-Market and Deemed-Return Systems
The Netherlands: Box 3
The Dutch Box 3 rules don’t tax your actual investment returns. The government imputes a fictional return based on the type of assets you hold and taxes that deemed income at a flat 36%.10Tax Administration | Ministry of Finance. Box 3 Provisional Assessment For 2026, the deemed rates are 1.28% on bank balances, 6.00% on investments and other assets, and 2.70% on debts (which reduce the taxable base). Hold €200,000 in stocks and the government assumes you earned €12,000, taxing that whether your real return was higher, lower, or negative. The tax-free threshold for 2026 is €51,396 per person, down from €57,684 the year before.11Government of the Netherlands. 2026 Tax Plan – Steps Towards a Better Tax System A replacement based on actual returns is under development but not expected before 2028.
U.S. PFIC Mark-to-Market Election
In the United States, mark-to-market treatment is available as an election for shareholders of a Passive Foreign Investment Company under IRC Section 1296. A PFIC is typically a foreign mutual fund or ETF, and the default PFIC regime is punitive: deferred gains can be taxed at the highest marginal rate with an added interest charge. Electing mark-to-market means you include the annual increase in value as ordinary income each year regardless of whether you sold anything.12Office of the Law Revision Counsel. 26 USC 1296 – Election of Mark to Market for Marketable Stock The election is only available for “marketable” PFIC stock that trades regularly on a qualifying exchange.
U.S. Section 475 Trader Election
Professional securities traders in the U.S. can elect mark-to-market accounting under IRC Section 475(f). Every position is treated as sold and repurchased on December 31, converting results to ordinary income or loss, eliminating the short-term/long-term distinction, and removing the wash sale rules. You must seek to profit from daily price movements, trade substantially, and trade with continuity and regularity. The election must be filed by the due date of the prior year’s return, and late elections are generally not allowed.13Internal Revenue Service. Topic No. 429, Traders in Securities It is a tool for people who trade for a living, not for casual investors.
Wealth Taxes That Reach Unrealized Appreciation
A wealth tax is not a capital gains tax. It taxes total asset value each year rather than the increase. But the practical effect overlaps: when your portfolio grows and you owe wealth tax on the new, higher total, you are paying tax on appreciation you have not cashed in.
Norway
Norway taxes net wealth above NOK 1,900,000 (roughly $175,000) for single taxpayers at both municipal and state level. The municipal rate is 0.35%. The state rate is 0.65% on net wealth up to NOK 21,500,000, rising to 0.75% above that. Married couples filing jointly double the threshold, and the combined top rate reaches about 1.1% annually.14The Norwegian Tax Administration. Net Wealth Tax and Valuation Discounts
Switzerland
Switzerland’s net wealth taxes are cantonal, with rates and thresholds that vary widely. The base is worldwide gross assets minus debts and covers bank accounts, securities, real estate, vehicles, and valuables such as art and jewelry. Zurich’s rates for single taxpayers run from 0.05% on modest wealth to 0.30% on taxable wealth above CHF 3,304,000, with municipal multipliers that push the effective rate higher. Geneva’s combined base and supplementary rates reach roughly 0.5%.
Spain
Spain’s Solidarity Tax on Large Fortunes applies to residents (and certain non-residents) whose net asset value on December 31 is €3 million or more. After a €700,000 general exemption, progressive rates start at 1.7% between €3 million and roughly €5.3 million, rise to 2.1% up to about €10.7 million, and reach 3.5% above that.
What’s Been Tried and What’s Proposed
Broad annual taxes on unrealized appreciation have a mixed history. Sweden ran a wealth tax from 1911 until 2007, valuing real estate at about 75% and listed stocks at 80% of market value, and eventually repealed it amid concerns about capital flight and administrative cost. Narrower mechanisms have proven more durable: exit taxes and elective mark-to-market regimes are still in force across the countries above, while broad-based versions have tended to be dropped.
In the United States, the Billionaire Minimum Income Tax Act, introduced in Congress in 2022, would require households worth over $100 million to pay at least a 20% effective tax rate on their full income, including unrealized gains.15U.S. Representative Don Beyer. Congressmen Cohen and Beyer Introduce Billionaire Minimum Income Tax Act It has not been enacted. Across the EU, the Anti-Tax Avoidance Directive requires member states to apply exit taxation to corporations that relocate assets across borders, setting a common floor for taxing unrealized gains at the corporate level throughout the bloc.