Before You Start
- Basic understanding of capital gains tax rules in your country (e.g., Germany, France, Netherlands, etc.)
- Active brokerage account with a European-accessible platform (e.g., DEGIRO, Trade Republic)
- Access to your portfolio’s transaction and tax reporting tools
- List of your ETFs or stocks with purchase dates and prices
Time needed: 30–60 minutes for your first harvest (plus annual review)
What you'll need: Access to your broker account, a spreadsheet or tax software, and your country’s tax guidelines
Tax loss harvesting in Europe means selling investments at a loss to offset taxable gains, thus reducing your annual tax bill. While this strategy is well-known in the US, European investors face different tax rules, broker tools, and “wash sale” regulations. This guide gives you a practical, EUR-based walkthrough—using brokers like DEGIRO and Trade Republic—so you can apply tax loss harvesting efficiently and compliantly.
Step 1: Know the Tax Rules in Your Country
What to do: Before you start, research how capital gains and losses are taxed in your country. For example, in Germany, you can offset capital gains with capital losses and carry losses forward indefinitely; in France, offsetting is also possible, but there are nuances.
Why it matters: Tax loss harvesting only works if your country lets you offset gains with losses. Some countries have restrictions on which assets or years you can use.
What can go wrong: If you harvest losses that can’t be offset due to local rules, you may lose their benefit. Always confirm with your tax office or a qualified advisor.
Pro Tip
Check official tax authority websites or use guides from major brokers. For German investors, the Bundesfinanzministerium offers resources in English.
Step 2: Identify Positions with Unrealized Losses
What to do: Log into your broker (e.g., DEGIRO or Trade Republic). Download or view your portfolio statement. Look for ETFs or stocks showing a current value below your purchase price.
- In DEGIRO: Go to “Portfolio” → Export your positions → Sort by “Profit/Loss” column.
- In Trade Republic: Tap “Portfolio” → Review each holding’s gain/loss percentage.
EUR Example: You bought 10 shares of the iShares Core MSCI World UCITS ETF (IE00B4L5Y983) at €100 each (€1,000 total). Now, they trade at €90 each (€900 total). Your unrealized loss is €100.
Why it matters: Only realized losses (from selling) count for tax purposes. Identifying losing positions is the first actionable step.
What can go wrong: Mistaking unrealized for realized losses. Losses only count after you sell.
Step 3: Decide What and How Much to Sell
What to do: Choose which positions to sell, keeping in mind how much taxable gain you want to offset. You do not need to sell your entire position; partial sales are possible.
EUR Example: If you have €500 in realized gains from selling another ETF this year, selling your 10 losing shares (with a €100 loss) will reduce your taxable gain to €400.
Why it matters: You want to match losses to gains—selling too much may “waste” losses you can’t use (unless you can carry them forward).
What can go wrong: Selling more than you can offset in the current or future years (depending on your country’s loss carry-forward rules).
Pro Tip
If you plan to rebuy a similar ETF, check “wash sale” rules (see next step). Also, consider liquidity—some ETFs are easier to sell quickly. See How to Evaluate ETF Liquidity Before You Buy: The European Investor’s Checklist for details.
Step 4: Execute the Sale on Your Broker
What to do: Place a sell order for the selected ETF or stock.
- In DEGIRO: Go to “Portfolio” → Click on the ETF → Click “Sell” → Enter the number of shares and type of order (market/limit) → Confirm.
- In Trade Republic: Tap “Portfolio” → Select the ETF → Tap “Sell” → Enter amount → Confirm sale.
Expected outcome: You should see a trade confirmation and your cash balance increase by the sale proceeds. The position will appear as “closed” or reduced in your portfolio.
Why it matters: This step “realizes” the loss, making it eligible for tax offset.
What can go wrong: Placing a market order during low liquidity can lead to poor execution prices. Always check bid/ask spreads and consider using limit orders.
Step 5: Avoid the Wash-Sale Trap
What to do: Understand your country’s “wash sale” rules—these prevent you from claiming a tax loss if you buy the same (or a “substantially identical”) asset within a certain period (often 30 days before or after the sale).
- In Germany and most of Europe: Wash-sale rules are not as strict as in the US, but tax authorities may challenge loss claims if you immediately repurchase the same ETF. It’s safest to wait 30 days, or buy a different but similar ETF (e.g., swap iShares MSCI World for Xtrackers MSCI World UCITS ETF, ISIN: IE00BJ0KDQ92).
Why it matters: If you violate wash-sale rules, your loss may be disallowed, and you’ll owe more tax than expected.
What can go wrong: Repurchasing the same ETF too soon. Always document your trades and waiting periods.
Pro Tip
Switching to a similar ETF (different provider, same index) lets you maintain market exposure while harvesting the loss. Always check the ETF fact sheet to confirm the underlying holdings and replication method.
Step 6: Document Your Transactions for Tax Reporting
What to do: Download your broker’s annual transaction report. Note the date, ISIN, number of shares, purchase price, and sale price for each harvested position.
- In DEGIRO: “Activity” → “Annual Statement” → Export as PDF or Excel.
- In Trade Republic: “Documents” → Download “Annual Tax Report.”
Why it matters: You must report both the realized loss and any offsetting gains on your tax return. Good records are essential if audited.
What can go wrong: Missing documentation or errors in reporting can lead to penalties or loss of tax benefits. Double-check all figures.
Step 7: File Your Tax Return and Offset Gains with Losses
What to do: Enter your gains and losses in the appropriate section of your country’s tax return (e.g., “Kapitalerträge” in Germany’s Einkommensteuererklärung). Attach supporting documents if required.
EUR Example: You realized €1,000 in gains and €400 in losses. You only pay tax on €600. If the tax rate is 26.375% (Germany’s Abgeltungsteuer), your tax due is €158.25 instead of €263.75—a saving of €105.50.
Why it matters: This is where the benefit of tax loss harvesting becomes real—reducing your tax bill for the year.
What can go wrong: Incorrect or incomplete reporting may delay your refund or trigger audits. If unsure, use tax software or consult a tax advisor.
Common Mistakes
- Ignoring local tax nuances: Not all losses are deductible in every country or for every asset type.
- Violating wash-sale rules: Repurchasing too soon can invalidate your loss.
- Poor documentation: Failing to keep detailed records may cause problems at tax time.
- Over-harvesting: Realizing more losses than you can offset in the foreseeable future may “lock in” losses with no benefit.
- Misunderstanding ETF differences: Swapping to a “similar” ETF that tracks a different index or uses a different replication method can change your portfolio risk.
Next Steps
- Schedule an annual portfolio review (ideally in November or December) to identify harvesting opportunities before year-end.
- Read up on how to switch your portfolio to EUR-denominated ETFs for further tax efficiency.
- Consider using tax software or a qualified tax advisor for complex portfolios or multi-country situations.
- Monitor changes to tax laws—European regulations evolve, and what works this year may be different next year.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Always do your own research and consider consulting a qualified financial advisor before making investment decisions.