r/europe • u/paneuropeanism_ Europe • 13h ago

News Von der Leyen: €300 billion in European savings flown overseas every year, primarily to the US, will be invested in Europe from now on. All 27 EU states agreed to establish the S&I Union, a step toward the full Capital Market Union

https://streamable.com/4h43qk
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u/hardolaf United States of America 9h ago

The main issue with startups in Europe is that many countries tax stock options and restricted stock units on the date of the grant and not on the date of exercise or vesting. That means employees get hit with massive tax bills for something that they may never see. Beyond that, they often get taxed on imaginary values with no way to sell any of the asset to cover the taxes. Without fixing the tax codes in Europe to work sanely with this sort of compensation, no amount of government intervention on the subsidy or monetary side is going to result in Europe actually being able to compete with the rest of the world on technology.

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u/Hutcho12 9h ago

Where in Europe do you have to pay taxes before vesting? Never heard of that before. They might not even vest if you don't work there anymore.

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u/Graham110 9h ago

Netherlands or Denmark I think 🤔

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u/Top-Squash6558 8h ago

Netherlands and Denmark currently. Then add ‘terrible for startups’ to the list. Denmark have not added a new company to the stock exchange in +1000 days.

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u/chard47 4h ago

In the NL you do not pay tax before vesting.. only when you exercise the option or they are transferred into shares!

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u/Sensanaty 4h ago

In NL you have to buy to cover if you decide to convert your stocks into cash true, but you're not forced into it, and you're still not really "losing" money either (well, unless you believe all tax is theft anyways, which is an ideology I subscribe to personally). They're also getting rid of the idiotic "potential gains" tax so it's not that bad of a situation. I work for a large company and get RSUs on top of a great salary, I don't even bother selling my stock grants when I get them annually and they've accrued a decent penny. Obviously once I sell the taxman will want his pound of flesh, but that's the same situation as in the US.

I do work for a public company though and things change if you work for startups of course, but the overwhelming majority of startups here don't even offer any kind of equity to begin with so it's a bit of a moot point.

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u/Portugearl 1h ago

I'm actually quite curious how someone living in the Netherlands believes "taxation is theft"! Public services are stellar, public transport is clean, speedy, frequent, comfortable, and reliable. Urbanism is world-class, there's bike lanes everywhere and public places are well cared for. Even in the largest cities, parks are plentiful and well-tended. Courts are speedy, the police is mostly competent. Healthcare is very good as well.

What I'm saying is: if I lived in a shithole, yeah I'd be pissed paying my taxes if nothing worked properly and the streets were dirty and dangerous and run-down. But in a country like the Netherlands? Baffling

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u/Exciting-Ad6897 1h ago

Go live there and the more you know the place the better you’ll know the flaws. In some aspects it might be better than other European countries, perhaps the one that you “name” could imply.

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u/RenderedMeat 3h ago

From my understanding, in 2028 the unrealized tax will get much worse. Instead of an assumed 6% gain they tax 38% on currently, it will be actual (unrealized) gains you will be taxed 38% on.

https://news.bloombergtax.com/tax-insights-and-commentary/week-in-insights-dutch-unrealized-gains-tax-is-a-surprise-reform

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u/smokesick 14m ago

Isn't it all box 3?

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u/FemFiFoFum 7h ago

I feel like Denmark is generally always in the top list of "best countries for startups".

https://www.usnews.com/news/best-countries/rankings/opportunity As a quick example.

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u/Infamous_Thought_189 3h ago

But thats exactly the problem. Great for a startup! But once you scale up you get out and go to the US! Exact same thing happens in the Netherlands.

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u/1PickNick 56m ago

IIRC, since 2010 the Danish stock exchange has lost half its companies. The world’s highest tax on investors, combined with recurring annual taxation before realization, is a clear message to companies and investors to stay away. The 10 largest Danish listed companies are all more than 50 years old. Denmark is primarily a body-shopper country with many mom’n’pop shops and all scale-ups moving abroad. Sweden OTOH has learned from their mistakes and instated a much friendlier tax regime, and is now a destination for many Danish startups looking to be listed. Most if not all successful startups are sold abroad.

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u/philomathie 4h ago

That's just not true though, not at all for the Netherlands. You're talking out of your ass.

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u/Top-Squash6558 1h ago

Fair enough, I’m not an expert on taxes in the Netherlands. It’s true for Denmark though.

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u/hardolaf United States of America 9h ago

Germany and Sweden (this is why Spotify left for NYC) are the two that come to the top of my head as the most egregious but I know most in same way treat the compensation incorrectly for regular employees.

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u/Hutcho12 8h ago

You do not pay on grant in Germany, only on vest which makes sense.. it is income that of course is taxed..

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u/hardolaf United States of America 8h ago

And what if it's stock in a startup with an illiquid stock, an imaginary valuation driven by investors to make it look more valuable than it is, and no OTC market willing to even entertaining buying the stock at even 1% of the imaginary valuation?

I know that Germany fixed some problems but they still haven't fixed that issue.

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u/Character-Second781 24m ago

a startup with an illiquid stock, an imaginary valuation driven by investors to make it look more valuable than it is, and no OTC market willing to even entertaining buying the stock at even 1% of the imaginary valuation?

Honestly, any country disincentivizing that is probably going to do fine in the long term. Startups don't have to be 50% scam as they can be in the US.

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u/Ingoiolo Europe 4h ago

It doesnt really, if it is a restricted security.

I run a PE fund and I cannot give traditional carry to my German team. For a 10y fund, carry vests a small % per year. So in Germany, employees would be hit by dry tax every year, for something that in 10 years might be worth a lot…. Or nothing

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u/Hutcho12 3h ago

If you can’t sell it, that’s indeed a problem.

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u/CopperSulfateII Europe 7h ago

Paying tax on vesting sucks as much as on grant. 

Just do like the american ISOs. Tax the spread on exercise and give preferential tax treatment after that, or do cashless exercise on exit (ie sale of the option)

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u/Hutcho12 7h ago

I don’t know why you think you should pay less tax on stocks when they’re given to you than cash when it’s given to you.

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u/MilkHaterNumber1 6h ago edited 5h ago

Because you can't buy groceries with stock. Instead just tax when you sell and therefore actually have cash. This isn't complicated.

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u/Hutcho12 5h ago

I'm sorry, that's a really stupid take on this. Just because there is another step in there to buy something, doesn't mean it doesn't belong to you.

Once your company releases those stocks, it is worth something, so you need to pay tax on it.

If your company gifts you a car, you think you shouldn't have to pay tax on it until you sell it?

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u/MilkHaterNumber1 5h ago

If your company gifts you a car, you think you shouldn't have to pay tax on it until you sell it?

If you want people to be able to be paid in cars then yes you shouldn't tax it until you sell. Otherwise, people would have to sell the car to have the cash for the tax. But also this isn't a real comparison obviously because a car is a tangible good.

Have you even considered what happens if the stock you've paid tax on suddenly goes to $0? Now you're out that "income" and you've paid tax on literally nothing.

Congratulations on your dumb ass plan.

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u/Infamous_Thought_189 3h ago

What happens in the US in that case? Do you pay income tax when you sell the stock? Or is it seen as 'wealth'?

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u/Hutcho12 5h ago

That’s the risk you take if you hold onto it, just like if you buy a stock with your paycheck. If you’re worried about this, sell them immediately.

There is no way they are going to change to a system where you pay your income tax on your stocks when you sell them. You could end up deferring it forever when in reality it is part of your compensation for a particular year.

If this worked, there would be a whole load of loopholes, eg. people get paid in “Neuros” which can be converted to euros whenever you want and you only pay tax when you convert them.

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u/Foreign_Telephone349 6h ago

Because it helps drive investment and innovation…people that owe a massive tax bill on illiquid private stock options are just going to move abroad to more business friendly countries, like they currently do.

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u/CopperSulfateII Europe 5h ago

You should ask your friendly neighborhood llm to explain: Employee Stock options (ESOP), Exercise, Strike, Tax on spread, Tax on sale, FMV, Cashless exercise on exit. 

It'll help. 

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u/Hutcho12 5h ago

Options is a different matter. I’m talking about receiving stocks as part of your compensation. This is income, and should be taxed as such as soon as the stocks become yours.

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u/CopperSulfateII Europe 5h ago

I mean this is done by options for employees. Even in countries with terribly disadvantageous tax systems for it. 

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u/Strange_Formal Sweden 1h ago

This is not true at all. Google "Sweden ISK"

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u/Own_Refrigerator_681 4h ago

Portugal used to tax stock options until recently. I still haven't been able to sell stocksi got from a startup that never had an exit event and I already paid thousands in tax. I'll probably never recover that money...

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u/Ingoiolo Europe 4h ago

Germany, for example

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u/Hutcho12 3h ago

You pay on vest in Germany.

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u/beerdude26 8h ago

Netherlands has it but I believe it's going to change in a few years

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u/RenderedMeat 7h ago

But so far the proposal is worse, not better. Currently they tax on an expected gain of 6%. The proposed change is to tax based on actual unrealized gains, which could be much more than 6% (and much less in some years).

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u/beerdude26 6h ago

Oh I thought it was on realized gains

Lmfao taxing on unrealised gains 😂

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u/cyaniod 54m ago

Ireland. It's called deemed disposal. After 7 years of owning an etf you will be deemed to have disposed of a the asset and as such pay CGT.

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u/EarthTwoBaby 9h ago

That means employees get hit with massive tax bills for something that they may never see. Beyond that, they often get taxed on imaginary values with no way to sell any of the asset to cover the taxes.

That's simply not true, at least in France (and in most countries of Europe). There was a french law proposing to tax acquired stocks that gain value over time but this is still not the case.

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u/hardolaf United States of America 8h ago

This is only true since Macron got rid of the wealth tax. Most European nations are still screwed up in how they handle the tax situation. I think Poland also had fixed their laws a few years ago to make it like the USA.

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u/EarthTwoBaby 8h ago

why is an american talking like they're a european tax expert ?

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u/IndependentMemory215 2h ago

What European taxes do you pay?

Or are you familiar with every EU members tax policies?

It is quite possible to google something as well. It certainly doesn’t make you an expert, nor did the poster claim to be.

Are you saying he is wrong? If so, say that.

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u/Prince_of_DeaTh Lithuania 9h ago

That was a valid critique 5–10 years ago, but it’s largely outdated now.

Most major European tech ecosystems have overhauled their ESOP taxation (the Baltics, France's BSPCE, the UK's EMI, and recent reforms in Germany and Spain) to defer taxation until actual liquidity/exit events.

But more importantly: even in countries with top-tier stock option regimes (like Estonia), startups still have to move to the US for Series C/D funding because European capital markets are too fragmented to provide late-stage liquidity. Fixing talent incentives means nothing if there is no domestic capital deep enough to take those companies public.

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u/Charlesinrichmond 7h ago

It's not as simple as lack of capital. There is a phenomenal amount of European capital that gets invested in the US.

The issue is the incentives.

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u/Prince_of_DeaTh Lithuania 7h ago

Exactly, we have the capital. But European money defaults to Wall Street because navigating 27 different regulatory regimes makes local investment a nightmare. Integrating our capital markets is literally what creates the incentive for that capital to stay and fund domestic scale-ups.

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u/Charlesinrichmond 7h ago

Integrating the markets is well worth doing, but no one I know who invests capital worries about it. They only worry about the returns.

Europe's primary issue is downstream from the markets.

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u/Prince_of_DeaTh Lithuania 6h ago

That’s because returns don't happen in a vacuum. Valuations and returns are driven by liquidity, scale, and low transaction friction. Investors care about the final number, but that number is the direct result of having an integrated market backing the companies.

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u/konstantin_gorca 4h ago

Rest of the world? I mean, only US and China. You are completely right, but you make it seem as if we are competing with Zimbabwe

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u/hardolaf United States of America 3h ago

Europe and the USA is competing with China, Japan, South Korea, Israel, Nigeria (in 10 to 20 years), South Africa, Brazil, Canada, the UK (unless they decide to rejoin Europe), India, Vietnam, Thailand (they are best in the world in several medical subfields already), Indonesia, Singapore, etc.

One country doesn't need to be better than Europe at everything to be a competitor. They just need to be good at one thing to be a competitor.

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u/konstantin_gorca 3h ago

I honestly don't see EU competing with Japan, Korea, Brasil etc. Not due to arrogance but due to them being individual countries and their populations and economies cant compare with those of EU. They can be compared to Germany, France, UK, Spain.. but EU as a block I see as having only competitors in China, USA (depending on administration, best thing for both would be cooperation) and Russia militarily. I could throw India in there, since I think its time is coming. Maybe I am wrong, idk. Time will tell.

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u/GlobalVillage30 2h ago

Totally agree - the taxes for entrepreneurs and the labour regulations are just too high - the US is a different planet. The issue is not capital.

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u/hardolaf United States of America 1h ago

The effective tax rates between the USA and the EU are similar. The main issue is when the taxes are owed. There's been some fixes in some EU nations, but there's still a lot of problems making it difficult to pay in toilet paper (pre-IPO stock).