Taxation (EU)๐Ÿ‡ช๐Ÿ‡บ๐Ÿ‡จ๐Ÿ‡ณ

Advertisement

There are no EU-wide rules that say how EU nationals who live, work or spend time outside their home countries are to be taxed on their income – coming from wages, pensions, benefits, property, successions and donations, or any other sources.

Advertisement

There are only national laws and bilateral tax treaties between countries – and these don’t cover all eventualities and vary considerably.

However, there are some basic principles that apply in most cases to people who spend time in EU countries outside their home country:

Other taxes

For information about taxes on unearned income in the country where you are tax resident (e.g. property taxes, local taxes, gift and inheritance taxes, etc.) consult the local tax office.

https://europa.eu/youreurope/citizens/work/taxes/index_en.htm

Company tax in the EU

Company tax โ€” also referred to as corporation tax โ€” should be paid by various types of companies, clubs, co-operatives and unincorporated associations on profits from doing business. The rules are set by national authorities and can be different for each member state.

https://europa.eu/youreurope/business/taxation/business-tax/company-tax-eu/index_en.htm

Company Tax

In October 2001 the Commission presented its new plans for the coming years for company taxation in the European Union in a Communication (COM(2001) 582 of 23/10/2001) based on a detailed study (see also press release IP/01/1468 and frequently asked questions MEMO/01/335 ). The Communication identified several steps which could be taken to remove individual tax obstacles to cross-border trade in the Internal Market and the Commission and Member States are currently discussing these. However, the Commission also concluded that in the longer term Member States should agree to allow EU companies to use a single consolidated base for computing tax on their EU-wide profits.

The Commission has since been engaged in intensive follow-up work both on various individual measures to address specific problems in the company tax field and on its long-term proposals for a common tax base.

The Commission presented a follow-up Company tax Communication in November 2003 (COM (2003) 726 – see also press release IP/03/1593 and frequently asked questions MEMO/03/237 ) confirming the commitment taken in the 2001 strategy,

  • reviewing its efforts to remove obstacles affecting businesses operating within the Internal Market and
  • presenting ideas for a pilot scheme that would allow small and medium-sized enterprises to use the tax rules of their home state for computing their EU-wide taxable profits.

In 2005 the Commission proposed a re-launching of the Lisbon strategy, with the focus on growth and jobs (COM (2005) 24 of 2.2.2005 and COM(2005) 330 final of 20.07.2005). The contribution of taxation and customs policies to the Lisbon strategy was highlighted in the subsequent Commission Communication COM(2005) 532 final of 25.10.2005. As far as corporate taxation is concerned, the Commission confirmed its policy to provide companies operating in the single market with a common tax base.

https://ec.europa.eu/taxation_customs/business/company-tax/overview_en

Dual residence

In some cases, two countries could consider you a tax-resident at the same time, and both could require you to pay taxes on your total worldwide income. Fortunately, many countries have double tax agreements, which usually provide rules to determine which of the two countries can treat you as a resident.

If the tax treaty does not provide a solution or if your situation is particularly complicated, contact the tax authorities of one or both countries and ask them to clarify your situation.

Posted workers/jobseekers

In some cases, such as for workers posted abroad for a limited time or jobseekers abroad, you may be considered taxโ€“resident, and therefore taxable, in your home country even if you stay abroad for more than 6 months – if you keep your permanent home in your home country and your personal and economic ties with that country are stronger. Contact the tax authorities to check which rules apply to you.

In such a case, your host country may also tax you – your local employer may, for instance, deduct taxes from your salary at the time of payment.

In addition, whether or not you continue to be resident in your home country, that country may tax income (for instance from property) arising there.

In these cases, be aware that there are solutions to double taxation and make sure that your income is not taxed twice if it doesn’t need to be.

Fictitious tax residence

Under some double tax treaties, the country where you earn all or almost all of your income will treat you as tax-resident, even if you don’t live there. This status of fictitious tax-resident is granted by some countries to cross-border commuters.

Under EU rules, each country still has a certain latitude to decide what percentage of your income represents ‘almost all’. In any event, whether the country where you earn all or almost all of your income treats you as tax-resident or not, it will be obliged to give you the same allowances and tax reliefs that it gives to a resident.

Of course, if you receive all allowances available to residents in the country where you work, you could not expect to receive all allowances and reliefs available to residents in the country where you live as well. Be aware that tax authorities will communicate with each other to ensure that you don’t receive a double set of allowances and reliefs.

Equal treatment

Under EU rules, no matter in which EU country you are considered a tax-resident, you should be taxed in the same way as nationals of that country under the same conditions. For example, in the country where you are tax-resident or where you earn all or most of your income, you should be entitled to:

  • any available family allowances and tax deductions for childcare costs, even if the costs are incurred in another EU country
  • any available tax deductions for interest on mortgages, even for a house you own in another EU country
  • joint tax assessment with your spouse, if this is possible in that country

If you feel discriminated against, you can seek personalised advice.

https://europa.eu/youreurope/citizens/work/taxes/income-taxes-abroad/index_en.htm

Double taxation

There is a risk that your income may be taxed twice if two countries have the right to tax your income because, for instance:

In these situations, while you will always be subject to the tax rules of your country of residence, you may also have to pay taxes in the other country.

Fortunately, however, most countries have double tax agreements. These agreements usually spare you from double taxation:

  • under many bilateral tax agreements, the amount of tax you paid in the country where you work will be offset against the tax you owe in your country of residence
  • in other cases, the income earned in the country where you work might be taxable only in that country and exempt from tax in your country of residence

You should note that the tax rates in the two countries involved will most likely be different. If the tax rate in the country where you work is higher, that is the final rate you will pay – even if the tax paid in that country is offset against the tax due in your country of residence, or if your country of residence exempts you from any further tax.

In order to claim relief from double taxation, you may need to prove where you are resident and that you have already paid taxes on your income. Check with the tax authorities what proof and which documents you need to submit.

Income taxes abroad

Which country can tax you?

There are no EU-wide rules that say how EU nationals who live, work or spend time outside their home countries are to be taxed on their income.

However, the country where you are resident for tax purposes can usually tax your total worldwide income, earned or unearned. This includes wages, pensions, benefits, income from property or from any other sources, or capital gains from sales of property, from all countries worldwide.

For information about property taxes, local taxes, gift and inheritance taxes consult your local tax office.

Each country has its own definition of tax residence, yet:

  • you will usually be considered tax-resident in the country where you spend more than 6 months a year
  • you will normally remain tax-resident in your home country if you spend less than 6 months a year in another EU country.

https://europa.eu/youreurope/citizens/work/taxes/double-taxation/index_en.htm

Income taxes abroad

Which country can tax you?

There are no EU-wide rules that say how EU nationals who live, work or spend time outside their home countries are to be taxed on their income.

However, the country where you are resident for tax purposes can usually tax your total worldwide income, earned or unearned. This includes wages, pensions, benefits, income from property or from any other sources, or capital gains from sales of property, from all countries worldwide.

Each country has its own definition of tax residence, yet:

  • you will usually be considered tax-resident in the country where you spend more than 6 months a year
  • you will normally remain tax-resident in your home country if you spend less than 6 months a year in another EU country.
Advertisement
Previous articlePartnership (EU)๐Ÿ‡ช๐Ÿ‡บ๐Ÿ‡จ๐Ÿ‡ณ
Next articleBusiness competition (EU)๐Ÿ‡ช๐Ÿ‡บ๐Ÿ‡จ๐Ÿ‡ณ