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Monthly Wrap: European countries which offer the best tax breaks for expats

currency-newsMonthly Wrap: European countries which offer the best tax breaks for expats
Many of us have dreamed of relocating to Europe. However the continent’s stereotypical high taxes can sometimes be off-putting to potential expats.

While those seeking to minimise their tax-burden will find that countries like France are off the table there are still plenty of European countries which offer more favourable tax rates.

When do you pay taxes

Generally speaking, an individual would need to reside in a country for longer than six months to become a ‘tax resident’. With this title, you will be liable for the same taxes as a permanent resident of your host country and are likely to be taxed on your worldwide income.

Low tax European countries

Bulgaria is one of Europe’s lowest-taxed countries. It has a flat tax-rate of 10%, regardless of an individual’s income, allowing workers to take home the majority of their pay packet. This is the same whether you are employed or self-employed.

Bulgaria also offers a variety of other benefits, such as a stable economy, job opportunities and is generally known as a safe country for British expats.

While Scandinavia is often thought as a region with a high tax burden, Norway actually has a very reasonable tax policy.

The first NOK190,350 (£16,125.85) is tax-free. From there, personal tax incomes increase in accordance with your salary.

For example, a personal income between NOK190,350 and NOK297,900 (£24,993.07) will be taxed at 1.7%; NOK267,900 – 643,800 (£54,006.08) will be taxed at 4%, and so forth. The highest tax rate is 17.4% and is applied to earnings over NOK2,000,000 (£168,766.00).

Expats are attracted to the Scandinavian country’s unique landscape. From mountains to coastal fjords, Norway is renowned for excellent outdoor activities, particularly fishing, hiking, and skiing.

In the east you might look to Poland, which has adopted a new tax regime in light of the war in Ukraine and the cost of living crisis.

The first bracket of income tax – those earning up to PLN 120,000 (£22,289.31) – will be reduced by 5%, decreasing it from 17% to 12% as of 1st July 2022.

Polish residents also aren’t required to pay tax on earnings below less than PLN30,000 (£5573.23).

British expats are often drawn towards Poland due to its high salaries and low house prices. The country is one of the most economically developed in Eastern Europe, and is rich in medieval history, scenic landscapes, and diverse culture.

The Czech Republic or Czechia is another low-tax country in the east of Europe.  The personal income tax rate is 15% for earnings below CZK1,867,728 (£64,847.69). Thereafter, the tax rate increases to 23%. The higher tax rate is also applicable to those earning 48 times more than the average wage within one calendar year.

In Czech Republic, there are five categories of income which personal income tax is applied to: employment, capital, leased assets, entrepreneurial activities, and ‘other’.

Given Czechia’s low cost of living even in the country’s picturesque capital, Prague, the country is ideal for those seeking to improve their quality of lift without increasing their outgoings.

Next is Ireland, home to picturesque landscapes and historical architecture.

The Irish tax system is split into two brackets: the standard rate of 20% and the higher rate of 40%. The two brackets are differentiated in accordance with your personal situation.

For example, if you are a single person without children, then the first €36,800 earnt will be taxed at the standard rate. Earnings over that are then taxed at the higher rate.

Whereas a person in the same situation but who has qualifying children will be taxed at the standard rate for the first €40,800 and taxed at the higher rate thereafter.

Luxembourg is also one of the smallest European countries and is therefore one of the least populated across the bloc. It’s also one of Central Europe's lowest taxed countries.

When it comes to income tax, Luxembourg has a varying scale with 23 brackets: ranging from 0% (tax-free on the first €11,265) to 42% (on earnings over €200,004).

In addition, providing less than 10% of a majority share is held, Luxembourg does not tax long-term capital gains on stocks.

There are also a number of personal tax allowances and deductions: workers are entitled to a €540 deduction to cover professional expenses. Additional deductions can be applied to commuting expenses (up to €2574 depending on distance travelled), overtime pay, etc. However, workers are subject to an additional fee of 7–9%; this will contribute to the employment fund.

Save more money with Currencies Direct

If you are considering moving to one of these countries you may also be interested in learning how you could make your money go even further by transferring your money with Currencies Direct.

Our highly competitive exchange rates, in addition to our fee-free transfers can help you to maximise the returns on your transfers.

We also offer a range of additional services, including our Forward Contracts which allow you to fix an exchange rate for up to a year. While locking in a rate in this way would mean you'd miss out if the exchange rate strengthened, your future transfer would be protected from any negative market movements.

Meanwhile a Limit Order is perfect if you are waiting for a more favourable exchange rate before making a transfer. All you need to do is target a level above the prevailing rate and we will make the transfer the instant your desired rate is hit.

If you wish to know more or would like to discuss your transfer options, get in contact with one of our friendly currency experts at +44 20 7847 9400.
Currencies Direct

Currencies Direct

Currencies Direct is one of Europe's leading non-bank providers of currency exchange and international payment services. Since we were formed in 1996, we've maintained our focus on providing innovative foreign exchange and international currency transfer services to corporations of all sizes, online sellers and private individuals. We have also expanded our services to provide dynamic and pioneering "business to business" solutions to help companies, tier 2/3 banks and other non-bank financial institutions to process their international payments. Our headquarters are in the City of London (United Kingdom) and we have operations in continental Europe, Africa, Asia, and the United States. Currencies Direct is jointly owned by private equity firms Palamon Capital Partners and Corsair Capital.

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