How Do European Tax Regimes Differ From the UK?

Chase Buchanan understand tax regimes for prospective expats differ depending on where they relocate or work. Some of the key EU countries are explored in this overview

Taxes are a certainty for everybody, irrespective of the country in which you live. However, understanding the variances and different tax regimes overseas is important for any prospective expat, or foreign national deciding where to relocate, retire or settle.

While there are some commonalities across Europe, there is no standardised tax system. Each EU member state has autonomy over how it raises tax revenues and the rates charged on various assets, revenues and incomes.

Chase Buchanan Wealth Management, the global expat financial advisory firm with eight locations throughout Europe, explains some of the key differences to be aware of – and the taxes that are the norm in Europe that do not exist in the UK.

The Importance of Understanding EU Taxes Before Planning a Relocation

While many expats have a firm idea of where they aspire to live, others may be keen to evaluate all the options and may, for example, be choosing between Portugal and Spain or whether they would enjoy a more comfortable lifestyle in Belgium or France.

The first consideration, when looking at the potential tax liabilities linked with an international move, is to assess your own financial circumstances and anticipated income. A tax regime that is appealing to one expat may not be to another. For instance:

• Retirement visas with flat-rate taxes and low tax obligations against foreign-sourced income can be an incentive to attract affluent overseas retirees. However, there may not be a corresponding favourable treatment for professionals and working-age adults.
• Low-income tax rates due to high personal allowances, may be beneficial for those falling into the basic tax band – but there may be much steeper tax rates on higher incomes for individuals earning the equivalent of the higher and additional income rates.
• Generous tax exemptions and allowances are a positive for expats relocating for work. However, if you intend to launch or expand a business in another country, you must also assess dividend and corporation tax rates.

As we've intimated, there are also taxes applied in some European countries that UK expats may be unfamiliar with – property and wealth taxes are the most notable.

In some countries, investing in a permanent family home can be a fast-track way to secure permanent residency and take advantage of affordable property markets. The drawback may be that, where international buyers can afford a far larger and more luxurious property against their budget, the size and value of a home could attract an annual tax obligation which should be budgeted for.

Average Taxation Rates Across Europe

In the UK, the average working adult pays an effective tax rate of 23.6%. In real-world terms, that means most people take home around 76.4% of their total salary, or gross pay, after deductions for tax, National Insurance and pension contributions.

EU averages are similar, with the latest figures showing an average net take-home pay of 70%, with tax burdens of 30%, split into 20% personal income tax and 10% social security deductions.

However, those averages may not be indicative of the EU countries where personal tax rates are either much lower or higher than the statistical average.

As an overview, we have collated a brief list based on the highest current statutory personal income tax rate of the most popular EU countries for expats, excluding local and municipal taxes, where applicable:

EU Country	Highest Personal Income Tax Rate
Belgium	50%
Portugal	48%
Spain	47%
France	45%
United Kingdom	45%
Ireland	40%
Cyprus	35%
Malta	35%

Note that a more detailed review of your finances and tax exposure is essential to make informed financial decisions since these are indications only.

For instance, the highest tax rate of 47% in Spain applies to resident taxpayers. Non-residents instead pay a flat rate of 24% taxation on most incomes, although this can vary between autonomous regions since each one sets their own thresholds, allowances and exemptions.

A similar variance applies in Portugal, where non-residents normally pay 25% taxation against local employment and self-employment earnings.

European Tax Charges UK Expats May Be Unfamiliar With

We mentioned wealth and property tax, which are the two types of taxation common in the EU that do not exist in the UK. It is worth reiterating that other taxes, such as inheritance, capital gains, investments, dividend and interest taxes should also be explored to assess your exposure and how this may change following an international move.

Spain, France, Belgium and Portugal all levy either a wealth or property tax, based on the net wealth owned by a taxpaying resident or calculated against specific assets:

• The Spanish wealth tax system applies to residents with net wealth above €700,000, with a tax exemption of €300,000 against primary homes.
• In France, the real estate wealth tax is assessed against worldwide assets, payable by taxpayers with above €1.3 million calculated on the 1^st January each year.
• Belgium superseded its previous wealth tax with the Solidarity Tax introduced in 2019, which charges a flat rate of 0.15% tax on securities worth €1 million or above.
• Portuguese taxpayers pay a municipal property tax on real estate with levies ranging from 0.3% to 0.8% depending on the location and assessed taxable value.

Expats who relocate and are unaware of their tax burdens linked with overall wealth or property ownership can face difficulties, particularly if they inadvertently fail to file the correct declarations.

Comparing EU Tax Rates With the UK

Preparing a direct comparison is complex due to the factors we have explored and the fact that tax obligations for one individual or family may differ substantially from another based on multiple aspects:

• Where their income originates, and the proportion earned in their country of residence.
• Their taxpayer status, and whether they are taxable as a resident or non-resident.
• Total asset holdings and exposure to property taxes and wealth taxes.
• The nature of income, whether from pension schemes, employment, self-employment, business ownership or other sources.

Our advice is always to discuss your intended move, long-term plans and financial status with an experienced wealth manager with sufficient knowledge of the localised tax framework and how this compares with other potential destinations to ensure you make confident decisions.

Advanced expat financial planning can make a huge difference to your experience relocating to Europe, and ensure you have a firm idea of your total tax liabilities to plan and budget accordingly.

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About Chase Buchanan Private Wealth Management

Chase Buchanan is a highly regulated wealth management company that specialises in providing global finance solutions for those with a global lifestyle. We are global financial advisers, supporting expatriates around the world from our regulated European headquarters, and local offices across Belgium, Canada, Canary Islands, Cyprus, France, Malta, Portugal, Spain, UK and the USA.

Chase Buchanan Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission with CIF Licence 287/15.

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