If you are an expatriate worker in the European Union (EU), you may face some common tax problems. This is because the tax rules in the EU can be complex, and there may be different rules in each country. Here are some of the most common tax problems that expatriate workers face, and how to resolve them.
First of all, let’s talk about taxation of foreign income. If you are an expatriate worker, you may be taxed on your foreign income in your home country as well as in the country where you work. This is because many countries have tax treaties with other countries, and these treaties often allow for the double taxation of income. To avoid this, you may be able to claim a foreign tax credit in your home country. This credit allows you to offset the taxes you have paid in another country against your tax liability in your home country.
Another common tax problem for expatriate workers is the issue of residency. Many countries tax individuals based on their residency status. This means that if you are considered a resident of one country, you may be taxed on your income in that country, even if you earned that income in another country. To determine your residency status, each country has its own rules. However, there are some general principles that apply in most cases. For example, you may be considered a resident of a country if you have a home or family in that country, or if you work in that country for more than 183 days in a year.
There is also the issue of social security contributions. When you work in another country, you may be required to pay social security contributions to that country. However, you may also be required to pay social security contributions to your home country. This can create a double social security burden for expatriate workers. This can be avoided by claiming a totalization agreement, which is an agreement between two countries that allows for the coordination of social security contributions.
Some helpful information is to know the exact tax regimes of certain countries within the EU (all information courtesy of Celia Alliance).
“Under Dutch law, expatriates working in the Netherlands may be entitled to tax-free compensation equal to 30% of their gross remuneration. This relates to the 30%-ruling which is a fiscal facility for foreign employees who have specific skills or expertise, which are scarce in the Dutch labour market, who come to work in the Netherlands and who meet certain other conditions. Read more on the 30%-ruling here.”
The United Kingdom:
“There is no expatriate regime in the UK, however, individuals who are not domiciled may elect to take advantage of the remittance basis. Under the remittance basis the tax payer will be taxed on all UK income and gains to the UK but foreign income and gains will only be taxable in the UK to the extent these are remitted to the UK.
Individuals who take advantage of the remittance basis will lose their entitlement to UK personal tax allowances and the annual exempt amount for capital gains tax. Longer term UK residents who are not UK domiciled may face a Remittance Basis Charge if they have £2,000 or more in unremitted foreign income and gains and elect to take advantage of the remittance basis.”
“Inbound expatriates who were not French tax residents for 5 years prior to their employment in France, and who transfer their tax residence to France, can enjoy personal income tax exemption on the compensation items linked to the transfer to France.
For transfers within the same group (intra-group mobility), compensation items linked to the mobility might be exempt. There is a 30% flat exemption for employees directly hired from abroad by a French company.
As you can see, there are a number of different issues to consider when it comes to expatriate taxation. These issues can be complex, and it is important to seek professional help if you are facing any of these problems. A qualified LEGID tax attorney can help you navigate the complexities of expatriate taxation, and ensure that you are compliant with all applicable laws. Learn more about how LEGID can help you with your expatriate taxation issues today.”