European countries like France and Italy are trying to attract rich expats with promises for low taxes. According to a study of the professional services company, KPMG LLP, the people working abroad, who earns an average annual salary of 250,000 EUR, will pay higher taxes on income and higher social security contributions in the UK than in five other European countries – France, Spain, Ireland, Germany and the Netherlands.
The savings are not small. The expats, living in France, with an annual income of 250,000 EUR could save an extra 27,588 EUR compared to the UK, according to the calculations. These funds increase to 42,545 EUR in Spain if all tax relief is applied. Even in Germany where there is no special regime for working foreigners, the expats will have 2,500 EUR more than in the UK.
These calculations disprove the widely accepted belief that Britain is an attractive tax island in the stifling European tax sea.
The international banks in the British capital make plans to move to different EU cities so they can continue to sell products to customers in the union after the Brexit. About 10,000 UK jobs may disappear after the country leaves the EU, according to calculations by the British Central Bank.
Meanwhile, Europe has already covered fiscal “red carpets” for arrivals.
France increased taxes in 2012. But shortly after the vote for Brexit in the UK, the government introduced a number of tax cuts, resulting in up to half of the expatriate salaries based in France being exempt from income taxes.
In Spain, expats pay a special tax rate of 24% on income up to 600,000 EUR. The Netherlands allows 30% of their salary to be exempt from taxes. In Ireland, reliefs extend to school fees for children. Belgium allows expats to deduct the cost of furnishing new apartments from their due taxes. Last year, Italy introduced a practice that provides tax relief of 50% for skilled workers coming from abroad.
In contrast, Britain does not offer many such generous concessions to foreigners working there.
But all this comes at the appropriate price. To take advantage of the reliefs in France, the expat must have lived abroad for at least five years. In Spain, the employee must receive a salary from a company outside the country to get a lower tax rate. Ireland requires the expat to earn at least 75,000 EUR per year to benefit from the relief. In the Netherlands, the expat can not work closer than 150 km from the Dutch border in the last 16 months. The country also has a ceiling on bonuses for bankers, which is also a factor.
It is also important to take into account that the deals apply to personal taxes and not to corporate tax. In the UK, corporation tax is lower than in France, for example. Also, labor law is much tougher in countries like Germany, which makes companies think twice before moving large parts of their business to the continent.
And last but not least, money is not everything. Factors such as language and places in private schools also play an important role in deciding to move abroad.
But lower tax rates undoubtedly make it easier for employees to take the decision to give up London at the expense of another European city.
The guest author Viliyana Filipova is from Varna, Bulgaria, and is founder and Chief Editor of Finance Apprise Journal, working also as analyzer on the world finance and commodity markets. This article was originally published on www.financeapprise.com and appears here with their kind permission.