European Taxation System Explained


Taxes in Europe have always been considered high. Nevertheless, there is opportunity for individuals and corporate units to reduce them but still enjoy the status of being registered in Europe, (for a company) or all the privileges of residency and work in Europe by an individual. Here is a short review on Europe’s taxation systems with a comparison, so as to determine which countries you would go for if you plan to move or start your business.

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Tax System in the EU

Individual European countries impose direct and indirect income tax duties upon an individual. Nevertheless, EU nations should adhere to the same tax policy norm in order to eliminate tax evasion and double taxation.

The EU Commission supervises enterprises to ensure conformity in indirect tax. The European system concentrates on the freedom of resources and the establishment of equal opportunities for all business owners obtaining profits within the EU.

Individual Income Taxes in Europe in 2023

Tax rates in Europe are not fixed, and hence they can significantly vary. Fully use all the advantages granted by the European states, in order not to break the law and reduce the sum distributed to the state!

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The majority of EU countries apply progressive income taxation, which implies that the tax rate increases with the growth of income. The highest tax amounts are paid out by major investors, large corporations and wealthy individuals.

EU citizens are generally taxed on their global income at rates applicable in that country. For instance, if you spend more than six months in a country as a foreigner, then you become its tax payer.

The above link leads you to an exhaustive taxes-by-country list. They range from 10 per cent in Romania and Bulgaria, 15 per cent in Hungary, and 20 per cent in Luxembourg, Lithuania and Estonia, to 55 per cent in Austria, 55.9 per cent in Denmark

As for the income tax rates, they can differ from 9% in Montenegro and l0% in Macedonia, Kosovo, and Bosnia and Herzegovina to l38.2% in Norway, l40% in Switzerland, and l46.

Corporate Taxes in Europe in 2023

In general, corporate income tax rates in Europe are among the highest. However, the set figure may be different then the one you will pay for in case of fulfilling particular conditions that allow obtaining tax benefits. Nevertheless, it is best to talk to your tax advisor about any tax optimization opportunities.

The corporate tax rates in the EU range from 9% in Hungary, 10% in Bulgaria, and 12. 5% in Cyprus and Ireland to 26. 5% in France, 30% in Germany, and 3

If we take a look at non-EU European countries, there are also some low tax regimes (9% in Montenegro, 10% in Kosovo and Macedonia), but some more high tax economies (20% in Iceland).

European Wealth Tax

After several controversies, most countries have completely repealed wealth tax in all aspects. However, in Europe there’s a levy on fortune and tax on other assets as well.

Among the countries that still collect wealth tax are Norway, Spain, and Switzerland; while Austria, Germany, Sweden, Luxembourg, Germany, Iceland, Finland and Denmark have canceled the tax.

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Let’s look at the three countries where the wealth tax is still used:

  • When an individual’s assets are larger than 152,000 euros in Norway, the rate of tax charged is 0.85%.
  • In Spain, the rate of taxation fluctuates from 0.2% to 3.75% for an individual with an asset more than 700,000 euros. While the residents will be taxed on their global wealth, the non-resident will pay the tax only on assets located in Germany for them.
  • In Switzerland, wealth taxes are to be paid, save for the real property tax, and the tax which concerns a foreign company that is managed under the personal law.

Wealth Tax on Separate Assets

In Italy, Portugal and France, the separate property is taxed. Let’s take a closer look:

  • A French resident has to pay wealth tax on any international real estate that costs 1.3 million euros or more. Similarly, non-residents who have equivalent values of local real estate are also subject to this tax. The rate may reach 1.5%.
  • If you are resident in Italy and own assets abroad, you will have to pay a wealth tax of 0.2%. Italian tax residents who possess foreign real estate are levied a wealth tax of 0.76%.
  • Even if your property investment in Portugal is worth less than EUR 600,000, you may still be obliged to pay the annual wealth tax in Portugal. For individuals, it is 0.7% and for legal entities is 0.4%. The owner pays wealth tax on any property with cost exceeding one million euros, whether it is an individual or a legal entity, with the rate being 1%.

Best European Country for Relocation

However, there is no list of specific countries to which the choice will be made based upon individual factors. Our specialists offer a complimentary introductory session, in which you can discuss your problems and receive a tailored approach. Click the hyperlink above and you will receive a perfect living or business place FREE!

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