Moving to a new country and tax rules
Tax rules and regulations when moving to a new country
The tax rules and your tax obligations will largely depend on the country that you are moving to and how long you are planning to spend there. If you are going to be spending less than 6 months in your country of origin with most of your time spent in your new home then you are not likely to pay taxes in countries like the UK. If you are planning on a permanent move and a clean break then you will become a resident of your new country and be subject to the tax laws of that country, you may however still have tax obligations in your current/former country.
If your tax requirements are going to be a little more complicated and you are concerned as to which rules apply to you then we advise that you seek professional advice from someone that is qualified in such matters but here is a little information to give you an insight:-
Of course, the first thing to consider is that every country is different and your country of original and the country that you are moving to will require you to undertake certain obligations. If you know the country you are moving to you can make your research much more specific.
Leaving your current country
If you are planning a permanent move you will need to inform the tax department of the move. You will need to tell them that you have finished employment in that country and will be a permanent residence in a new country. You may have to provide proof of this to ensure that you aren’t subjected to dual taxation. You may even be liable for a refund if you are leaving part way through a tax year.
Also, you need to check whether you are still required to submit a tax return even if you are no longer a resident. If you are a company director or are still earning any type of income from the UK, for example, you will be required to submit a self-assessment tax return even if you are no longer a UK resident.
Paying income tax in your new country
This will depend on whether you are self-employed or employed and each country will have its own set of tax rules so it is important that you find out what applies to you.
If you are self-employed you will be required to declare and classify your business in countries like Spain. As well as income tax there are other taxes to consider like VAT and social contributions. If you plan to return to your country of origin you may want to continue making social contributions to that country. In many countries, there is a flat rate of tax for self-employed individuals of around 20%. Some countries like Romania make this lower for new businesses to allow them to find their feet.
If you are employed income tax is usually deducted at source. In Spain, for example, it is collected by the employer whilst other countries will expect an individual to self-assess and pay their taxes. It is important that you find out which applies to you to ensure that you are putting aside the correct amount of money to pay your tax bill when the time comes to self-assess. If you are living in Poland and are paid by a company that is based outside of Poland then you are taxed at a lower rate.
The amount of social contributions and what they include vary from country to country. In Italy for example, the social contributions include benefits for unemployment, sickness and maternity, old-age, invalidity and accidents at work as well as others. It does not, however, cover national health insurance which is funded from taxation. Social contributions are deducted along with income tax by your employer. If you have come from another EU country or the US there are agreements in place which cover you as soon as you arrive in Italy for a certain amount of time.
How much tax will you have to pay?
The tax that you will be required to pay will vary hugely on a number of factors:–
- How much you earn – as with many countries there is a tiered system for calculating income tax with as much as 50% being charged for very high earners.
- Where you live – In Romania if you are self-employed you could pay as little as 3% whereas in other countries you can earn up to 20,000 euros before you pay any tax.
- Self-employed or employed – different tax rules for different countries but taxes vary depending on your situation.
- Double taxation – if you are earning income in both countries you may be required to pay tax in both countries with one being used to offset the other in your self-assessment.
Other factors to consider before you move
When it comes to income tax it is usually charged by the national government. Other taxes like property tax and road tax are collected regionally – in these circumstances, it is important to understand the tax rules that apply to the region that you will be living in. When you know where you will be living make sure you investigate the local authorities that you come under and any taxes or obligations that apply to you.
Having all of the information before you move will make things much easier but as we stated earlier it is important to have all the correct information so if you are unsure or in any doubt seek professional advice from someone who has experience in managing finances and taxes abroad.