EU TAX – a summary guide

NOTE: This guide does not constitute advice, and should not be used or interpreted as such.  Always consulate a registered professional before acting on any legal, financial or similar matter.

All EU countries operate a tax exchange system; this means that if you earn money in one country, any tax you pay can be offset in the country where you pay tax.  What this means in practise is that you only pay tax on earning once.  The complicated issue is where you are supposed to pay this tax, and what to do in the event of a dispute.
The first rule of the EU tax regulations is where are you resident?  It might sound a simple question, and for most of us it is.  The rules state that you are resident if you:

1)     Were in the country more than 183 days of the tax year.

This it the most important rule, and all other rules or working practice as to where you need to pay tax are secondary to this.  If more than one country qualifies under these rules (quite possible for weekly commuters) or if the TAX years do not align (as is often the case with the UK starting on April the 6^th, compared to most EU countries starting on January the first) secondary rule apply (NOTE: These rule do not appear to have been written down – it just seems that the tax offices follow them).

        1)    Where your main home residence is
2)   Where you are contracted for employment
3)   Where you are most likely to be resident in the next tax year.
4)  Where you feel most associated to/filed the main tax form.

These are fairly broad classifications, but remember – you also have to have been in the country for more than 183 days in the tax year to qualify. This is based on the rule that: If tax is paid in one EU country, it is considered paid in all.  These high level principles should mean that most people in EU countries are able to work out how and where they should pay tax. It gets complicated if you are in a country for a very short period of time, and wish to off set your tax, or claim back excesses, or if you do not declare or if the tax system of one country claims you have not paid enough tax on a portion of your earning.

If you have paid tax for a short period, or at a higher or lower rate than in the country of your residence, then the tax rule of your resident country will apply.  For example if you left Country A and move to Country B during the tax year, if you were paying tax at a higher rate in country A, than you are subject to in country B (As would be the case, if you went from working in country A to not working, or working for a lower wage in county B), it is possible to use the tax paid in country A, to reduce the tax burden in county B.  If you find your self in the situation where you have paid more tax in Country A than the total you are liable in country B (Your assumed tax resident country) then you may claim back from country A any over tax you have paid.  If you start to claim tax across many countries, then we strongly advice that you use a tax specialist or accountant.