Quick survey of expatriate tax regimes in the European Economic Area and Switzerland
Expatriate tax breaks
Some countries offer expatriates tax breaks (a tax relief or advantage) if they meet certain criteria. Below we look at some of the countries that offer these.
A special tax regime is available for foreign executives and specialised employees “temporarily” working in Belgium. “Temporarily” implies that this special tax status is only allowed to apply as long as the employee can demonstrate that he has kept sufficient links with his home country.
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.
In both of the above scenarios, to be exempt, the compensation has to be similar to the French salary generally offered for equivalent positions.
Should the expatriate employee and employer fulfil certain conditions, the qualifying expenses and allowances paid by an employer in Luxembourg (in connection with an expatriate employee’s secondment or recruitment to Luxembourg) do not constitute employment income or benefits in kind for expatriate workers. This means that reasonable assignment-linked benefits are tax exempt. These include certain costs relating to the transfer of residence, travel expenses, school fees, and the cost of living allowances.
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.
A non-resident individual with earned income taxable in Norway, may, as an alternative to ordinary allowances, opt for a flat allowance of 10% of his or her taxable earned income (maximum NOK 40,000). The standard allowance in earned employment income is reduced depending on the length of time the individual has resided in Norway during the year.
Sweden offers tax relief for expatriates if they are deemed as experts, specialists, researchers or key employees; or if their monthly income exceeds a certain level.
Expatriate tax breaks in Switzerland are available upon request (a tax ruling may be required or recommended depending on the region). Expatriate tax status allows qualifying expatriates to claim special professional expenses as deductible from their taxable income.
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.
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