European taxes are traditionally thought to be high. However, there are different options for individuals and legal entities that allow them to diminish them while retaining the prestige of being registered in Europe (for a company) or using all the benefits of living and working in Europe (for an individual). In this post, we are going to take a brief look at tax rates in Europe and see which jurisdictions are best if you want to relocate or start your business.
We would like to invite you to our portal where you can read the full text of the article on taxes in Europe and find more useful information for individuals and legal entities. Our experts write about international business and banking, investment, tax optimization, citizenship/residency by investment, and more. You can find details of all popular jurisdictions that are typically used for relocation, starting a business, or opening a bank account.
If you need any help with tax optimization, relocation, company incorporation, opening a bank account, or obtaining a second passport, you can book a session with our expert. We provide some services for free: we will choose a suitable country or bank that will be a perfect match for your needs and preferences. And if you decide to delegate any administrative procedures to us, we will be glad to be of assistance at an affordable fee. We will open a company or a bank account for you without much hassle on your part!
Tax System in the EU
Direct and indirect income tax obligations are imposed by each European country on an individual basis. However, all EU countries are required to follow a common tax policy standard to prevent tax evasion and double taxation practices.
The European Commission is an authority that supervises enterprises to make sure they comply with indirect tax requirements. The European system focuses on the free movement of resources and the provision of equal conditions for all business owners who derive income in the EU.
Individual Income Taxes in Europe in 2023
There are no standard tax rates in Europe, so they may vary considerably. Use all the benefits generously provided by the European states to comply with the laws and minimize the amounts shared with the state!
Most EU countries use a progressive income tax system, which means that the tax rate depends on the amount of income. Major investors, large corporations, and wealthy individuals are liable for the highest tax amounts.
EU residents are usually taxed on their worldwide income at the rates applicable in a particular country. You are considered a tax resident if you live in a respective country for more than half a year.
You can see the full list of taxes by country following the above link. They vary from as low as 10% in Romania and Bulgaria, 15% in Hungary, and 20% in Lithuania and Estonia, to 55% in Austria, 55.9% in Denmark, and 56.95% in Finland.
And if we look at the income tax rates, they may vary from 9% in Montenegro and 10% in Macedonia, Kosovo, and Bosnia and Herzegovina, to 38.2% in Norway, 40% in Switzerland, and 46.25% in Iceland.
Corporate Taxes in Europe in 2023
Corporate income tax rates are traditionally the highest in Europe. However, the amount set may differ from the one you will actually pay if you comply with certain conditions giving you the right to tax benefits. However, it is always safer to discuss tax optimization opportunities with your tax advisor.
Corporate tax rates in the EU vary from 9% in Hungary, 10% in Bulgaria, and 12.5% in Cyprus and Ireland, to 26.5% in France, 30% in Germany, and 35% in Malta.
If we look at European countries that are not EU members, you can also find some low-tax jurisdictions (9% in Montenegro, 10% in Kosovo and Macedonia) to higher-tax ones (20% in Iceland and 22% in Norway).
European Wealth Tax
The majority of countries have abolished the wealth tax completely after many disputes. Tax on fortune and tax on some other assets is still levied in Europe, though.
Norway, Spain, and Switzerland are the countries that still levy the wealth tax, while Austria, Germany, Sweden, Luxembourg, Germany, Iceland, Finland, and Denmark have canceled it.
Let’s look at the three countries where the wealth tax is still used:
● In Norway, if the amount of the individual’s assets exceeds 152,000 euros, the tax is levied at the rate of 0.85%.
● In Spain, the tax rate varies from 0.2% to 3.75% if the individual possesses a wealth exceeding 700,000 euros. If you are a non-resident, you will only pay the tax on the local assets you own, while the residents have to pay it on their world wealth.
● In Switzerland, the wealth tax is paid on worldwide income except for the real estate tax and the tax related to a foreign company run by an individual.
Wealth Tax on Separate Assets
Separate assets are taxed in Italy, Portugal, and France. Let’s take a closer look:
● If a French resident owns international real estate that costs from 1.3 million euros, he/she is subject to a wealth tax. Non-residents are also liable for this tax if they own local real estate with the same value. The rate may reach 1.5%.
● If you live in Italy and have assets in other countries, you will have to pay a wealth tax of 0.2%. If foreign real estate is possessed by Italian tax residents, they are subject to a wealth tax of 0.76%.
● If your real estate in Portugal costs 600,000 euros or more, you will have to pay a wealth tax regardless of your tax residency. Individuals have to pay 0.7%, while legal entities are liable for 0.4%. If the real estate costs more than 1 million euros, the owner pays the wealth tax at a rate of 1% regardless of whether it is an individual or a legal entity.
Best European Country for Relocation
Unfortunately, there is no list of countries we can definitely recommend as the choice depends on many unique factors! You can book a free initial session with our experts to discuss your situation and obtain a customized solution. Follow the link above to find a perfect place to live or start your business free of charge!
