Most countries charge taxes on income, including any salary or earnings, pensions, rental income, savings and investments. Income tax is usually charged at progressive rates that increase the more income you earn, although it can also attract a fixed rate.
Income tax rates can reach over 50%, depending on the country and type of income. You could also face additional taxes if your income exceeds a certain threshold.
If you understand the allowances and tax planning opportunities available, it’s often possible to reduce your taxable income and minimise exposure to the higher income tax rates.
Who’ll pay income tax and where?
If you live in France, Spain, Portugal, Cyprus, Malta or the UK, you'll have to pay tax on your worldwide income. This applies whether or not you bring the income into the country, apart from where there are special rules in place, such as in Malta. So if you’re resident abroad and rent out a British property, say, you may be liable to tax on the UK rental income in your country of residence as well as in the UK.
Even non-residents may have to pay tax if income is sourced in that country. For example, UK residents are liable for Spanish income tax on any rent received from a holiday home in Spain.
Thanks to the double tax treaties between the UK and many other European countries, however, you should not pay the full level of tax twice on the same asset. Instead, you’re likely to receive a credit for tax paid in the other country.
While income tax rules shouldn’t be affected by Brexit developments, they can vary greatly between countries and sometimes even between regions. They can also change frequently, so it’s important to seek professional advice to make sure you get it right and only pay as much as you need to.
How we can help with income tax advice
With thorough knowledge of income tax in Spain, France, Portugal, Cyprus and Malta, Blevins Franks understands how the income tax rates and rules affect UK nationals living there.
We can advise you on: