Double Taxation - A Guide for Expats Moving to Europe

For expats moving to Europe, there are many things to take into consideration and to prepare before the big day. Amongst the priority actions, is telling HM Revenue and Customs that you are leaving the UK. This is important to make sure that you pay the right amount of tax.
The UK already has treaties in place with around 120 countries, to ensure that any expats moving to Europe, or further afield, will not pay tax twice. This is known as the ‘double taxation agreement’.
When the double taxation agreement is applicable, it can work in one of three ways:

  • The earner pays tax in the country of their residence and gets a tax exemption in the country where the income was made
  • The earner pays tax in the country where they made the income and receives an exemption or relief from tax in their country of residence
  • Tax is deducted in the country where the earner makes their income, and they declare this tax as already paid on their tax return for the country where they are resident. The tax already paid is known as ‘withholding tax.’

In the instance of the earner being a resident of both countries, the method of paying tax depends on the agreement between the countries in question. For example, British expats moving to Spain can claim tax exemption from Spanish income tax.
The intricate rules and variations of double taxation vary from country to country. However, there are a number of consistent aspects of the agreements and they normally allow tax relief on the following:

  • Pensions (not including UK Government pensions)
  • Earnings from employment or professional services
  • Royalties
  • Interest
  • Income from Real Estate Investment Trusts
  • Dividends

There are currently more than 3,000 double taxation treaties worldwide and the UK has the largest amount for any one country. The treaties are designed to help protect against the risk of double taxation, provide certainty of treatment for cross-border trade and prevent excessive foreign taxation against UK business interests abroad.
To read more about the treaties and to find out more information regarding your destination, please visit the HM Revenue & Customs website.
If you are considering moving to Europe or further afield, click here for more information on Cadogan Tate’s international removals service.
Information correct at time of publication