Updated : 12/2012
There is no EU-wide law regulating how people looking for work are to be taxed. There are only national laws and multilateral or bilateral tax agreements between countries, and they do not cover all eventualities. However, the basic principles that apply in most cases are given below.
Under many bilateral tax agreements, unemployment benefits are treated as "other income" that is subject to tax only in the country of residence. Nevertheless, the precise tax treatment depends on the terms of the relevant bilateral tax agreement in place, which you should consult for further information.
If you spend a short period (less than 6 months in a year) in another EU country without working there, you probably won’t be considered a resident for tax purposes in that country. In that case, normally, your unemployment benefits should only be taxed in the country that pays them.
You are unemployed in Spain and go to Belgium for 3 months to look for a job there. Under the national tax law of both countries, you will probably be resident for tax purposes in Spain only. In that case, you will continue only to pay Spanish income tax on your Spanish unemployment benefits.
If you spend more than 6 months in a year in another EU country, in most cases you will become a tax resident of that country and, for that reason, your unemployment benefits may be taxed there.
However, under most bilateral tax agreements, if you keep a permanent home and strong personal and economic ties with your home country, you will remain a resident for tax purposes in your home country. In that case, the other EU country may not be entitled to tax your unemployment benefits.
For full information it would be necessary to look at the relevant bilateral tax agreement and internal law of countries concerned.
Because bilateral treaties try to address situations of double tax residence and double taxation, you will not usually be taxed twice on the same income or, if you are, you will be able to credit the tax paid in one country against the tax paid in the other.
You are unemployed in Iceland and go to Sweden for 10 months to look for a job there, cutting your personal and economic ties with Iceland. You will probably have to pay tax on all your income in Sweden. If you have any kind of income from Iceland, it may also be taxed in Iceland. If so, Sweden will normally take less tax from you, to make up for the tax paid in Iceland.
In 2009, Ana from Denmark went to Sweden and claimed her Danish unemployment benefit from there. After 6 months, she still had not found a job and went back to Denmark. In 2010, the Swedish tax office informed her that her whole income for 2009 was taxable in Sweden, regardless of where the income came from.
After more than 6 months in Sweden, Ana could be considered a Swedish resident for tax purposes in 2009. But the same income should not be taxed twice with no relief for the double taxation. Ana should contact both Danish and Swedish tax authorities to clarify her situation.
Adam, who is Polish, worked in France and received unemployment benefits after he lost his job there. Because of his personal ties with Poland, he remained a tax resident in Poland.
When he returned to Poland, he was surprised that the Polish tax authorities, based on the bilateral tax agreement concluded between France and Poland, required him to pay income tax on the French unemployment benefits. Adam should indeed pay his taxes in Poland.
However, if France applied any tax to his unemployment benefits, Adam is entitled to obtain a deduction of the French tax in Poland.
This is just a summary of what usually happens. There could be exceptions to the general rule in some bilateral tax agreements. Also, each country has its own definition of residence for tax purposes.
If you intend to move abroad and get your unemployment benefits paid there, do not forget to check where you will have to pay taxes.
Find out more about income tax abroad - check in particular the definition of tax residents in the country where you became unemployed and in the country you are going to:
If, when you go abroad to look for work, you are considered as resident there for income tax purposes, you should be treated in the same way as nationals living in that country.
As a foreign tax resident, you should be entitled to the same tax deductions as nationals on any contributions you pay in the new country (for instance, pension contributions or private sickness and invalidity insurance). Under certain conditions, you should also be able to make deductions for contributions paid in your country of origin. If you feel you are being discriminated against, you can seek personalised advice.
If you need additional information on income tax or other taxes, such as income tax on earnings, property taxes, local taxes, gift or inheritance taxes, you can contact a tax office in your new country.
If you find a job, check how and where your employment earnings will be taxed:
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