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Postings abroad

Updated : 12/2012

Taxes

As an EU national, you can work temporarily in another EU country.

There is however no EU-wide law that settles taxation issues when you work and live in various different countries over a short period of time.

There are only national laws and double tax agreements between countries – and these don't cover all eventualities and vary considerably. However, the basic principles that apply in most cases are given below.

Income tax during postings abroad

Employed or self-employed work

Income earned during a posting abroad may be taxed in that country.

For country-specific information (tax rates, contact details for tax authorities, definitions of tax residence):

Could you be taxed twice?

If you're still tax resident in your home country (the country where you normally live), you might also be taxed there on the same income.

However, there are usually arrangements in place that in effect spare you from double taxation:

  • under many bilateral tax agreements, the amount of tax you paid in your country of work will be set against the tax you owe in your country of residence.
  • in other cases, your income earned in the country of work might be taxable only in that country and exempt from tax in your country of residence.

For a definitive answer, see the relevant tax agreement.

Specific information for employees

When posted abroad, you usually have to pay tax in your home country only if:

  • you stay abroad less than 6 months a year and
  • your salary is paid directly by your employer (at home), rather than by a branch or other company they have in that country.

Example

  • You usually live and work in Portugal.
  • You're posted to England for 4 months (so fewer than 6 months or 183 days).
  • Your Portuguese employer continues to pay your salary directly, as if you were working there.

Result — under the UK — Portugal double taxation agreement, you won't be taxed on that income in England. The only country that can tax your salary is Portugal.

If your employer is required by UK law to deduct UK tax at source on your salary paid in England, you should be able to reclaim it later.

Example

  • You usually live and work in Portugal.
  • You're posted to England for 8 months (so more than 6 months or 183 days).
  • Your Portuguese employer continues to deduct tax and contributions from your salary, as if you were working in Portugal.
  • You later receive a letter from the UK tax authorities requiring you to fill in a return for the 8 months you spent on British territory.

Result — under the UK — Portugal double taxation agreement, you can't be taxed twice on that income.

If tax is deducted from your salary in both countries for the period of your posting, you'd be able to claim it back from one or other country, depending on where you're considered resident during that year.

But your employer was right to pay social security contributions in Portugal.

Sample story

Which country will tax you during your posting?

Last year, Carla worked most of the time in Portugal but was posted to France for 1 month, Italy for 2 months and Iceland for 2 months. Does she need to fill tax returns in all 4 countries?

No. Carla was posted to these countries by her Portuguese employer and never spent more than 6 months in any of them (within a 12-month period). So she'll probably only need to file and pay taxes in Portugal (unless her employer has an office in any of the other countries).

However, for a definitive answer, there's no alternative to checking the relevant national laws and double taxation agreements.

These might require certain procedures: Carla's employer might be required to deduct tax on her salary paid during secondments to all or some of these countries. And it may be possible to reclaim these tax deductions, or else Portugal may give credit for the tax paid in the other countries.

Tax on your worldwide income

The information below is only a summary of the most common rules:

  • there could be exceptions to it in some bilateral tax conventions
  • each country has its own definition of "resident for tax purposes"
  • your specific, personal circumstances should also be taken into account.

Worldwide income means your income and earnings from all countries — not just what you earned during your posting.

Which country taxes your worldwide income usually depends on where you are considered tax resident.

How long can you stay abroad on a posting without being considered tax resident (and so liable for tax on your worldwide income)?

More than 6 months a year?

There is a possibility you could be considered tax resident.

But under most tax agreements, you usually remain tax resident in your home country — if you keep your permanent home there and your personal and economic ties with that country are stronger.

In that case, the host country would not be entitled to tax your worldwide income.

Fewer than 6 months a year?

In most cases you remain tax resident in your home country — meaning the host country would not be entitled to tax your worldwide income. However, it could tax you on the income and gains earned there.

Other taxes

For information on other taxes in the country you're now living in, consult the local tax offices.

Equal treatment to nationals

If you're considered tax resident in the country where you've been posted, you should be treated (for tax purposes) the same as nationals resident in that country.

If you don't become tax resident but still earn most of your income there, you should be allowed the same tax deductions as those available to residents – under certain conditions.

If you feel discriminated against, you can seek personalised advice.

Example

Where national law in your host country allows certain tax deductions (to offset contributions to an occupational pension or private health/disability insurance), you should be eligible for these on contributions you have to pay there.

Under certain conditions, equivalent deductions should be accepted by the host country for contributions paid to pension schemes in your home country.

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Footnote

or a national of Iceland, Liechtenstein or Norway

Retour au texte en cours.

In this case, the 27 EU member states + Iceland, Liechtenstein, Norway and Switzerland

Retour au texte en cours.

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