Sitting in reading subtitles on a Saturday night is now a perfectly acceptable activity. I know I’m not the only one amongst friends and family who enjoyed watching the Scandinavian drama ‘The Bridge’ earlier this year. All muted shades and moody lighting offset the acerbic nature of the lead Saga and a mildly overblown plot nicely. Until the third series I’ve transitioned to the heart of Europe, following the mildly rumpled Paul Gerardi as he drives an assortment of German cars around Belgium in Salamander, politicians falling like nine-pins all about.
If, risk of a grisly end aside, all this mood lighting has led you find the backdrops of mainland Europe attractive then, inevitably, there will be some interesting tax rules to negotiate.
From the UK perspective, if you are working full time abroad it is possible for your overseas salary to remain outside the UK tax net. There are restrictions on the amount of time you can return to the UK and you also need to be working outside the UK for a minimum period for this to apply.
Once abroad, you’ll be subject to the tax rules of your new home, which can often be quite different to ours. Differences are not just in rates - Sweden is known for having one of the highest tax rates in the world - but very different rules. When negotiating your remuneration package make sure you take advice before you go so you know what the after tax position will be. In a one case a client was offered a choice of placements and, with help from local advisors we accessed through our membership of MSI Global Alliance, they were able to compare the bottom line of each option to the current package. This gave our client the information to negotiate a sizeable uplift on their preferred choice – which turned out to be Sweden. (No prizes for guessing the company car options).
As well as different tax rules, there can be different reliefs – for example your martial status or the number of dependants you have can make a difference elsewhere in the EU. Sweden has a particular relief to attract foreign experts, scientists and executives to come to work temporarily there. The relief provides a deduction of 25% of taxable income for up to three years. Given the high tax rates, this is very appealing. They also have reliefs for commuting – assuming that unlike Saga you do go home at the end of the day.
From a National Insurance/Social Security perspective there are special rules when working in different EU countries. The basic rule is that you pay social security charges in the country you are living in. However, you can in some circumstances opt out of the local system and keep contributing to the UK scheme. This would generally apply to shorter placements of 12 months, but potentially can apply for postings of up to two years. An application to stay with the UK scheme should ideally be made before you leave.
There are also special rules to deal with people who work in more than one EU country at the same time – handy I suppose if you happen to be a Danish detective popping across to Malmo, Sweden on a regular basis.
But don’t forget that, while you are away, if you still have UK income such as rental from your house, you may still need a tax return back in Blighty. It might also be sensible to make sure your will is up to date before you go...
Helen Thornley, Tax Consultant
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