Personal Income Tax in Europe in 2024: Rates and Methods of Minimization

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Income tax, or personal income tax (PIT), is levied on the income of individuals (wages, dividends, interest, or other income) that you may receive during the year.

Taxation in Europe by country in 2024 can vary significantly from one country to another. Although the EU develops common standards and recommendations in taxation, decisions on income tax rates remain within the competence of individual countries.

However, there are common trends applied to income tax in the European Union. For example, in most EU countries, a progressive taxation system is applied. In a progressive system, the tax rate increases as income increases. Usually, several tax brackets are set, each applying to different income ranges.

Income tax rates can vary widely, ranging from 0% to the maximum rates set in each specific country, depending on the taxpayer’s income level.

Below in the table, we have listed the maximum income tax rates set by each country, so you can compare them.

Countries are arranged from highest rates to lowest, which may be applied based on the tax policy of each state.

Comparing the taxes of EU countries will help better understand the differences in tax systems and assess the level of tax burden in each of them.

Maximum income tax rates in EU countries: France:

 

France55.4 %
Austria55 %
Spain54 %
Portugal53%
Netherlands 49.5%
Germany47.5%
Italy47.3%
Greece44 %
Poland36%
Malta35%
Cyprus35%


How is income tax calculated in the EU?

The calculation of income tax depends on the specific tax system applied in each country.

However, in most cases, it is based on the following fundamental principles:

The taxable base usually comprises the total income of the individual for the tax period. This income may include wages, investment interest, rental income, dividends, and other sources of income. The tax base may be adjusted for deductions and allowances provided for by tax legislation.

In a progressive system, the tax rate increases as income rises. Typically, several tiers of tax rates are established, each of which applies to different income ranges.

Tax calculation is usually performed by multiplying the tax base by the corresponding tax rate. Various deductions, allowances, and discounts may then be applied to reduce the total amount of tax owed by the taxpayer.

Taxpayers must submit tax returns, indicating their income, deductions, and allowances, as well as the calculated amount of income tax. Subsequently, the tax payment must be made in accordance with the requirements of tax legislation.

How to reduce income tax in the EU?

There are strategies that can help reduce this burden and optimize taxes.

One of the most important tools for reducing income tax is the use of Double Taxation Avoidance Agreements. Many countries enter into such agreements to prevent situations where the same income is taxed in two different countries. This helps to lower the tax burden on individuals and companies engaged in international activities.

Each country establishes minimum income thresholds that are exempt from income tax. For example, in Portugal, this amount is €7,703, while in Cyprus, it’s €19,500. This means that if your income does not exceed these amounts, you are exempt from paying tax on that portion of income.

Various countries offer special deductions to reduce the taxable amount depending on the nature of the income. Deductions may be available for expenses related to children, education, medical expenses, donations, etc.

You can obtain tax residency status in countries with favorable tax policies to reduce both corporate and personal taxation. Some countries offer lower income tax rates for individuals and businesses.

For instance, Cyprus is known for its low personal income tax rate and various tax incentives for residents (low corporate tax, no tax on dividends, interest, as well as no inheritance or gift taxes). Choosing a country with a more favorable tax system for tax residency status can significantly reduce tax obligations.

 

Feel free to reach out to us for more detailed information on how to reduce your income tax and optimize your tax situation.

Remember, effective tax planning can significantly save your money and ensure financial stability.

 

It is better to ask ones than to search 100 times

If you have any questions, please contact us.

 

READ ALSO:

In which European country should you open a business in 2024 and pay low taxes?

Taxes for individuals in Cyprus. Tax optimization for individuals

Non-Domicile Tax Residency Status in Cyprus. Tax optimization in Cyprus

Taxes in Portugal. Tax status of Non-Habitual Residents (NHR)

Taxes in Spain

 

Article author

Anastasia Taran Head of Corporate Services
Ukraine
In 2013, she graduated in law from the National University «Odessa Law Academy» with honors and received a Master of Law degree. Anastasia Taran has experience in international and contract law, as well as corporate and tax law in Europe. Within the framework of Feod Group, she specializes i...
In 2013, she graduated in law from the National University «Odessa Law Academy» with honors and received a Master of Law degree. Anastasia Taran has experience in international and contract law, as well as corporate and tax law in Europe. Within the framework of Feod Group, she specializes in immigration and corporate law of European countries, particularly:
  • family and corporate immigration solutions.
  • establishing a business in Europe.
  • personal and corporate taxation in Europe.
  • opening accounts in European banks.
  • obtaining a tax resident status.
read more
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