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Tax residency in Cyprus

Definition and requirements

In Cyprus there are resident and non-resident taxable persons. A resident person is someone who:

• has a permanent address in Cyprus
• who is present within the territory of Cyprus for a period exceeding 183 days in any twelve-month period

Any resident and non-resident person of Cyprus shall be liable to taxes in respect of any income acquired from sources inside and outside of the Republic of Cyprus.

Days of presence

For the purposes of calculating the days of presence in Cyprus within one or more periods, any part of the day of presence is regarded as a whole day including day of arrival but not the day of departure.

Split tax residency

Split tax residency is acknowledged between more countries within one tax period.

Personal income tax in Cyprus

Tax rate and tax period

• 0% is the applicable tax rate for income between EUR 0 and EUR 19,500
• 20% is the applicable tax rate for income between EUR 19,500 and EUR 28,000
• 25% is the applicable tax rate for income between EUR 28,000 and EUR 36,300
• 30% is the applicable tax rate for income between EUR 36,300 and EUR 60,000
• 35% is the applicable tax rate for income exceeding EUR 60,000

Based on the local tax system, salaries paid in January for the work performed in December are considered as taxable income of the previous calendar year. Salaries are usually paid at the end of the month when the work has been executed.

Tax base and deductions

In general, the tax base is calculated from the gross income decreased by compulsory social and health insurance contributions withheld by the employer which are for the account of the employee, decreased by non-taxable parts of the income and tax reliefs, if applicable.

The non-taxable value of income may be:

• Transportation and reimbursement of costs incurred to perform work
• The value of any travel and accommodation expenses

Social security contributions in Cyprus

Social security rates and registration

Social security is due by both the employer and employee. For example, the calculation of the social security contributions for the “Pensions” fund is formed as follows:

• 12% rate for the employer for the “Pensions” fund
• 8.3% rate for the employee for the “Pensions” fund

The reporting and the deposition of the whole payment is done by the employer.

In case the employee is a foreigner, they must receive a personal number from the Immigration Office and then become registered with the Social Insurance Office.  In case the employee is a Cyprus citizen, they do not need to issue this personal number as the registration with the Social Insurance Office takes place with the Identity Card of the employee.

A local employer does not need to register as the registration is done ex officio, but a foreign employer must. Regardless, both must deduct and pay the social security contributions on behalf of the employee.

Social security base calculation

Social security contributions are calculated from the income received as all kind of labour remunerations under the Cypriot legislation with several explicit exceptions. The calculation base is multiplied by the applicable rate. The minimum calculation base is on the minimum wage per employee category, whereas in case of EUR 870 and the maximum threshold, the Social Security is calculated on the gross amount of EUR 4,554 which applies to the whole income of the employee from all employees.

The social security contributions are divided and paid into several funds such as pensions, unemployment, training, cohesion and redundancy.

Payment and reporting of the social security

Social security contributions are calculated and paid separately from the due tax. The contributions are paid and reported on a monthly basis and are subject to the yearly reconciliation.

If a person is employed by multiple employers, all of them are obliged to report and pay social security contributions unless the whole income of the employee from all employers is higher than the maximum calculation base. In that case, the employee is obliged to inform the second employer about the amount of the social security contributions paid by the first employer so that the other would not deposit contributions over the maximum calculation base.

A1 Forms

The A1 form is issued upon request, after submitting the necessary documents. Once the submission is done, the competent authorities review the existence of a ground for issuance. If additional information is needed, additional documents may be required during the inspection.

The A1 form is issued for the period indicated in the request, corresponding to the period of the business travel abroad, but not more than 24 months.

Health insurance contributions in Cyprus

Health insurance rates and registration

• 2.65% is the rate for employees for health insurance in Cyprus
• 2.90% is the rate for employers for health insurance in Cyprus

The rates above could be subject to change.

The employer is obliged to deduct, pay and report these contributions on behalf of the employee from their income on a monthly basis.

The rates above could be subject to change.

The employer is obliged to deduct, pay and report these contributions on behalf of the employee from their income on a monthly basis.

Health insurance base calculation

Health insurance contributions are calculated from the income whereas the calculation base is multiplied by the applicable rate. The minimum calculation base is EUR 870, and the maximum is EUR 4,554 which applies to the whole income of the employee from all employees.

Payment and reporting of the health insurance

Health insurance contributions are calculated and paid separately from the due tax, whereas 2.90% of the contribution is covered by the employer and 2.65% by the employee. The reporting and the deposition of the whole payment is done by the employer.

If a person is employed by multiple employers, all of them are obliged to report and pay health insurance contributions unless the whole income of the employee from all employers is higher than the maximum calculation base. In that case, the employee is obliged to inform the second employer about the amount of the health insurance contributions paid by the first employer so that the other would not deposit contributions over the maximum calculation base. For example, in case the income of the employee from the first employer is higher than EUR 4,554, the second employer would not pay health insurance contributions.

The contributions are paid and reported monthly and are subject to the yearly reconciliation.

Cyprus tax resident working in one or more other countries

Personal income tax return filing

In case the employee is a tax resident of Cyprus and receives income taxable abroad, they are obliged to file an annual tax return in Cyprus.

The tax return shall be submitted by July 31 of the following year after the acquisition of the income.

The tax return can be filed only electronically. Representation by a tax adviser and power of attorney is not required as in order to obtain access to the “taxisnet” system certain applications must be submitted to the income tax office by the accountants or the taxpayers.

Avoiding double taxation

If there is no double tax treaty, to avoid double taxation the provisions of the local legislation should be applicable. If there is a double tax treaty, which allows the application of a set-off method, the exemption method can be applied if it is more beneficial for the employee.

For the purposes of avoiding double taxation, generally, a certificate on the paid tax, a tax receipt or similar confirmation is required. Also, a tax return filed in other country after certified translation might be accepted.

Tax benefits and other specifics

To apply for available tax benefits, respective evidence is required. Depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return.

In general, provided that there is a single employer, and the employee works for them also in another country, the income is attributable to the country where the work is performed.

Tax resident of other country working and paying taxes in Cyprus

Personal income tax return filing

The employer is obliged to report and pay tax on a monthly basis and the tax is also subject to a yearly reconciliation.

The monthly tax is due till the last day of the month following the month in which the tax is withheld. In case the annual amount of the tax is higher than the sum of the withheld tax during the year, the employer shall pay the additional amount.

If the foreign person is not a resident of Cyprus, receives income only from an employment contract with no other income and does not use tax benefits, they are not obliged to file for an annual tax return.

The annual tax return shall be submitted by July 31 of the year following the acquisition of the income. However, this period may be extended if the government is undergoing significant changes in its “taxisnet” system or actual tax return form. Extensions are granted according to the government.

The tax return can be filed only electronically. Representation by a tax adviser and power of attorney is not required as in order to obtain access to the Cyprus tax system called “taxisnet” certain applications must be filled in by the accountants or taxpayers.

Tax benefits and other specifics

Entitlement to tax benefits is not subject to a minimum value of income having source in Cyprus. To apply for available tax benefits, respective evidence is required. Depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return.

In general, provided that there is a single employer, and the employee works for them also in another country, the income is attributable to the country where the work is performed.

Penalties

Penalties related to tax

• Delayed filing of the tax return: Monetary penalty of EUR 100
• Delayed payment of the due tax: Monetary penalty of EUR 100 and up to 5% interest
• Delayed or missing registrations at tax authorities: Penalties apply based on the taxes due
• Delayed or missing report on monthly salary or withholding tax from salary: Penalties apply based on the taxes due

Penalties related to social security

• Not requesting an A1 form from the respective authorities: There is no special penalty related to A1 forms in Cyprus. However, in case the employee is sent to perform work in another EU member state, a missing A1 form may lead to the double payment of the social insurance contributions, both in the home country and the host country
• Delayed report on social security: Up to EUR 10,000 for a less than 10 employees affected as a result
• Delayed payment of the social security contributions: Fine of the reported gross salary by the following rates: first month 3%, second month 6%, third month 9%, thereon 27% on both social security and national health system and depending on the case an additional fine of up to EUR 10,000 for less than 10 employees affected as a result.
• Delayed or missing registrations for the purposes of social security: Fine of the reported gross salary by the following rates: first month 3%, second month 6%, third month 9%, thereon 27% on both social security and national health system and depending on the case an additional fine of up to EUR 10,000 for less than 10 employees affected as a result.

Penalties related to health insurance

• Delayed report on health insurance: Up to EUR 10,000 for a less than 10 employees affected as a result
• Delayed payment of the health insurance contributions: Fine of the reported gross salary by the following rates: first month 3%, second month 6%, third month 9%, thereon 27% on national health insurance and depending on the case an additional fine of up to EUR 10,000 for less than 10 employees affected as a result.
• Delayed or missing registrations for the purposes of health insurance: Fine of the reported gross salary by the following rates: first month 3%, second month 6%, third month 9%, thereon 27% on national health insurance and depending on the case an additional fine of up to EUR 10,000 for less than 10 employees affected as a result.

Criminal acts

A person concealing mandatory contributions for public social security, assessment or payment of tax obligations will be subject to criminal offense. If a legal person is found guilty liability extends to the directors and any officer who had duties in relation to the payroll functions of the legal person (company).

The offences are punishable with a fine of up to EUR 17,860, imprisonment for up to five years or both.

Tax residency in the Czech Republic

Definition and requirements

An individual is considered a Czech tax resident if:

• the individual has a permanent place of residence in the Czech Republic in which they intend to stay permanently or
• the individual stays for 183 days or more in the Czech Republic continuously or intermittently in the calendar year

Tax residence is crucial for the determination of the extent of taxation in each country. A Czech tax resident is obliged to report his worldwide income in the Czech Republic, i.e. including income from sources abroad. In contrast, a Czech tax non-resident in the Czech Republic is only obliged to tax income from sources in the Czech Republic (e.g. for income from employment, days physically worked in the Czech Republic).

Days of presence

For the purposes of calculating the days of presence in the Czech Republic within one or more periods, any part of the day of presence is regarded as a whole day (including day of arrival and day of departure).

Split tax residency

An individual may be considered a split tax resident if they move their permanent place of residence during the year.

Double tax treaty

Should an individual be also regarded as a tax resident in another country based on the other country’s domestic law, the double tax treaty determines their final tax residency status based on the following tie breakers:

• Country of permanent home, if in both countries;
• Country of centre of vital interests (personal and economic relations), if in both countries;
• Country of habitual abode (183 days), if in both countries;
• Nationality.

Types of taxable income in the Czech Republic

Based on the Czech legislation, the following types of income are subject to taxation:

• Employment income: Salaries, bonuses, remuneration of executives and members of the board of directors.
• Self-employment income: Revenues from business and professional services
• Capital gains: Interests and dividends (from foreign sources), dividends and interests from Czech sources are usually subject to withholding tax at source and may not be included in the annual personal income tax return.
• Rental income: Proceeds from the lease of real estate and flats, long-term rental of movables.
• Other income: Proceeds from the sale of securities, sale of property (unless they are exempt from taxation).

All forms of remuneration, whether in cash or in other forms, are generally considered taxable income (with the exception of certain tax-exempt income / benefits).

For each type of income, the legislation states calculation of the tax base.

Employee benefits

A specific group of income from dependent activities are employee benefits, such as:

• Provision of company car for work and private purposes – 1%/0,5% (electric vehicle) of the purchase price of the car (including VAT) is considered taxable income, this income is also subject to social security and health insurance contributions.
• Non-monetary benefits such as contributions to cultural events, holiday vouchers, the possibility of using sports, health and educational facilities, books, etc. – this is tax-exempt income, if the related costs of the employer are not tax deductible.
• Pension and life insurance contributions – exempt from tax up to CZK 50,000 / year.
• Meal vouchers – the employer contributes 55% of the value of meal vouchers and the remaining 45% is paid by the employee, if the legal limits are met, this income is exempt from taxation.
• Alternative to meal vouchers: cash benefits exempted up to CZK 107.10.

Personal income tax in the Czech Republic

Tax rate and tax period

• 15% is the standard tax rate
• 23% is a second tax rate

In the Czech Republic, the tax period is the same as the calendar year. Based on the local tax system, salaries paid in January for the work performed in December are considered as taxable income of the previous calendar year.

Tax base and deductions

The abolition of the concept of super-gross salary introduced progressive personal taxation in the Czech Republic with effect from 2021. The standard tax rate of 15% applies to all types of income up to CZK 1,935,552 (approx. EUR 77,422) for 2023. The tax rate of 23% applies to all types of income exceeding this amount.

The tax on income from dependent activities is deducted and paid by the employer through the payroll. Selected categories of employee benefits are not considered taxable income. These are, for example, some non-monetary benefits, pension and life insurance contributions or meal vouchers.

The basis of the tax on dependent activity is simply gross salary plus taxable benefits. For other types of income, expenditures can be claimed.

In order to reduce the tax base and tax liability, employees can take advantage of the tax benefits listed in the following table. Tax reliefs and tax allowances directly reduce tax liability. Tax base deductible items then reduce the tax base. Some tax reliefs can be applied monthly, other tax benefits are applied only on an annual basis. Tax residence also has an impact on the application of tax benefits:

• Czech tax resident: Some tax reliefs and tax allowances can be claimed monthly. Foreigners must prove their residence with a tax domicile issued by the Czech tax office on the basis of an application, or they must provide a permanent residence permit. A Czech tax resident can claim other tax benefits via annual tax settlement with their employer or a personal income tax return.
• Czech tax non-resident: A Czech tax non-resident can only claim the basic taxpayer relief per month. Czech tax non-residents can claim other tax benefits only if they have received more than 90% of their income from sources in the Czech Republic, and this is possible only via filing a personal income tax return.

Tax reliefs	Amount/year	Conditions
Taxpayer relief	CZK 30,840	applicable for everyone
Spouse relief	CZK 24,840	spouse living with the taxpayer in common household
		in case the spouse’s income did not exceed CZK 68,000 in the taxable period
Disability relief	CZK 2,520	for first or second degree of disability
	CZK 5,040	for the third degree of disability
Relief for the holders of disability card	CZK 16,140	card of person with disabilities
Student relief	CZK 4,020	student of primary school, high school or university until the age of 26 (or 28 for Ph.D. students)
Relief on the nursery school placement of child	CZK 17,300	the child is living with the taxpayer in common household
Allowance on 1st, 2nd, 3rd or more dependent children	CZK 15,204 CZK 22,320 CZK 27,840	child lives with the taxpayer in a common household
Donation for charitable purposes including blood donation	max. 15% of tax basement CZK 3,000 per blood donation	at least 2% of tax basement, minimum CZK 1,000 (in total)
Life Insurance Contributions *	Max CZK 24,000	payment of insurance benefits after 60 months (5 years) and simultaneously not earlier than on 60 years of age (unless the insured amount is agreed)
Mortgage interests	Max CZK 150,000 per a household (for mortgages concluded after 1.1.2021)	interest on building savings, mortgage loans or related contracts
		direct contractor
		apartment, land or building ownership, cooperative share
		use for permanent housing
Pension Insurance Contributions*	Max CZK 24,000	payment of insurance benefits after 60 months and at the earliest in the year of reaching the age of 60 years; tax base deduction is applicable from the amount exceeding CZK 12,000 of the contributions paid (up this amount a state subsidy is applicable)
Membership fees to the union organisations	1.5% of taxable income, max          CZK 3,000	Membership fees which were truly paid in the period
Expenses for exams proving additional education based on special law	Max CZK 10,000	The payment was made by the employee, not included in the employer’s costs, in accordance with the law on the recognition of the results of further education

*Please note that in case of pension insurance / life insurance contributions paid to insurance company seated outside the Czech Republic, all related documents need to be translated into Czech (if not issued in Czech). As tax deduction can be applied contributions paid to an organization within EU.

Social security contributions in the Czech Republic

Social security rates and registration

• 24.8% rate for the employer
• 6.5% rate for the employee

Therefore, in the Czech Republic, social security is paid by both the employee and employer, while the employer is obliged to register the employee at the local social security institute (even if it is a foreign employer).

Social security base calculation

The assessment base for the social security is the gross total taxable employment income. Although there is no minimum calculation base, but the maximum value is set to CZK 1,935,552 for 2023 (in 2022, this value was CZK 1,867,728). It is settled as an annual amount.

In case the employee works for multiple employers, the maximum assessment base for social security has to be followed by all of them, separately. If the cap is reached, the employee may ask the Czech Social Security Authority for refund of overpayment after the end of year.

Payment and reporting of the social security

The contributions are calculated and paid separately and not included in the due tax. In case the employee is employed by 2 or more employers, all employers are obliged to report and pay social security contributions.

The reporting and payments are made by the employer on a monthly basis within the payroll agenda.

A1 Forms

Upon request, the Czech authorities issue A1 forms in case of posting to other countries easily, even for a longer period (e.g. 1 or 2 years) under the Art. 12 of the EU regulation 883/2004, if the employee travels abroad regularly or often due to different activities.

On the other hand, a foreign employee is not subject to the Czech insurance system if they submit an A1 form confirming participation in a foreign insurance system issued by a foreign authority.

Health insurance contributions in the Czech Republic

Health insurance rates and registration

• 9% rate for the employer
• 4.5% rate for the employee

Therefore, health insurance is paid by both the employee and employer, but it is the employer’s obligation to register the employee at the local health insurance institute (even if it is a foreign employer).

Health insurance base calculation

The assessment base for health insurance is the gross total taxable employment income, with no minimum or maximum calculation base.

Payment and reporting of the health insurance

The contributions are calculated and paid separately and not included in the due tax.

In case the employee is employed by 2 or more employers, all employers are obliged to report and pay health insurance contributions on a monthly basis within the payroll agenda.

A1 Forms

The practice of issuing A1 forms and the recognition of forms issued by a foreign authority was described in the previous section.

Obligations of the employer and the employee regarding the employment

Employment of EU citizens

In general, EU citizens and their family member are not considered foreigners. EU citizens are covered by one of the fundamental freedoms of the internal market, namely the free movement of workers. EU citizens have the right to move and reside freely within the EU Member States. They can therefore reside and work in the Czech Republic without the need for any permit, i.e. they enjoy the same treatment as citizens of the Czech Republic. This means that although they do not need a work permit, they may need (there is no obligation) a temporary residence permit if they stay in the Czech Republic for more than 3 months.

A spouse, parent of a citizen under the age of 21, descendant under the age of 21, descendant of the spouse of an EU citizen, ancestor or descendant dependent on care and nutrition or a foreigner in a permanent partnership with an EU citizen are considered to be family members of the EU citizen. When employing EU citizens, the employer has information obligation and the obligation to keep records of EU citizens (obligation to register certain personal data about employed or posted EU citizens or their family members).

Information obligation

If an employer employs an EU citizen, they have the following information obligation:

• Must inform the relevant regional branch of the Labour Office of the Czech Republic in writing about the entry of an EU citizen or their family member into employment or to perform work within the framework of posting.
• This obligation must be fulfilled by the employer at the latest on the day of taking up employment or performing work within the framework of the posting. Notifications can be submitted via a data box, in person or by e-mail.
• In the event of termination of employment or posting, the employer is obliged to inform the relevant regional branch of the Labour Office of the Czech Republic also about termination of employment or of the posting within 10 calendar days at the latest.
• When renewing an employment contract, the employee must be reported again.
• If the contract is for an indefinite period, termination must be reported.
• The employer faces a fine of up to CZK 100,000 for non-compliance with the information obligation.

Employment of third – country nationals

Unlike EU citizens, the Employment Act does not provide foreigners with any priority status or the same rights as citizens of the Czech Republic. Third-country nationals must, in principle, have a residence permit and a work permit. Both conditions must be met before performing work in the Czech Republic.

In order to be employed, a foreigner must hold:

• Work permit (for work shorter than 3 months, issued by the Labor Office of the Czech Republic).
• Employee cards (for a period longer than 3 months) – it is also a residence permit.
• Blue cards (for a period longer than 3 months, with university education) – it is also a residence permit.
• Intra-employee transferred (ICT) cards (for performance longer than 3 months).

In some cases, it is not necessary to have a work permit, e.g. in the case of posting as part of the provision of services by an employer from another EU Member State, preparation for a future profession, with a secondary or university degree obtained in a Czech school (accredited field, full-time form), family cohabitation, educational or scientific activities.

Obligations of the employer when employing foreigners

As with the employment of EU citizens, employers have almost the same obligations:

• Must inform the relevant regional branch of the Labour Office of the Czech Republic in writing about the foreigner’s entry into employment or the performance of work within the scope of posting. The regional branch of the Labour Office of the Czech Republic is competent according to the foreigner’s place of work.
• This obligation must be fulfilled by the employer at the latest on the day of taking up employment or performing work within the framework of the posting. Notifications can be submitted via a data box, in person or by e-mail.
• In the event of termination of employment or posting, the employer is obliged to inform the relevant regional branch of the Labour Office of the Czech Republic about the termination of employment or performance of work within the posting within 10 calendar days at the latest.
• When renewing an employment contract, the employee must be reported again.
• If the contract is for an indefinite period, termination must be reported.
• The employer faces a fine of up to CZK 100,000 for non-compliance with the information obligation.
• Furthermore, the employer is obliged to keep copies of documents proving the right of residence of foreigners, for the duration of employment and for a period of 3 years from termination, including translation into the Czech language.

Obligations of an EU citizen and their family members

If an EU citizen decides to stay in the Czech Republic for more than 30 days, they are obliged to report their place of residence at the relevant Foreign Police office within 30 days of entering the territory. A citizen or their family member is fined up to CZK 3,000 for failing to report to the Foreign Police.

If an EU citizen or their family member changes residence in the Czech Republic and this change is for a period longer than 180 days, they must notify the change of residence within 30 working days from the day the change occurred. Failure to comply with this obligation imposes a fine of up to CZK 3,000 on the citizen or their family member.

Czech tax resident working in one or more other countries

Personal income tax return filing

Generally, an employee is liable to file a Czech personal income tax return if their taxable income exceeds the amount CZK 15,000 during a calendar year. However, if they only have employment income and no other income exceeding CZK 6,000 or CZK 30,000 from occasional activities throughout the year, they may request the employer to perform the annual tax reconciliation on their behalf. However, this needs to be done before February 15.

The tax return is due 3 or 4 months after the end of the tax period, so that is usually April 1 (in paper form) or May 1 (electronically via data mailbox) of the year following the tax period, or July 1 if the tax return is filed by a tax advisor based on a power of attorney. The deadline for filing may be extended by further 3 months, or until November 1 in case there is a foreign income.

The tax return can be filed by post or online, which is mandatory if the employee or tax advisor has a data box. Otherwise, they would risk penalties imposed by the tax authorities. Representation by a tax adviser or power of attorney is optional.

Avoiding double taxation

In case there is an applicable double tax treaty, which allows the application of the set-off method, the employee can apply exemption method based on local legislation if it is more beneficial, but under the assumption that the employment income has been already taxed in the contracting state, and the employer is either a resident of the contracting state or the income is borne by their permanent establishment located in the contracting state.

In practice a confirmation of the tax paid abroad is needed, issued by the foreign tax authority – especially in case of the tax credit method. In case of exemption method, a simple confirmation of income or the copy of the foreign personal income tax return is accepted.

In case there is no double tax treaty is applicable, the tax paid abroad can be deducted from employment income.

Tax benefits and other specifics

A Czech tax resident has the opportunity to claim all the tax benefits listed above if the conditions are met. In most cases, it is necessary to provide the tax administrator with the relevant document proving the right to claim the relevant tax benefit. The documents may be required to be submitted to the tax office together with the tax return.

Assuming that the employee has one employer for whom they also work in another country, the income is taxed in each country according to the relative number of working days. This may also apply to paid leave (provided for a calendar year), holidays and sickness benefits, bonuses, etc. In the tax return, the employee reports their worldwide income, including foreign income which is exempt from taxation in the Czech Republic.

Tax resident of other country working and paying taxes in the Czech Republic

Personal income tax return filing

If the seat of the employer is registered in the Czech Republic, they are obliged to report and pay tax on a monthly basis. This obligation is also applicable in case they are registered in another EU member state, but their branch or permanent establishment is located in the Czech Republic or they have an employee with place of work in the Czech Republic.

Generally, filing the tax return is the personal liability of the employees, the employer cannot file the tax return for them. Employees are obliged to file a tax return mostly in the following cases regardless of their residency:

• they have different types of income i.e. rental income, dividends, income from sale of shares.
• they have incomes from multiple employments
• their income is related to the previous tax periods i.e. bonuses for previous years related to Czech working days

Czech tax non-residents may file a tax return if they want to apply for other tax benefits, as on a monthly basis only the basic taxpayer relief may be applied. The only condition is that they have to have more than 90% of their total worldwide income taxable in the Czech Republic.

The employer can process the annual payroll tax reconciliation provided that the employee does not have the liability to file the personal income tax return.

The tax return is due 3 months after the end of the tax period, so that is usually April 1 of the year following the tax period or May 1 if the employee has a data mailbox, and July 1 if the tax return is filed by a tax advisor. Therefore, the deadline for filing may be extended by further 3 months, or until November 1 in case there is a foreign income.

The tax return can be filed by post or online, which is mandatory if the employee or tax advisor has a data box. Representation by a tax adviser or power of attorney is optional.

Tax benefits and other specifics

Entitlement to tax benefits is subject to condition of having at least 90% of the total income from sources in the Czech Republic. Depending on the respective tax benefit, the evidence or documentation may need to be presented to the tax authorities with the tax return.

Provided that there is a single employer and the employee works for them also in another country, the income is attributed based on the prorate of working days. This may concern, especially, the paid vacation (granted for calendar year), state holiday and sickness, bonuses and benefits.

Penalties

Penalties related to tax

• Delayed filing of the tax return:The fine for late filing is 0.05 % of tax assessed, 0.01 % of tax loss, max. 5% or CZK 300,000. First 5 days of delay are without any penalty. The penalty is issued only if exceeds CZK 1,000
• Delayed payment of the due tax:Late interest payment calculated on the CNB’s annual repo rate at the first day of the relevant calendar half-year increased by 8%. First 3 days of delay are without interest. The late interest payment is issued only if exceeds CZK 1,000
• Delayed or missing registrations at tax authorities:A fine of up to CZK 500,000 for failure to fulfil a non-monetary nature
• Delayed or missing report on monthly salary or withholding tax from salary:A fine of up to CZK 500,000 for failure to fulfil a non-monetary nature

Penalties related to social security

• Not requesting an A1 form from the respective authorities: The fine is up to CZK 20,000
• Delayed report on social security: The fine is up to CZK 50,000
• Delayed payment of the social security contributions: The fine is 0.05% of the amount due for each calendar day
• Delayed or missing registrations for the purposes of social security: The fine is up to CZK 20,000

Penalties related to health insurance

• Delayed report on health insurance: The fine is up to CZK 50,000
• Delayed payment of the health insurance contributions: The fine is 0.05% of the amount due for each calendar day
• Delayed or missing registrations for the purposes of health insurance:The fine is up to CZK 10,000 or CZK 20,000 in case of repeated failure/CZK 200,000, or CZK 400,000 in case of repeated failure for employers

Criminal acts

Evasion of taxes, fees and similar compulsory payments is provided for under sections 240 and 241 of the Czech Criminal Code. This offence is punishable by imprisonment for 2 to 10 years, depending on the scope of the offence and further circumstances of the case. Alternative punishments may be also applied. Furthermore, if the incorrect reporting of tax to the revenue service is due to distortion of data on status of management and assets (accounting books) provided for in section 254 of the Czech Criminal Code, further punishment may be imposed.

The Czech Criminal Code does not specifically regulate reporting, although intentionally misleading reporting may be considered an attempt to commit a criminal offence. For this reason, the criminal qualification for this offence is equal to the previous point above.

The concept of effective regret applies to the later reporting or payment of due tax, social security or health insurance contributions. In that liability the offence of tax evasion under sections 240 and 241 expires, if the offender satisfies the obligations additionally, prior to the enunciation of a judgement of the court of law.

Tax residency in Egypt

Definition and requirements

Individuals are residents of Egypt if they meet any of the following conditions:

• Egypt is their place of habitual abode, i.e. the taxpayers is present in Egypt most of the year whether in an owned or leased residence or the taxpayer has a commercial, professional, or industrial place of business or any other place of business.
• Individuals residing in Egypt for a period exceeding 183 days whether continuously or non-continuously in a 12-month period.
• Egyptians who perform their services overseas and receive their income from an Egyptian treasury (public or private).

Days of presence

Residing in Egypt for more than 183 continuous or intermittent days within twelve months and any part of the day is considered as whole day in Egypt including day of arrival and day of departure.

Split tax residency

Split tax residency is acknowledged between more countries within one tax period.

Personal income tax

Tax rate and tax period

The current tax rates in Egypt are the following: (Valid until June 30^th, 2023)

• 0% on income between EGP 0 and EGP 15,000
• 2.5% on income between EGP 15,001 and EGP 30,000
• 10% on income between EGP 30,001 and EGP 45,000
• 15% on income between EGP 45,001 and EGP 60,000
• 20% on income between EGP 60,001 and EGP 200,000
• 22.5% on income between EGP 200,001 and EGP 400,000
• 25% on income above EGP 400,000

At higher rates of annual income, the brackets cease to be applied:

• Between EGP 600,000 and EGP 700,000 no exemption on the first EGP 15,000
• Between EGP 700,001 and EPG 800,000 no 2.5% bracket applied
• Between EGP 800,001 and EPG 900,000 no 10% bracket applied
• Between EGP 900,001 and EPG 1,000.000 no 15% bracket applied
• Above EGP 1,000,000 no 20% bracket applied

The tax rates in Egypt starting from July 1^st, 2023, are expected to be as the following upon the approval of the Egyptian Parliament:

***(It may vary upon the executive regulations of the income tax law amendments)

• 0% on income between EGP 0 and EGP 15,000
• 2.5% on income between EGP 15,001 and EGP 30,000
• 10% on income between EGP 30,001 and EGP 45,000
• 15% on income between EGP 45,001 and EGP 60,000
• 20% on income between EGP 60,001 and EGP 200,000
• 22.5% on income between EGP 200,001 and EGP 400,000
• 25% on income between EGP 400,000 and EGP 1,200,000
• 27.5% on income above EGP 1,200,000

At higher rates of annual income, the brackets cease to be applied:

• Between EGP 600,000 and EGP 700,000 no exemption on the first EGP 15,000
• Between EGP 700,001 and EPG 800,000 no 2.5% bracket applied
• Between EGP 800,001 and EPG 900,000 no 10% bracket applied
• Between EGP 900,001 and EPG 1,000.000 no 15% bracket applied
• Above EGP 1,000,000 no 20% bracket applied

The tax period is the same as the calendar year. Based on the local tax system, salaries paid in January for the work performed in December are considered as taxable income for December.

Tax base and deductions

The net taxable amount is determined based on the gross taxable income (including salary and all benefits) after deducting the following:

• Personal relief of EGP 9,000 (expected to be EGP 21,000 starting from July 1^st, 2023)
• Employee’s share of local social insurance
• Exemption of special increases will continue to apply.
• End of services payments and pensions
• Life insurance and medical insurance to a certain extent
• Collective benefits-in-kind
• Employee’s profit share

To increase their tax base, the following deductions are allowed for employees:

• Personal relief of EGP 9,000 (expected to be EGP 21,000 starting from July 1^st, 2023), calculated on a prorate basis, applicable to all employees.
• Employee’s share of social insurance
• A special increase amount paid by the employer is tax-exempt within certain limits, according to a presidential decree.
• Life insurance and medical insurance – however, in case the insurance premium is paid by the employer, the payment will be treated as a taxable benefit on specific conditions.
• End of services payments and pensions are exempt from taxes provided that a number of documents should be available to the tax authority during the salary tax inspection – however, in practice this is not allowed for expats.
• Collective benefits-in-kind – based on the new tax law these are: meals for employees, collective transportation for employees or its cost, medical care, tools and uniforms for work purposes, and housing provided by the employer for all employees.
• Employee’s profit share, exempt under the Tax Law 91 for 2005.

Social security contributions in Egypt

Social security rates and registration

• 11% rate for the employer
• 18.75% rate for the employee
• 25% rate for self-employed taxpayers (at the governorates that apply the comprehensive health insurance scheme)
• 21% rate for self-employed taxpayers (at the governorates that don`t apply the comprehensive health insurance scheme)

Therefore, in Egypt the social security is paid by both the employee and employer, while the employer is obliged to register the employee under the entity name in the social insurance authority since day 1. Both local and foreign employers must register, deduct, and pay the respective contributions on behalf of the employee and the employer. However, this does not apply to foreign employers who are not operating in Egypt under a legal entity.

Social security base calculation

The minimum insurance salary for the year 2023 is EGP 1,700, increased annually by 15% till January 1, 2027, by rounding the result to the highest EGP 100. (Taking into consideration that the minimum wage in 2023 is EGP 2,700 as per the presidential decree. However, some employers are allowed to register the employees at the minimum of EGP 1,700 after submitting a request for exception of applying the minimum wage presidential decree until October 15^th, 2021)

The maximum insurance salary for the year 2023 is EGP 10,900, increased annually by 15% till January 1, 2027, by rounding the result to the highest EGP 100. It applies only to the income from the employer who is insuring the employee.

Starting from Jan 1^st, 2028, the increase will be determined according to the inflation rate at that moment.

Payment and reporting of the social security

Social security is paid both by the employee and the employer, but the reporting and payments are done by the employer monthly.

Social insurance contributions are levied only on Egyptian nationals with full-time employment, therefore in case of 2 employers only the main employer is obliged to pay the contributions, on a monthly basis.

There is no obligatory reporting monthly, however, the employer must submit separate forms for the new hires (form no. 1) and leavers (form no. 6) and another form no. 2 once annually in January of each year for the whole insured population of the company to reflect any changes in salaries or titles.

Recently, there is no need any more to buy the official forms no. 1, 6 or 2 from SI authority & it is accepted to print these forms & fill them in with the employee’s data to be presented to the SI office.

Also, it is allowed to submit form 1 & 6 through NOSI portal by using the token however, so far, not all forms can be successfully submitted & still need to be physically submitted through SI office.

Health insurance contributions in Egypt

Health insurance rates

Based on the Social Insurance law, health insurance is paid by both the employer and the employee. In the additional comprehensive health insurance scheme, it is paid only by the employee.

Currently, health insurance is included in the monthly social insurance contributions as per social insurance law. However, there is an additional Comprehensive Health Insurance Scheme under the gradual application which will be generalised on the rest of the country gradually. The additional health insurance scheme contribution is 1% of the gross salary.

Health insurance base calculation

Currently, the minimum and maximum calculation base for health insurance is based on the minimum and maximum insured salary. In the additional comprehensive health insurance scheme, it is based on the gross salary.

The maximum calculation base applies only to the income from the employer who is insuring the employee.

The due health insurance is calculated as a rate of the employee`s insured salary. In the additional comprehensive health insurance scheme, it will be a rate of the gross salary.

Payment and reporting of the health insurance

Given that health insurance is included in the monthly social insurance contributions as per social insurance law, it is paid and reported the same way.

Egyptian tax resident working in one or more other countries

Personal income tax return filing

In case the employee is a tax resident of Egypt and receives income taxable abroad, they are obliged to file an annual tax return in Egypt.

The tax return is due in January of each calendar year. It is not explicitly mentioned in the income tax law whether the due period for filing can be extended, however, an interest will be applied in case of late payment.

The tax return can be filed by hand, but an online submission system is currently under development. Representation by tax adviser is not required, but if so, a signed power of attorney is required.

Avoiding double taxation

If there is no double tax treaty, local legislation is applicable. If the income from employment was taxed in such other country, the tax credit method would be applicable.

If the income from employment was taxed in such other country and it is more beneficial to the employee, it is possible to apply the exemption method.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required.

Provided that there is a single employer, and the employee works for them also in another country, the employee is taxed on their Egyptian-source income based on the rule of 183 days.

Tax resident of other country working and paying taxes in Egypt

Personal income tax return filing

Tax on employment income is withheld from the salary on a monthly basis. The employer is required to file quarterly tax statements in January, April, July, and October of each calendar year.

The employer is required to file quarterly tax statements in January, April, July, and October of each calendar year.

If an employer or a person required to pay taxable revenue is a non-resident of Egypt or does not have a headquarters or an establishment therein, the obligation to remit the tax falls on the person entitled to such taxable revenue. The employee has to submit Form no. 5 in this case.

In case of a foreign employer, the employee has to pay the due tax on the same date when they submit Form no. 5 at the beginning of January. On the contrary, in case of local employer, tax on employment income is withheld at source on a monthly basis. The due period for filing the tax return cannot be extended.

The tax return can be filed online.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required. However, the annual personal exemption of EGP 9,000 (expected to be EGP 21,000 starting from July 1^st, 2023) is applicable to all employees to a minimum value of income.

For tax donations, the following information may be required:

• 05% of the net salaries to honour martyrs, victims, missing and injured in military, terrorist and security operations and their families.

Provided that there is a single employer, and the employee works for them also in another country, the employee is taxed on their Egyptian-source income based on the rule of 183 days.

Penalties

Penalties related to tax

• Delayed filing of the tax return:The fine is ranging from EGP 3,000 to EGP 50,000 for:
  • Failing to submit the tax returns of (CIT, payroll tax, VAT, and state development tax) within 60 days after the legal date of submission. After 60 days, the fine ranges from EGP 50,000 to EGP 2,000,000. In case the delayed filing is repeated within the next 3 years, the fine is doubled.
  • Including false information in the tax returns.
  • Non-cooperation during tax audits.
  • Non-compliance with the transfer pricing three-tier filing requirements.
• Not notifying the ETA of change(s) in the company’s tax registration information within a period of 30 days of such change: Penalty of EGP 20,000 up to EGP 100,000 is applicable.

Penalties related to social security

• Delayed report on social security/No reporting/Misleading salary information: The penalty for employee registration form (Form 1) ranges between EGP 30,000 and EGP 100,000. The penalty for employee deregistration delay is subject to the social insurance inspector judgment. For the filing of Form no. 2 which states all registered employees in the company, the delay filing penalty is 50% of the difference between the old and new social insurance contributions amounts up to the filing date.
• Delayed payment of the social security contributions: The penalty is 50% of the due total contribution amount for one-month delay. If the payment was delayed for more than one month, the account will be blocked so no registrations or de-registrations or printouts can be processed until the full delayed amount is paid, in addition to 50% as a delay penalty + delay interest.

Tax residency in Estonia

Definition and requirements

In Estonia, a person is regarded as a tax resident if:

• they have a permanent place of residence in Estonia
• they stay for 183 days or more in Estonia during any 12 consecutive calendar months

If under the rules of any double tax treaty the individual is resident of the other treaty country, then that individual will be taxed as a non-resident regardless of the Estonian domestic tax residence criteria.

The tax residency is not based on formal requirements, as the actual situation is analysed by the tax authorities.

The individuals are required to notify the tax authorities about the shift of tax residency both upon the arrival to and the departure from Estonia, by submitting the application form R to the tax authorities.

Days of presence

For the purposes of calculating the days of presence in Estonia within one or more periods, any part of the day of presence is regarded as a whole day (including day of arrival and day of departure).

Split tax residency

An individual may be considered a split tax resident if they move their permanent place of residence during the year.

Personal income tax

Tax rate and tax period

• 20% is the applicable tax rate

In Estonia, the tax period is the same as the calendar year. Based on the local tax system, salaries paid in January for the work performed in December are considered as taxable income of the next calendar year.

Tax base and deductions

The tax base is calculated from the annual income reduced by the deductions provided by the local law. The fringe benefits are taxable at the level of employer monthly and are not included in the tax base of the individual.

The employee submits an application to the employer in respect of the applicable monthly non-taxable amount of income. From 2023, generally the non-taxable amount of the income of the resident individual is EUR 7,848 in case the annual income does not exceed EUR 14,400. As a general rule, above taxable income of EUR 25,200 annually, the non-taxable amount ceases.

However, from 2023 the general non-taxable amount of the income will be no longer applicable to individuals who have reached the retirement age (in 2023, individuals born before July, 1959). If the individual reaches the retirement age during the taxation period, then regardless of the annual income derived, the non-taxable amount equal to old-age pension (EUR 8,448 annually) will be applicable to that individual from the 1 January of the respective calendar year.

The final adjustment of non-taxable amount of the income is made in the annual income tax return.

For resident individuals the following deductions are allowed to decrease their tax bases:

• Additional tax-free income of EUR 1,848 for the second child and EUR 3,048 starting from the third child (these deductions are expected to be abolished from 2024)
• Deductions for housing loan interest, which can be maximum EUR 300 per annum (this deduction is expected to be abolished from 2024)
• Deductions for special training expenses, special gifts and donations
• Deductions for contributions to voluntary funded pension – the limitation on deductions of 15% from annual taxable income is applied, but not exceeding EUR 6,000 per annum
• Contributions to a funded pension and unemployment insurance (considered during a monthly payroll taxation)
• Social security payments mandatory in a foreign state
• Additional tax-free income may be available related to the spouse (this deduction is expected to be abolished from 2024)
• Additional tax-free income of EUR 5,000 per annum for certain forestry and agricultural income

In 2023, a resident individual may deduct in the annual income tax return the housing loan interest, training expenses, gifts and donations in the total amount of EUR 1,200, but not more than 50% of the taxable income during the same period of taxation.

The above referred non-taxable amounts and deductions are available also to non-resident individuals who are tax residents of other EU or EEA countries. Under certain conditions the employer is allowed to apply the non-taxable amount of the income in the monthly payroll taxation of such non-residents.

For other non-residents, only unemployment insurance contributions are deductible.

Social security contributions in Estonia

Social security rates and registration

• 33% rate for social security contributions
• 0.8% rate for employer’s unemployment insurance contributions
• 1.6% rate for employee’s unemployment insurance contributions
• 2% rate for funded pension contributions in case of Estonian resident individuals, if applicable

Social tax covers the public pension and health insurance contributions.

The employees are registered in the employment register of the Tax and Customs Board. Therefore, their information is available for other authorities while the institution has information regarding both tax and social security at the same time.

Thanks to an online administration system, the information is often exchanged automatically.

In case a local employer has not paid payroll taxes and declared a taxable salary, employees have to include such income to their personal income tax returns. In case of a foreign employer, if the salary is subject to taxation in Estonia, the foreign employer is obliged to register itself as a non-resident employer with the Tax and Customs Board and proceed the same obligations as the local employer.

Social security base calculation

The social security contributions are calculated from the gross salary and paid or withheld only by the employer in Estonia. In 2023, the minimum monthly calculation base for social tax is EUR 654.

Payment and reporting of the social security

Employer pays monthly 33% social tax on the gross salary. Employer’s unemployment contribution is 0,8% (payable on gross salary) and employee’s unemployment contribution is 1,6% from the gross salary (withheld by the employer).

If the Estonian resident employee has joined the funded pension scheme, then the employer is liable to withhold monthly 2% funded pension contributions from the gross salary of the employee.

If the employee is employed by 2 or more companies, generally all employers are obliged to report and pay social security contributions monthly.

The employer (either local or non-resident) is required to declare and transfer withheld employment-related taxes to the bank account of the Tax and Customs Board not later than by the 10th day of the month following the month during which the payment was made.

A1 Forms

A1 forms for the purposes of the Art. 12 of the EU regulation 883/2004 are generally issued only for the duration of each respective posting, for up to 2 years.

A1 forms for the purposes of the Art. 13 or 16 of the EU regulation 883/2004 may be issued for period of up to 2 years.

The Estonian Social Insurance Board issues the A1 forms in case of posting employees to other countries easily, as there is an electronic application procedure available, and the A1 form is generally issued on the following working day after submitting the application.

Health insurance contributions in Estonia

In Estonia, public health insurance contributions are included in the social tax. Therefore, there is no additional rate and public health insurance contributions are paid monthly within the social tax, which also includes the calculation base of the health insurance.

In addition, under the employer’s private health insurance agreement with any insurance company operating in Estonia, the employer can make voluntary health insurance contributions without fringe benefit taxes, if the annual contribution (considering total sporting and health expenses) for the employee will not exceed EUR 400.

Estonian tax resident working in one or more other countries

Personal income tax return filing

Under certain conditions, foreign employment income may be tax exempt in Estonia, but should be declared for information purposes in the personal income tax return. Submission of an annual tax return is not required, if the income of the individual is not subject to additional income tax (except some special cases) or the total income did not exceed the basic tax exemption (up to EUR 6,000 per annum).

The due date for the tax return falls on April 30 (however, in 2023, on May 2) and it cannot be extended. The final income tax payment is due on October 1 thereof (however, in 2023, on October 2)

The tax return can be filed personally online in the e-MTA portal, at the tax board office or by post. Representation by a tax adviser and power of attorney is not required.

Avoiding double taxation

If an individual receives income for working in a foreign state, then it is exempt from Estonian income tax, if all the following conditions are met:
1) the individual has stayed in the foreign state for the purpose of employment for at least 183 days over the course of a period of 12 consecutive calendar months; and
2) the respective income has been the taxable income of the individual in the foreign state and if this is certified and the amount of foreign income tax is indicated on the certificate (even if the amount is zero).

If there is no double tax treaty applicable, the credit or exemption method can be applied.

In case a double tax treaty is applicable, which allows the application of a set-off method, employees can apply the exemption method if it is more beneficial to them.

If more income tax is paid or withheld in a foreign state than prescribed by the double tax treaty or other international agreement, only the mandatory payable part of the income tax from the foreign state may be deducted from income tax payable in Estonia. For that, the employee needs to have a certificate issued by the foreign tax administrator or withholding agent certifying the payment of income tax or tax withheld in the foreign country. When so requested by the tax authorities, that certificate should be submitted to the tax authorities as a document of proof.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required, which may need to be presented to the tax authorities with the tax return, if so requested by the tax authorities.

Provided that there is a single employer, and the employee works for them also in another country, the income is attributed based on the prorate of working days. Generally, the payroll income is taxed by the employer in Estonia, unless the employer has a permanent establishment in another country, or the employer has a certificate from the foreign tax authorities that the remuneration paid is subject to foreign income tax.

Tax resident of other country working and paying taxes in Estonia

Personal income tax return filing

Employment-related taxes need to be paid and declared monthly by the employer and the personal tax return of the employee is submitted on an annual basis, unless the employee has no other income. For Estonian payroll taxation, generally foreign companies with employees in Estonia should be registered as non-resident employers with the Tax and Customs Board.

In case the employer (foreign or local) had paid and withheld employment-related Estonian taxes, such data is generally included in the pre-filled tax return of the employee.

The employer is required to transfer the withheld employment-related taxes to the bank account of the Tax and Customs Board no later than by the 10th day of the month following the month when the payment was made.

The same deadline is applicable also to the tax return. The personal income tax return (i.e., the annual tax return of the employee) has to be submitted no later than by April 30 (however, in 2023, by May 2). The deadline cannot be extended. The final income tax payment is due on October 1 thereof (however, in 2023, on October 2)

The tax return can be filed personally online in the e-MTA portal (if the individual has received digital ID in Estonia), at the tax board office or by post. Representation by a tax adviser and power of attorney is not required.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required, which may need to be presented to the tax authorities with the tax return, if requested so by the tax authorities.

The tax benefits of resident individuals (within established limits) are available also to non-resident individuals who are tax residents of other EU or EEA countries. For other non-residents, only unemployment insurance contributions are deductible.

Provided that there is a single employer, and the employee works for them also in another country, the income is attributed based on the prorate of working days.

Penalties

Penalties related to tax

• Delayed filing of the tax return: Failure to submit a tax return, other document or thing by the due date, failure to register with a tax authority, failure to comply with the requirements for the keeping of records or failure to comply with an order of a tax authority is punishable by a fine of up to 300 fine units (currently EUR 1,200). If committed by a legal person, a fine up to EUR 3,200 may be due. In case of criminal act, imprisonment may be applicable
• Delayed reporting and payment of the due tax: Failure to submit information to a tax authority intentionally or submission of false information if the tax or withholding obligation is decreased thereby or the claim for refund is increased is punishable (in case of a legal person) by a fine of up to EUR 32,000. Please note that there is an additional late payment penalty, with the interest rate of 0.06% per day on any unpaid amount of tax. Estonian companies and permanent establishments are obliged to pay 20/80 corporate income tax on such interest and fines as well.

Penalties related to social security and health insurance

The Social Insurance Board confirms that the A1 form can be applied for retroactively. If this has triggered unpaid employment taxes in Estonia, the sanctions mentioned in “Penalties related to tax” may be due.

In Estonia, there is no special registration related to social security and health insurance contributions, therefore there is no special penalty.

Criminal acts

The failure to submit information or the submission of incorrect information to tax authorities for the purpose of reduction of an obligation to pay tax or obligation to withhold, or increase a claim for refund, if a tax liability or obligation to withhold is thereby concealed or a claim for return is unfoundedly increased by an amount corresponding to or exceeding major damage, is punishable by a pecuniary punishment or imprisonment for up to five years.

The same act, if a tax liability or obligation to withhold is thereby concealed or a claim for refund is unfoundedly increased by an amount corresponding to particularly great damage, is punishable by one to seven years of imprisonment.

In such case, the court may also impose extended confiscation of assets or property acquired by the criminal offence.

Please note that companies are subject to a fine, not imprisonment.

Tax residency in Greece

Definition and requirements

In Greece, a person is regarded a tax resident if they fulfil formal and material requirements, such as:

• they have a permanent residence or home in Greece (available place for living)
• they have a habitual stay in Greece, i.e., they stay in the country for more than 183 days, except for the purposes of studying, medical treatment or commuting to work

The tax residency is not based on formal requirements, as the actual situation is analysed by the tax authorities. The individuals are required to register their Greek tax residency with the tax authorities.

Days of presence

For the purposes of calculation of the days of presence in Greece within one or more periods, any part of the day of presence is regarded as a whole day (including day of arrival and day of departure).

Split tax residency

Split tax residency is not acknowledged between more countries within one tax period.

Personal income tax in Greece

Tax rate and tax period

• 9 – 44% is the range of the applicable tax rates, based on the tax base

In Greece, the tax period is the same as the calendar year. Based on the local tax system, salaries paid in January for the work performed in December are considered as taxable income of the previous calendar year. However, a salary paid after January is regarded as taxable income of the next year, even if it concerns the previous year.

Tax base and deductions

Generally, the tax base is calculated from the gross income (money and in-kind), which is decreased by social and health contributions paid by the employee decreased by the non-taxable parts of the income, if applicable.

Incomes are taxable from the first euro, but there are some tax credits based on the value of income (ceasing with high incomes) and the number of children.

In order to decrease the tax base, the following deductions are allowed:

• Social and health contributions
• Tax deduction of at least EUR 777 for an annual income of EUR 50,000
• Tax bonus on children, in which case the tax deduction of EUR 777 is being increased for each child

Social security contributions in Greece

Social security rates and registration

• 22.29% rate for the employer
• 13.87% rate for the employee

Employees must be registered after their very first employment. Also, the employee needs to register as an insured person for health insurance.

A local employer is obliged to register the employee, then deduct and pay the respective contributions on behalf of the employee and the employer´s part. When it comes to foreign employers, only the employment relationship is registered, while the employee is responsible for the payments to the social authorities.

Social security base calculation

Social security is calculated from the gross taxable income without accord to social and health contributions decreasing the tax base, whereby a maximum base is applicable. It is calculated on the monthly basis, from the monthly salary.

The maximum calculation base is ten times the national minimum wage in Greece. Currently in 2023, the amount is EUR 7,800 per month, while due to an additional increase expected in the current year this amount will be increased too. It is applicable to the whole income of the employee, from all employers.

Payment and reporting of the social security

Social security contributions are calculated and paid separately from the due tax, as they are separate systems from tax. Although the contributions are paid both by the employee and the employers, the reporting and payment is done by the employer on a monthly basis. In case there are more employers, all of them are obliged to report and pay.

A1 Forms

A1 forms for purposes of the Art. 12 of the EU regulation 883/2004 are generally issued only for the duration of each respective posting. A1 forms for purposes of the Art. 13 or 16 of the EU regulation 883/2004 may be issued for period of 1 to 2 years. Greek authorities do a thorough check of documents and conditions before issuing A1 form. Therefore, it may be lengthy process.

Health insurance contributions in Greece

The health insurance contributions are covered by the social security contributions. However, employees must register for health insurance as an insured person.

Health insurance contributions are calculated from the gross taxable income (in-kind included). The same maximum calculation base is applicable as in the case of social security, i.e. EUR 7,800 per month.

Although the contributions are paid both by the employee and the employers, the reporting and payment is done by the employer on a monthly basis.

Greek tax resident working in one or more other countries

Personal income tax return filing

Employee with income taxable abroad is obliged to file income tax return, while a yearly tax reconciliation by the employer is not allowed.

The due date for the tax return falls on June 30 and it cannot be extended, unless the ministry amends the deadline. The tax return can be filed only online. Representation by a tax adviser is voluntary but requires a signed power of attorney.

Avoiding double taxation

If there is no double tax treaty, then only the exemption method is applicable, however only in case the income from employment was taxed in such other country.

In case a double tax treaty is applicable, which allows the application of a set-off method, the employee can apply the exemption method, if the income was taxed abroad and it is more beneficial to them.

For the purposes of avoiding double taxation, generally, a certificate on the paid tax or similar confirmation is required. In exceptional cases other evidence may be accepted.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required. Depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return.

In general, the income is attributable to the country where the work is performed. If the income or its part cannot be attributed to one country as a whole, then a ratio based on respective time worked in Greece and other countries is applied. Individual parts of income may need individual evaluation and attribution ratio as they may concern different time periods or situations; this may concern especially paid vacation (provided for a year of work), state holiday, sickness, bonuses and benefits.

Tax resident of other country working and paying taxes in Greece

Personal income tax return filing

The employee is always obliged to file for tax return. The employer is obliged to report and withhold tax on monthly basis. Withheld tax and the monthly report of the employer is due within two months after the month concerned. A yearly report is not required.

The due date for the tax return falls on June 30 and it cannot be extended, unless the ministry amends the deadline.

The tax return can be filed only electronically. Representation by a tax adviser is voluntary but requires a signed power of attorney. However, tax residents of other countries need a local tax representative for deliveries from tax authorities.

Tax benefits and other specifics

Entitlement to tax benefits is subject to condition of having at least 90% of the total income from sources in Greece. Depending on the respective tax benefit, the evidence or documentation may need to be presented to the tax authorities with the tax return.

In general, the income is attributable to the country where the work is performed. If the income or its part cannot be attributed to one country as a whole, then a ratio based on respective time worked in Greece and other countries is applied. Individual parts of income may need individual evaluation and attribution ratio as they may concern different time periods or situations; this may concern especially paid vacation (provided for a year of work), state holiday, sickness, bonuses and benefits.

Penalties

Penalties related to tax

• Delayed filing of the tax return: The fine is EUR 100 for employees
• Delayed payment of the due tax: The fine is 0.73 % p.m. from the value of overdue tax
• Delayed or missing registrations at tax authorities: The fine can range from EUR 100 up to EUR 2,500. It is usually the obligation of the employer
• Delayed or missing report on monthly salary or withholding tax from salary: The employer is obliged to report salaries and withheld tax on monthly basis. Penalty is EUR 250 or EUR 500, depending on the accounting system of the company

Penalties related to social security

There is no special penalty in Greece related to A1 forms. However, a missing A1 form may lead to negative implications and penalisations abroad.

Similarly, a foreign employee working in Greece without an A1 form may lead to following implications:

• missing registrations with respective penalties from social and health insurance institutions
• missing reports and contributions with respective penalties
• their employment may be regarded as illegal, with respective penalties applicable

• Delayed report on social security: The fine can soar up to EUR 10,550
• Delayed payment of the social security contributions: The fine is 0.667% per month from the overdue payment
• Delayed or missing registrations for the purposes of social security: The fine can soar up to EUR 10,550

Penalties related to health insurance

• Delayed report on health insurance: The fine can soar up to EUR 10,550
• Delayed payment of the health insurance contributions: The fine is 0.667% per month from the overdue payment
• Delayed or missing registrations for the purposes of health insurance: The fine can soar up to EUR 10,550

Criminal acts

If the purpose of incorrect reporting or missing payment of due tax, social security and health insurance contributions is to avoid or decrease them, it is regarded as a criminal offence. The penalty depends on the value of the missing payment and may be at least 3 years of prison. Their later reporting or payment avoids criminal punishment.

Criminal penalisation may concern also the employer – as legal entity. There are different penalties applicable, e.g. money penalty, ban of activity, cease of assets.

Tax residency in Hungary

Definition and requirements

In Hungary, a tax resident is:

• a person who is a citizen of Hungary (except dual citizens), as formal criteria
• a citizen of the European Union who spends more than 183 days per calendar year in Hungary
• a third-country citizen with permanent residence status, whose vital interest is in Hungary
• any natural person who has a permanent home (habitually residing in the country) or habitual stay in Hungary (where they stay for more than 3 months without the intention to leave)

Days of presence

For the purposes of calculation of days of presence in Hungary within one or more periods, any part of the day of presence is regarded as whole day (including day of arrival and day of departure).

Split tax residency

Split tax residency is acknowledged between more countries within one tax period. Although according to the Hungarian law and OECD treaties, in a certain point of time the person can be resident in only one place, but the residency can be changed within a tax period. In lack of a double tax treaty, dual residency may occur.

Personal income tax in Hungary

Tax rate and tax period

• 15% is the applicable tax rate without threshold

The tax period is the same as the calendar year. Based on the local tax system, salaries paid till January 10 for the work performed in the previous year are considered as taxable income of the previous calendar year. If paid after the 10^th day, even if it concerns the previous year, the salary is regarded as a taxable income of the following year.

Tax base and deductions

The tax base is calculated from all the revenue (money and in-kind) decreased by non-taxable parts of the income, if applicable – such as tax base allowances based on family status. Other possible deductions are allowances for newlyweds, for young people under the age of 25 years, for young mothers under the age of 30, allowances granted to mothers raising four or more children, personal allowance for handicapped private individuals, etc.

Social security contributions in Hungary

Social security rates and registration

• 18.5% rate for the employee (together with the pension and health care contribution)
• 13% rate for the employer

The registration of the employee including any other further changes and the payments of contributions of the employee and the employer´s part is done by the employer. This applies also to foreign employers.

Social security base calculation

The social security base is calculated on a monthly basis, from the monthly salary. The salary should be not less than minimum wage or guaranteed minimum wage, in case of full-time employment.

Payment and reporting of the social security

Social insurance contributions in Hungary are not covered by due tax, therefore they are calculated and paid separately on a monthly basis. The reporting and payment of the contributions are done by the employer, including foreign employer. If the employee is employed by 2 or more employers, all of them are obliged to report and pay the contributions.

In case the employee is under a foreign social security, the social contribution tax is not payable by the employer, neither are the health care and pension contributions payable by the employee.

A1 Forms

A1 forms for purposes of the Art. 12 of the EU regulation 883/2004 are generally issued only for the duration of each respective posting. The Hungarian authorities do a thorough check of documents and conditions before issuing A1 form. Therefore, it may be lengthy process.

Health insurance contributions in Hungary

The health insurance contributions are covered by the social security contributions. However, employees must register for health insurance as an insured person.

Health insurance contributions are calculated from the gross taxable income (in-kind included). No maximum threshold.

Although the contributions are paid both by the employee and the employers, the reporting and payment is done by the employer on a monthly basis.

Hungarian tax resident working in one or more other countries

Personal income tax return filing

According to general rule, the employee is obliged to file the tax return. The due date for filing falls on May 20 with the possibility of extension, however, the tax office needs to be notified beforehand. Application for justification may not be refused if the private individual has any income from abroad, penalty for his delay in filing may not be imposed until November 20.

The tax return can be filed electronically, in written form by post or personally. However, entrepreneurs are obliged to communicate with the tax authorities only electronically. The easiest way of filing the tax return for individuals is to opt for registering at the Client Gate. If they do so, the Hungarian Tax Authority will send them their draft tax return after March 15. In this case, the employee will be able to check and, where necessary, modify or accept the draft tax return.

Representation by a tax adviser is voluntary, but it requires a signed power of attorney.

Avoiding double taxation

If there is no double tax treaty, then only the tax-credit (set-off) method is applicable. The calculated tax shall be reduced by 90% of the tax paid on the income abroad (except refundable tax), but not more than the tax calculated for this income by the Hungarian tax rate.

If there is a double tax treaty, the applicable method (exemption or set-off) depends on the rules of the concerned treaty.

In order to apply the respective methods, a certificate on paid tax or similar confirmation is required. In exceptional cases tax return filed in such other country may be accepted.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required. Depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return.

In general, the income is attributable to the country where the work is performed. If income or its part cannot be attributed to one country as a whole, then the ratio based on the respective time worked in Hungary and other countries is applied. Individual parts of income may need individual evaluation and attribution ratio as they may concern different time periods or situations. This may concern, especially, the paid vacation (granted for calendar year), state holiday and sickness, bonuses and benefits.

Tax resident of other country working and paying taxes in Hungary

Personal income tax return filing

The employer who is considered as a payer i.e. domestic legal entity, branch or commercial agency (excluding non-resident foreign employer) is obliged to report and withhold personal income tax on a monthly basis. The monthly report of the employer is due by the 12th day of the calendar month following the month concerned.

The local or foreign employer do not able to handle the yearly tax reconciliation, as it is the obligation of the employee to file their own annual tax return.

The due date for filing falls on May 20 with the possibility of extension, however, the tax office needs to be notified beforehand. Application for justification may not be refused if the private individual has any income from abroad, penalty for his delay in filing may not be imposed until November 20.

The tax return can be filed electronically, in written form by post or personally. However, entrepreneurs are obliged to communicate with the tax authorities only electronically. The easiest way of filing the tax return for individuals is to opt for registering at the Client Gate. If they do so, the Hungarian Tax Authority will send them their draft tax return after March 15. In this case, the employee will be able to check and, where necessary, modify or accept the draft tax return. Representation by a tax advisor is voluntary, but it requires a signed power of attorney.

Tax benefits and other specifics

Entitlement to tax benefits is subject to condition of having at least 75% of the total income from sources in Hungary. Depending on the respective tax benefit, the evidence or documentation may need to be presented to the tax authorities with the tax return.

In general, the income is attributable to the country where the work is performed. If income or its part cannot be attributed to one country as whole, then the ratio based on the respective time worked in Hungary and other countries is applied. Individual parts of income may need individual evaluation and attribution ratio as they may concern different time periods or situations. This may concern, especially, the paid vacation (granted for calendar year), state holiday and sickness, bonuses and benefits.

Penalties

Penalties related to tax

• Delayed filing of the tax return: The fine ranges from HUF 0 up to HUF 500,000
• Delayed payment of the due tax: The fine is the prevailing central bank (MNB) base rate plus 5% from the value of overdue tax. The fine was 18.00 % on the 1^st of January 2023.
• Delayed or missing registrations at tax authorities: Up to HUF 1,000,000 shall be imposed on an employer for employing an unregistered employee. Up to HUF 500,000 in case the employer complies with the obligation of registration of employees erroneously, defectively or with false data content. It is usually the obligation of the employer
• Delayed or missing report on monthly salary or withholding tax from salary: The employer (excluding non-resident foreign employer) is obliged to report salaries and withheld tax on monthly basis. Penalty is up to HUF 500,000

Penalties related to social security

• Delayed report on social security: The fine can soar up to HUF 500,000
• Delayed payment of the social security contributions: The fine is the prevailing central bank (MNB) base rate plus 5% divided by 365 for each day from the overdue payment. The fine was 18.00 % on the 1^st of January 2023.
• Delayed or missing registrations for the purposes of social security: The fine can soar up to HUF 1,000,000 for the employer

There is no special penalty in Hungary related to A1 forms. However, a missing A1 form may lead to negative implications and penalisations abroad.

Similarly, a foreign employee working in Hungary without an A1 form may lead to following implications:

• missing registrations with respective penalties from social and health insurance institutions
• missing reports and contributions with respective penalties
• their employment may be regarded as illegal, with respective penalties applicable

Penalties related to health insurance

• Delayed report on health insurance: The fine can soar up to HUF 1,000,000 for the employer
• Delayed payment of the health insurance contributions: The fine is the prevailing central bank (MNB) base rate plus 5 % divided by 365 for each day from the overdue payment
• Delayed or missing registrations for the purposes of health insurance: The fine can soar up to HUF 1,000,000 for the employer

Criminal acts

If the purpose of incorrect reporting or missing payment of due tax, social security and health insurance contributions is to avoid or decrease them, it is regarded as a criminal offence. The penalty depends on the value of the missing payment and may be at most 10 years of prison. Their later reporting or payment avoids criminal punishment. Criminal penalisation may also concern the employer – as legal entity. Beside imprisonment, penalties may be community service work, fine, prohibition to exercise professional activity, and deprivation of civil rights may be imposed as a form of additional penalty.

Tax residency in Italy

Definition and requirements

In Italy, tax resident is a person who fulfils – for the greater part of the tax year – the formal or material criteria, such as:

• the person is registered with the Office of Record of resident population
• the person has their residency (i.e., days of physical presence and habitual abode) in Italy
• the person has their domicile (i.e., centre of vital interest) in Italy

Days of presence

For the purposes of calculation of the days of presence in Italy within one or more periods, any part of the day of presence is regarded as a whole day (including day of arrival and day of departure).

Split tax residency

Generally, split of the tax residency is not admitted, but a few countries fall under exception, such as Germany and Switzerland.

Personal income tax in Italy

Tax rate and tax period

• 23 – 43% is the range of the applicable tax rates, based on the tax base

The tax period is the same as the calendar year.

Additional regional tax is applicable with a rate from 1.23% to 3.33% and a municipal tax with a rate up to 0.8%, based on the place of residency.

Based on the local tax system, salaries paid till January 12 for the work performed in December are considered as taxable income of the previous calendar year. Otherwise, if paid later, it is considered as a taxable income of the new calendar year.

Tax base and deductions

Generally, the tax base is calculated from the gross taxable income (including cash and taxable benefit-in-kind) reduced by the social and pension contributions paid by the employee because of the applicable laws.

According to the Italian tax law, there is no non-taxable part of income, but the following deductions are allowed:

• Mandatory social and pension contributions at the employee’s expenses
• Employment deduction and dependant deduction*
• Private pension contribution paid (up to EUR 5,164.57)

When it comes to tax benefits, generally the 19% of a wide group of expenses (e.g., medical expenses, mortgage interest for the purchase of the habitual abode in Italy etc.) are allowed as tax deductions, with limits, depending on the kind of expenses and the total income.

*Under particular circumstances, the tax deduction for dependant has been cancelled and replaced by another financial aid, namely assegno unico e universale.

Social security contributions in Italy

Social security rates and registration

• 28% average rate for the employer*
• 10.19% maximum rate for the employee

The registration of the employee is done by the local employer, who is also obliged to deduct and pay the contributions on behalf of the employee along with part at employer’s charge. When it comes to foreign employers, if they are based in a Country that has no social security agreement with Italy, they are obliged to appoint a social security representative in Italy and pay the respective contributions on behalf of the employee along with part at employer’s charge. Otherwise, such appointment is not needed when a certificate of coverage can be obtained in the foreign Country.

*The average rate may increase based on the position of the employee and on the social security classification of the employer.

Social security base calculation

Based on the applicable rate, the social security is calculated from the gross income. The minimum calculation base is EUR 1.402,70 per month while the maximum calculation base for individual who started to pay social security and pension contribution after January 1, 1996, is EUR 113,520 in 2023 (it varies annually).

The maximum calculation base applies to the whole income received from all employers, but each employer pays the pro-rata contributions.

Payment and reporting of the social security

Social security contributions are paid and reported separately on a monthly basis by the employer. If there are more employers, all of them are obliged to pay and report the contributions.

A1 Forms

A1 forms for the purposes of the Art. 12 of the EU regulation 883/2004 are generally issued only for the duration of each respective posting.

A1 forms for the purposes of the Art. 13 or 16 of the EU regulation 883/2004 may be issued for period of 1 to 2 years or even longer.

Italian authorities issue the A1 forms in case of posting employees to other countries easily, since there is an electronic procedure available.

Health insurance contributions in Italy

In Italy, the mandatory health insurance is part of the income tax system. In case it is paid in a foreign country, the employee can deduct the amount of the health insurance paid from the taxable base.

Italian tax resident working in one or more other countries

Personal income tax return filing

The employee is obliged to submit the tax return when there is no Italian-based withholding agent or when, aside of the employment income, they receive other kind of income or want to ask for tax deductions.

For the tax return form “730”, the deadline varies based on the procedure of submission: last deadline is the 30^th of Sept. For the “modello Redditi” tax return form, the deadline is November 30 each year. In this case, the due period may be extended by 90 days maximum.

The tax return must be filed online, however, under circumstances, it can be submitted via ordinary mail. Representation by a tax adviser and power of attorney is not mandatory, but strongly recommended.

Avoiding double taxation

If there is no double tax treaty, then only the foreign tax credit method is applicable. If there is a double tax treaty, the exemption method can be applied under circumstances; in line of principle, only the foreign tax credit method is available to recover the income taxes definitively paid abroad against the income subject to double taxation in Italy.

In order to apply the respective methods, it is necessary to meet the conditions provided by the DTA (in case of exemption method) or that the foreign taxes are definitively paid. The documents needed in the latter case are (among others): foreign income tax return, foreign tax assessment, proof of the payment of the income taxes in the foreign country, employment income statement (where applicable), and others.

Tax resident of other Country working and paying taxes in Italy

Personal income tax return filing

The employer’s obligation depends on the actual entity who pays the salary.

In case there is a foreign employer involved which pays the salary and does not qualify a withholding agent, there is no process available for the calculation and payment of the due income tax. The employee is obliged to file an income tax return.

Conversely, in case an Italian based employer pays the salary, it qualifies a withholding agent and must calculate and pay income taxes due on a monthly basis, through withholding taxes which are due to be paid within the 16^th day of the month following the one when the salary is paid.  The employee could be obliged to file an income tax return, based on his/her personal position.

For the tax return form “730”, the deadline varies based on the procedure of submission. Last deadline is the 30^th of Sept. For the “modello Redditi” tax return form, the deadline is November 30 each year.  In this case, the due period may be extended by 90 days maximum.

The tax return must be filed online; however, under particular circumstances, it can be submitted via ordinary mail. Representation by a tax adviser and power of attorney is not mandatory, but strongly recommended.

Other specifics

In case of Italian non-tax resident individuals, only the income sourced in Italy are subject to Italian taxes. In order to account the taxable income sourced in Italy, it is necessary to provide a report of workdays which are attributable to Italy and the taxable income is calculated on a pro-quota basis, considering the tax residency of the individual.

In case of Italian tax resident individuals, the worldwide income is subject to Italian taxes. Furthermore, tax resident persons are obliged to disclose the value of the investments held abroad and to pay wealth taxes on financial activities (namely IVAFE) and real estate properties (namely IVIE) held outside of Italy.

Penalties

Penalties related to tax

• Delayed filing of the tax return: The delayed submission – within 90 days from the original deadline – is subject to a fixed penalty of EUR 250. However, the penalty is reduced to the 10% of the minimum (i.e., EUR 25.00) through the self-amnesty procedure. Penalties are higher in case the personal income tax return is submitted after 90 days from the original deadline.
• Delayed payment of the due tax: Penalty for delayed payment of the due tax is of 30%, reduced to 15% in case the payment is done within 90 days from the original deadline. A self-amnesty procedure is available; the penalty in that case is up to 5%. In both cases interests apply too
• Delayed or missing report on monthly salary or withholding tax from salary: Missing labour book is fined from EUR 500 to EUR 2,500. Delayed reporting or missing withholding is fined from EUR 150 to EUR 1,500 per employee. This penalty could increase from EUR 500 to EUR 3,000 for each employee if there are at least 5 employees involved and from EUR 1,000 to EUR 6,000 in case there are at least 10 employees.

Penalties related to social security

• Delayed report on social security: In case of delayed or omitted payment of the social security contributions, the fine is 5.5% plus interests. If the monthly social security report is not submitted by the deadline, no penalties are applied. In case of omitted monthly social security report, the penalty ranges from 30% to 60% of the amount due
• Delayed or missing registrations for the purposes of social security: In case of delayed or missing registrations for the purposes of social security, the monthly report cannot be submitted and the potential penalty ranges from 30% to 60% of the amount due

In case the request for the A1 form is missing, no penalty is issued. However, the Italian Social Security Authority can consider the employee not regular and apply the related penalties.

No penalties are applicable either in case of delayed submission of the monthly social security reporting, but the employer will not be considered as regular, with related implications (in example recovery of any social security discount applied to the employer)

Criminal acts

The incorrect reporting of the due taxes (in case of withholding agent) is subject to the following penalties:

• in case the withholding taxes have not been paid, penalty varies from 90% to 180%, with a minimum of EUR 250 and additional EUR 50 for each recipient
• in case the withholding taxes have been paid, the penalty varies from EUR 250 to EUR 2,000.00 for each recipient not reported
• in case of withholding report with no recipient indicated, the penalty is EUR 50 for each recipient
• self-amnesty procedure is available

The incorrect reporting of social security contributions is regarded as a criminal act and can be punished with imprisonment for up to 2 years if the following conditions are met:

• omitted payment of the amount due exceeds the monthly threshold of EUR 2,582.28 and
• the omitted amount is at least 50% of the monthly total social security due.

In addition, criminal penalties apply also if the employer omits to pay out an amount higher than EUR 10,000.00 of social security per year, related to the employee’s part and previously withheld to the same employee.

Social security penalty always applies when the employer does not pay the amount of contributions at the charge of the employee which was withheld.

Missing payment of the due tax is subject to a penalty as 30% of the amount due. In case of omitted payment of withholding taxes, imprisonment from 6 months to 2 years is provided. Missing payment of the social security contributions is subject to the same penalty as for incorrect reporting.

In line of principle, for tax purposes, self-amnesty procedure is available, and this allows to avoid criminal penalties. The same does not apply for social security purposes, since in this case no self-amnesty procedure is allowed.

Tax residency in Norway

Definition and requirements

In Norway, an expatriate becomes a tax resident if:

• the person stays for more than 183 days in Norway

In case the days are split between two income years, the employee becomes a tax resident from January 1 of the second year.

Days of presence

For the purposes of calculation of the days of presence in Norway within one or more periods, any part of the day of presence is regarded as a whole day (including day of arrival and day of departure).

Split tax residency

Split tax residency is acknowledged in Norway.

Personal income tax in Norway

Tax rate and tax period

• 22% is the applicable tax rate

The tax period is the same as the calendar year.

The Norwegian tax system has two bases of income. The ordinary income base is a net base. The tax on ordinary income is 22% for 2022. In addition, there is also the personal income base, which is a gross base for taxation. The bracket tax and the social security contributions for employees are based on this. Bracket tax is a progressive tax on gross salary and other personal income. The employee’s social security contribution is 7.9% of the gross income.

Bracket tax is a percentage share which changes according to earnings, and it is calculated from the employee’s income as an additional tax.

Based on the local tax system, salaries are usually paid in the current month, not in arrears. Therefore, the salary paid in January is taxable in the ongoing calendar year.

Tax base and deductions

The tax base is calculated from the general income, which is the total income of the employee after the deductions. The amount of tax the employee must pay will depend on the income. People on a low income pay proportionately less tax than those with a high income.

In general, there is no non-taxable part of the income, but the following deductions can be made:

• Personal allowance
• Deduction for commuters
• Deduction for interest on debt
• Child-care deduction

Social security contributions in Norway

Social security rates and registration

• 14.1% is the rate of social security contributions paid by the employer. Employers must pay an extra 5 % of social security contributions when employees exceeding NOK 750 000 in a yearly salary.
• 7.9% is the rate of social security contributions paid by the employee

A foreign national working in Norway must apply for an identification card and a tax card. In order to do so, the employee must personally go to one of the tax offices.

Both local and foreign employers are obliged to register and then deduct and pay the respective contributions on behalf of the employee and the employer´s part.

Social security base calculation

The social security paid by the employer is 14.1% of the income on top of the salary and all taxable benefits. When employees exceeding NOK 750 000 in a yearly salary there is additional 5 % in social security cost for the employer.

The social security paid by the employee is calculated as 7,9% from the income. In case the income of the employee was lower than NOK 60 000 in 2022, they do not have to pay national insurance contributions.

Payment and reporting of the social security

Employee’s social security contribution are calculated, paid and reported by the employer separately from due tax, as they are a separate system from tax. In case of multiple employers, all of them are obliged to report and pay the contributions.

In Norway, the public social insurance scheme is known as ‘folketrygden’ (National Insurance Scheme). Among other things, this scheme covers benefits from NAV and health services. In order to receive benefits under the National Insurance Act, the employee must be a member of the Norwegian National Insurance Scheme. If the employee is a member of the National Insurance Scheme in Norway, the employee must pay national insurance contributions. If the employee is not a member of the scheme, the employee can be granted an exemption from the obligation to pay national insurance contributions.

National insurance contributions are calculated from the employee’s personal gross income before deductions, paid bi-monthly and reported monthly by the employer. In case of multiple employers, all of them are obliged to report and pay the contributions.

A1 Forms

The Norwegian authorities issue the A1 forms in case of posting to other countries easily. As a rule, a person working in the EEA area should be covered by social security legislation in the country of work. Employees who are sent out to work temporarily in another EEA country must, under certain conditions, still be covered by social security legislation in the country where they usually work.

Health insurance contributions in Norway

Health insurance contributions are included in the social security contributions.

Norwegian tax resident working in one or more other countries

Personal income tax return filing

In case an employee is a tax resident of Norway, they are liable to pay tax in Norway on all income earned from the country or abroad. Therefore, filing of the tax return is mandatory.

The deadline for filing the tax return is April 30 every year. The extension of the deadline is not granted beyond 30 days. However, if the extension is granted, the employee cannot expect to receive the tax settlement in June.

The tax return can be filed online or by post. Representation by a tax adviser is voluntary, but it requires a signed power of attorney.

Avoiding double taxation

If there is no double tax treaty applicable and the employee paid tax abroad on the same income that is liable for tax in Norway, they can claim a deduction from the Norwegian tax for the foreign tax. The employee must include this in the tax return.

If a double tax treaty is applicable, it may limit the right of Norway to tax the income of the employee from abroad. Therefore, the employee must ask to be considered as a resident in the other country under the tax treaty. In that case, they must present the confirmation of their residence from the tax authorities in the other country.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required. Depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return.

Employees can claim a deduction from the taxable income for monetary donations to institutions which carry on scientific research with the involvement of the state. If employees have given a monetary donation of at least NOK 500 to a voluntary organisation or religious or belief-based community, they can get a deduction for them.

When it comes to the attribution of the income, individual parts of the income may need individual evaluation and attribution ratio as they may concern different time periods or situations.

Tax resident of other country working and paying taxes in Norway

Personal income tax return filing

Starting with the first day of the work of an employee in Norway, the legal employer is obliged to pay income tax for such employee in Norway, irrespective of the existence of a permanent establishment or the 183-day principle. Thus, income tax has to be withheld on a monthly basis. Only if the company applies for an exemption for the individual employee the legal employer has no withholding obligation.

If all the information is correct in the tax return and no changes are made, the employee does not have to do anything. Employees are responsible for ensuring that the information given in the tax return is correct. They must also check the information and correct any errors and add any missing information. In case of a local employer, the employer can file the tax return with Power of Attorney from the employee.

The deadline for filing the tax return is April 30 every year. The extension of the deadline is not granted beyond 30 days. However, if the extension is granted, the employee cannot expect to receive the tax settlement in June.

The tax return can be filed online or by post. Representation by a tax adviser is voluntary, but it requires a signed power of attorney.

Most foreign workers who are new in Norway will automatically become part of a voluntary tax scheme called PAYE (Pay As You Earn) when they apply for a tax deduction card. Under this scheme, you’re taxed at a fixed percentage that your employer deducts from your salary. If you’re part of the PAYE scheme, your tax is completed after your salary has been paid to you. You do not submit a tax return, nor do you receive a tax assessment notice. Instead, you’ll receive a receipt for PAYE tax, which shows how much salary and tax your employer has reported to the Tax Administration for the work you did last year. If you’re in the PAYE scheme, you’re taxed at a fixed percentage every month, no matter how much or little you earn. You’ll receive a tax receipt in August that shows how much salary and tax your employer has reported to the Tax Administration for the work you did last year.

Tax benefits and other specifics

To apply for available tax benefits, employees usually do not need to provide any documentation, but depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return upon their demand.

Employees can claim a deduction from the taxable income for monetary donations to institutions which carry on scientific research with the involvement of the state. If employees have given a monetary donation of at least NOK 500 to a voluntary organisation or religious or belief-based community, they can get a deduction for them.

When it comes to the attribution of the income, individual parts of the income may need individual evaluation and attribution ratio as they may concern different time periods or situations.

Penalties

Penalties related to tax

• Delayed filing of the tax return: The additional tax rate is 20% of the tax advantage. In serious cases, the additional tax rate can increase up to 60%
• Delayed payment of the due tax: 10% is the currently applicable interest
• Delayed or missing registrations at tax authorities: The fine is NOK 119 per day for each recipient of the income. The penalty fee can be maximum NOK 1,199,000
• Delayed or missing report on monthly salary or withholding tax from salary: The fine is NOK 119 per day for each recipient of the income. The penalty fee can be maximum NOK 1,199,000

Penalties related to social security

• Not requesting an A1 form from the respective authorities: As a penalty, the employer has to pay social security contributions (14.1%) on top of the reported salary
• Delayed report on social security: There is a penalty fee for each day
• Delayed payment of the social security contributions: 10% is the currently applicable interest
• Delayed or missing registrations for the purposes of social security: The fine is NOK 119 per day for each recipient of the income. The penalty fee can be maximum NOK 1,199,000

Health insurance is reported together with withholding taxes and social security taxes.

Criminal acts

The incorrect reporting of due tax, social security or health insurance contributions or their missing payment results in an additional tax rate of 20% on the tax advantage. In serious cases the additional tax rate can increase up to 60%. Also, imprisonment can be assessed.

The possibility to avoid criminal punishment by a delayed reporting or payment of due tax, social security or health insurance contributions depends on the specific case.

Tax residency in Poland

Definition and requirements

In Poland, tax residents are natural persons, who:

• stay on Polish territory for more than 183 days in a tax year
• have a centre of personal or economic interests (centre of vital interests) on the territory of Poland

Fulfilment of one of the above conditions is sufficient to be considered a Polish tax resident.

Days of presence

For the purposes of calculation of days of presence in Poland within one or more periods, any part of the day as a whole day (including day of arrival and day of departure).

Moreover, there should be excluded days spent in the given country travelling between two places outside the country (transit).

Besides this, any full day spent outside the given country, whether on holiday, business or any other reason, should not be taken into account.

Split tax residency

Split tax residency is acknowledged between more countries within one tax period.

Personal income tax in Poland

Tax rate and tax period

• 12% is the applicable tax rate up to PLN 120,000
• 32% is the applicable tax rate above the threshold PLN 120,000

The tax period is the same as the calendar year.

Tax base and deductions

The tax base is calculated from the remuneration, which is decreased by the statutory cost (provided in the legislation) and additional allowances.

The tax free threshold of income is PLN 30,000.

There is a variety of allowances that decrease the tax base of employees, such as:

• PLN 3,000 yearly for one agreement, PLN 4,500 yearly for multiple agreements – this may be increased in case the employee has to travel to work
• Costs for internet are partially tax deductible
• Payments to the Individual Retirement Security Account.

Furthermore, 1,5% of the personal income tax can be dedicated for charity.

Among others, the Polish tax benefits are the following:

• The income of employees aged under 26 and employees raising at least four children are exempt from tax (to amount PLN 85,828)
• Child allowance, where the value depends on the number of children
• Disabled employees are granted a special allowance, etc.

Social security contributions in Poland

Social security rates and registration

• 20.48% rate for the employer
• 13.71% rate for the employee

The rate covered by the employer is distributed the following way:

• 76% stands for retirement
• 5% stands for disability
• 67% stands for accidents (may vary according to the employer)
• 45% stands for FP
• 01% stands for FGSP pension from the employee’s salary.

The due social security paid by the employer is calculated from the gross salary, where:

• 76% stands for retirement
• 5% for disability
• 45% for sickness pension from the employee’s salary.

Each employee has to be registered in the Polish Social Insurance Institute (ZUS) via Płatnik, a special program dedicated for ZUS communication.

A local employer is obliged to register and deduct or pay the respective contributions on behalf of the employee, while foreign employers are recommended to do so, otherwise the employee has to register themselves as the employer in ZUS and sign special documents with the employer. This procedure is more complicated for the employee.

Social security base calculation

The base of the social security contributions is calculated from the gross salary of the employee, or from the total income which is a base for social security received each month.

The maximum calculation base for social security is the annual limitation for retirement and disability pension insurance for 2023, in the amount of PLN 208,050.

Payment and reporting of the social security

The social insurance contributions are calculated separately, from the employee’ gross salary, but together with the due tax.

In case the employee is employed by 2 or more employers, all employers are obliged to report and pay the health insurance contributions on a monthly basis.

A1 Forms

Upon fulfilling some formalities, the authorities issue the A1 forms in case of posting to other countries easily. The forms are generally only issued for the duration of the posting in question, not longer than 12 months.

Health insurance contributions in Poland

Health insurance rates and registration

• 9% is the rate of health insurance in Poland

The contribution is calculated the following way: 9% of the gross salary deducted by the social security contributions.

From 2022, it is not possible to deduct health insurance contribution from tax to be pay.

Payment and reporting of the health insurance

The health insurance contributions are calculated separately, from the employee’ gross salary, but together with the due tax.

In case the employee is employed by 2 or more employers, all employers are obliged to report and pay the health insurance contributions on a monthly basis.

Employee capital plans

General information

Employee Capital Plans (PPK) is a pension saving system for the employees paying the social security contributions, regardless of the form of employment. This is a universal social program which aim is to increase the financial security of Poles.

Regulations concerning PPK are included in the Act on Employee Capital Plans from October 4^th, 2018.

For the employer, introduction of this program is mandatory (please see the exemption below). However, the employee’s participation is voluntary. Employees can resign from participation in PPK by signing explicit declaration. If all employees resign and the employer falls within the definition of micro entrepreneur then it is not necessary to introduce PPK.

Contributions for PPK

The contributions to the program are made by the employer, employee and the State in the following amounts:

OBLIGED ENTITY	THE AMOUNT OF PAYMENT
State – welcome contribution	250 PLN
State – annual contribution	240 PLN
Employer – basic contribution	1.5% of basis of pension and disability insurance contribution
Employer – additional contribution	2.5% of basis of pension and disability insurance contribution
Employee – basic contribution	2% of basis of pension and disability insurance contribution
Employee – additional contribution	2% of basis of pension and disability insurance contribution

Polish tax resident working in one or more other countries

Personal income tax return filing

In Poland, both the employee is obliged to file an income tax return, but the employer may process the calculation and payment of the due tax too. Tax authorities prepare the tax return and it can be replaced by the tax return filed by the employee.

The due date for filing the tax return falls on the end of April, with no possibility to extend the deadline.

The filing can be done online, by e-mail, by post or personally. Representation by a tax adviser and power of attorney is not required.

Avoiding double taxation

If there is no double tax treaty applicable, the tax credit method may be applied to avoid double taxation.

If there is an applicable double tax treaty, depending on the particular case, the employee can apply the credit or exemption method depending on the provisions resulting from a double tax treaty. In order to do so, the confirmation of tax payment from a foreign jurisdiction is required.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required. Depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return.

In Poland, 1.5% of the paid tax may be donated for charity.

In general, the income is attributed to a country based on the rule of 183 days of presence.

Tax resident of other country working and paying taxes in Poland

Personal income tax return filing

If there is a tax resident of another country and foreign employer at the same time when Poland has the right to tax, there is no tax remitter and therefore the taxpayer has to settle the tax on their own.

The local employer is obliged to calculate, pay tax and provide information to the employee. As a rule, tax advances are paid till the 20th day of the following month, while social security contributions are paid till the 15^th day of the following month. At the end of the year, the employee files the annual tax return, which can be filed online.

The due date for filing the tax return falls on the end of April, with no possibility to extend the deadline.

The filing can be done online or on paper. Representation by a tax adviser and power of attorney is not required.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required. Depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return.

In Poland, 1.5% of the paid tax may be donated for charity.

In general, the income is attributed to a country based on the rule of 183 days of presence.

Penalties

Penalties related to tax

• Delayed filing of the tax return: The fine ranges from PLN 349 up to PLN 69,800 (to 30th of June) and from PLN 360 up to PLN 72,000 (after 1th of July)
• Delayed payment of the due tax: The fine ranges from PLN 349 up to PLN 69,800 (to 30th of June) and from PLN 360 up to PLN 72,000 (after 1th of July)
• Delayed or missing registrations at tax authorities: The penalty can be 5 years in prison or a fine up to about PLN 34,000,000, depending on the approach of the court
• Delayed or missing report on monthly salary or withholding tax from salary: The fine ranges from PLN 349 up to PLN 69,800 (to 30th of June) and from PLN 360 up to PLN 72,000 (after 1th of July)

Penalties related to social security

• Not requesting an A1 form from the respective authorities: In practice, the penalty for not requesting an A1 form from the respective authorities is the same as the penalty for a delay with social security obligation and payment
• Delayed report on social security: The fine ranges up to PLN 5,000
• Delayed payment of the social security contributions: A penalty interest is applicable
• Delayed or missing registrations for the purposes of social security: The fine ranges from PLN 349 up to PLN 69,800 (to 30th of June) and from PLN 360 up to PLN 72,000 (after 1th of July)

Penalties related to health insurance

• Delayed report on health insurance: The fine ranges from PLN 349 up to PLN 69,800 (to 30th of June) and from PLN 360 up to PLN 72,000 (after 1th of July)
• Delayed payment of the health insurance contributions: The fine ranges from PLN 349 up to PLN 69,800 (to 30th of June) and from PLN 360 up to PLN 72,000 (after 1th of July)
• Delayed or missing registrations for the purposes of health insurance: The fine ranges from PLN 349 up to PLN 69,800 (to 30th of June) and from PLN 360 up to PLN 72,000 (after 1th of July)

Criminal acts

The incorrect reporting and payment of due tax, social security or health insurance contributions can be regarded as a criminal act. The applicable punishment is either 5 years in prison or a monetary penalty in the amount of up to about PLN 34,000,000, depending on the approach of the court.

The later reporting or payment of due tax, social security or health insurance contributions can avoid criminal punishment, as long as the payment is made, all formalities are fulfilled and so-called voluntary disclosure letter is filed.

Tax residency in Portugal

Definition and requirements

In Portugal, a person is considered as a tax resident upon fulfilling either formal or material requirements, such as:

• having a permanent home in the country
• staying in the country for longer than 183 days within a period of 12 months

Upon arrival, the employee must declare their address of stay to the local tax office.

Days of presence

For the purposes of calculation of the days of presence in Portugal within one or more periods, any part of the day of presence is regarded as a whole day (including day of arrival and day of departure).

Split tax residency

Split tax residency is acknowledged within one tax period.

Personal income tax in Portugal

Tax rate and tax period

• 14.5 – 48% is the range of the applicable tax rates, based on the tax base

The tax period is the same as the calendar year. Based on the local tax system, salaries are paid at the end of the month (not in arrears), therefore salaries paid in January are considered as taxable income of the ongoing calendar year.

Tax base and deductions

Generally, the tax base is calculated from the gross taxable income, including benefit-in-kind.

The annual tax base below EUR 10,640 is not subject to tax. Other non-taxable parts of income are:

• Meal allowance
• Children allowance
• Cash responsibility allowance, until certain limits

The tax base can be further reduced by expenses related to family, health and health insurances, education, house mortgage or rental, among others. Other tax benefits include saving investments for retirement pensions or tax benefit for demanding invoices to suppliers.

Social security contributions in Portugal

Social security rates and registration

• 23.75% rate for the employer
• 11% rate for the employee

The total rate, therefore, is 34.75%.

The employee needs to register in Portugal for social security, while local and foreign employers must also register and then deduct and pay the respective contributions on behalf of the employee and the employer´s part.

Social security base calculation

The calculation base for social security is calculated monthly from the gross taxable income.

Payment and reporting of the social security

Social security is covered by due tax in Portugal, deducted, reported and paid by both local and foreign employer on a monthly basis.

A1 Forms

A1 forms for purposes of the Art. 12 of the EU regulation 883/2004 are generally issued only for the duration of each respective posting.

A1 forms for purposes of the Art. 13 or 16 of the EU regulation 883/2004 may be issued for period of 1 to 2 years or even longer.

Health insurance contributions in Portugal

Health insurance is covered by the social security contributions, but it is not mandatory. However, insurance for working accidents is mandatory, usually costing between 0.5% and 1% of the calculation base. It is paid by the employer on a monthly, quarterly or yearly basis, calculated from the gross income.

The employee needs to register in Portugal for this insurance, while local and foreign employers must also register and then deduct and pay the respective contributions on behalf of the employee and the employer´s part.

Portugal tax resident working in one or more other countries

Personal income tax return filing

Any employee with income taxable abroad is obliged to file an income tax return, whereas a yearly tax reconciliation by the employer is not allowed.

The due date for filing the tax return falls on June 30, with the possibility to extend the deadline till December 31 for incomes having source abroad in case the tax assessment in the other jurisdiction is not finalised until June 30. If a new fact resurfaces that has an impact on the tax assessment, a 30-day long extension is possible.

The filing must be done online. Representation by a tax adviser and power of attorney is not required.

Avoiding double taxation

If there is no double tax treaty, the set-off method can be applied, limited to the applicable tax in Portugal. If there is a double tax treaty, the set-off method can be applied limited to the tax paid abroad. The application of the exemption method only applies to non-habitual residents, which is a special tax regime to new residents. To apply the respective method, a certificate on paid tax or similar confirmation is required.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required. Depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return.

In Portugal, 0.5% of the paid tax may be donated to a non-profit organisation.

In general, the income is attributable to the country where the work is performed. If the income or its part cannot be attributed to one country as whole, then the ratio based on the respective time worked in Portugal and other countries is applied.

Tax resident of other country working and paying taxes in Portugal

Personal income tax return filing

The employer, including foreign employer, is obliged to report and withhold tax on a monthly basis. Withheld tax is due within 20 days after the end of the month in which the salary was paid. The monthly report of the employer is due within 10 days after the end of the month in which the salary was paid. The yearly report is due until February 10 of next year.

The employee is obliged to file an income tax return, whereas there is no system allowing the local or foreign employer to process the calculation and payment of due tax.

The due date for filing the tax return falls on June 30, with the possibility to extend the deadline till December 31 for incomes having source abroad in case the tax assessment in the other jurisdiction is not finalised until June 30. If a new fact resurfaces that has an impact on the tax assessment, a 30-day long extension is possible.

The filing can be done online, in written by post or personally. Representation by a tax adviser and power of attorney is not required.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required. Depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return.

In Portugal, 0.5% of the paid tax may be donated to a non-profit organisation.

In general, the income is attributable to the country where the work is performed. If the income or its part cannot be attributed to one country as whole, then the ratio based on the respective time worked in Portugal and other countries is applied.

Penalties

Penalties related to tax

• Delayed filing of the tax return: The fine ranges from EUR 150 up to EUR 3,750
• Delayed payment of the due tax: The fine ranges between a 15% and 50% interest rate from the value of overdue tax
• Delayed or missing registrations at tax authorities: The fine ranges from EUR 150 up to EUR 3,750
• Delayed or missing report on monthly salary or withholding tax from salary: The employer is obliged to report salaries and withheld tax on monthly basis. The penalty ranges from EUR 300 up to EUR 7,500

Penalties related to social security

• Delayed report on social security: The fine ranges from EUR 75 up to EUR 25,000
• Delayed payment of the social security contributions: The fine ranges from EUR 75 up to EUR 25,000
• Delayed or missing registrations for the purposes of social security: The fine ranges from EUR 75 up to EUR 25,000 for employers, from EUR 50 to EUR 12,500 to employees

There is no special penalty related to A1 forms in Portugal. However, a missing A1 form may lead to negative implications and penalisations abroad.

Similarly, foreign employee coming to Portugal without an A1 form may lead to the following implications:

• missing registrations with respective penalties from social and health insurance institutions
• missing reports and contributions with respective penalties
• their employment may be regarded as illegal, with respective penalties applicable

Criminal acts

If the purpose of incorrect reporting of due tax and social contributions is to avoid or decrease them, it is regarded as a criminal offence. The penalty depends on the value and may be as high as 8 years of prison.

The missing payment of the due tax and social contributions is regarded as a criminal act if the tax due exceeds EUR 7,500. The penalty may be as high as 8 years of prison.

However, their later reporting or payment can avoid criminal punishment.

Tax residency in Romania

Definition and requirements

A person is a tax resident if:

• has a permanent home in Romania
• is present in Romania for a period (or more periods) exceeding a total of 183 days, during any 12 consecutive months, ending in the current calendar year
• is a Romanian citizen working abroad, as an official or employee of Romania in a foreign state
• has centre of vital interests is in Romania

Days of presence

For the purposes of the calculation of days of presence in Romania within one or more periods, any part of the day of presence is regarded as a whole day (including the day of arrival and the day of departure).

Split tax residency

Split tax residency is not acknowledged between more countries within one tax period.

Personal income tax in Romania

Tax rate and tax period

• 10% is the applicable tax rate

The tax period is the same as the calendar year.

Tax base and deductions

Generally, the tax base is calculated from the gross taxable income (money and in-kind) decreased by social security contributions paid by the employee, further decreased by non-taxable parts of the income, if the case.

The non-taxable values of income, among others, are the following:

• aid for extraordinary cases;
• gifts for specific events up to RON 300 per event;
• value of safety equipment;
• value of trainings;
• stock options plan;
• expenses related to food, phone and car, in certain conditions.

There are multiple possibilities for deductions, however, they depend on the income, family situation and tax residency.

Social security contributions in Romania

Social security rates and registration

• 25% is the rate of social security in Romania

In Romania, social security contribution is withheld and paid by the employer from the income of the employee. It is also the obligation of the employer to register the employee.

Social security contribution base calculation

The monthly basis for calculating the social security contribution in case of individuals who obtain income from wages, represents the gross income received in Romania or abroad.  In the case of individual full-time or part-time employment contracts for which the level of social security contributions (CAS and CASS) is below the level of contributions calculated on a basis equal to the basic minimum gross salary in the country, the CAS and CASS obligation is introduced at the level of those due on a basis represented by the minimum gross salary in the country, corresponding to the number of working days in the month in which the individual employment contract was active, the difference being borne by the employer on behalf of the employee.

Payment and reporting of the social security contribution

The social security contribution is calculated and paid by the employer no later than 25^th of the month following the payment.  Should the employee be part of two or more separate labour contracts, then all employers be obliged to report and pay social security contributions.

A1 Forms

The process of issuing the A1 form may be lengthy, as the documentation requested by the relevant authority is cumbersome and needs a further specific analysis.

Health insurance contributions in Romania

Health insurance rates and registration

• 10% is the rate of health insurance in Romania

In Romania, health insurance is withheld and paid by the employer from the income of the employee. It is also the obligation of the employer to register the employee.

Health insurance base calculation

The monthly basis for calculating the contribution of health insurance in case of individuals who obtain income from wages, represents the gross income received in Romania or abroad. In the case of individual full-time or part-time employment contracts for which the level of social security contributions (CAS and CASS) is below the level of contributions calculated on a basis equal to the basic minimum gross salary in the country, the CAS and CASS obligation is introduced at the level of those due on a basis represented by the minimum gross salary in the country, corresponding to the number of working days in the month in which the individual employment contract was active, the difference being borne by the employer on behalf of the employee.

Payment and reporting of the health insurance

The contribution of health insurance is calculated and paid by the employer no later than 25^th of the month following the payment.  Should the employee be part of two or more separate labour contracts, then all employers be obliged to report and pay health insurance.

Romanian tax resident working in one or more other countries

Personal income tax return filing

An individual who works in Romania and receive salaries from employers with no registered office in Romania would have the liability to declare income tax, while the non-resident employer could be subject to social security contributions on behalf of the latter.

The due date for tax return is 25^th of the month following the payment.

The submission of the related tax return would be requested by electronic communication.

Avoiding double taxation

As per the Romanian legislation, provisions of a double tax treaty may apply provided that a valid tax residency certificate would be available.

Tax resident of other country working and paying taxes in Romania

Personal income tax return filing

Non-resident individuals working in Romania for local employers, would be subject to local taxation as per the labour legislation. Thus, they will be subject to monthly income tax, that would be computed, withheld and paid to relevant tax authority by the employer.

The due date for tax return is 25^th of the month following the payment.

The submission of the related tax return would be requested by electronic means of communication.

Penalties

Penalties related to tax

Failure to submit the relevant statement in due time may be imposed with a fine ranging RON 50 – 5.000.

Also, late payment charges in total amount of 0.03% may be imposed for each and every day of failure to declare and pay the relevant tax liability.

• Delayed filing of the tax return: The fine ranges between EUR 105 and EUR 1,050.
• Delayed payment of the due tax: Interest and late payment penalties are 0.03% per day of delay and fine between EUR 210 and EUR 2,900 for taxes and contributions subject to withholding tax.
• Delayed or missing registrations at tax authorities: The fine ranges between EUR 105 and EUR 1,050.
• Delayed or missing report on monthly salary or withholding tax from salary: The fine ranges between EUR 105 and EUR 1,050 and for taxes and contributions subject to withholding tax it ranges between EUR 210 and EUR 2,900.

Penalties related to social security

• Not requesting an A1 form from the respective authorities: The fine ranges between EUR 1,050 and EUR 1,850.
• Delayed report on social security: The fine ranges between EUR 105 and EUR 1,050.
• Delayed payment of the social security contributions: The interest and late payment penalties are 0.03% per day of delay and a fine between EUR 210 and EUR 2,900 for taxes and contributions subject to withholding tax.
• Delayed or missing registrations for the purposes of social security: The fine ranges between EUR 105 and EUR 1,050.

Penalties related to health insurance

• Delayed report on health insurance: The fine ranges between EUR 1,050 and EUR 1,850.
• Delayed payment of the health insurance contributions: The fine ranges between EUR 105 and EUR 1,050.
• Delayed or missing registrations for the purposes of health insurance: The interest and late payment penalties are 0.03% per day of delay and the fine for taxes and contributions subject to withholding tax ranges between EUR 210 and EUR 2,900.

Criminal acts

The incorrect reporting and missing payment of due tax, social security and health insurance contributions can be regarded as a criminal act if it is proven that they were done for the purposes of tax evasion.

Tax residency in Slovakia

Definition and requirements

In Slovakia, tax residency is based on fulfilling either formal or material criteria, such as:

• having a registered permanent residence in Slovakia, including temporary residence of EU citizen in Slovakia
• having actual residence in Slovakia
• staying in Slovakia for more than 183 days, except for purposes of study, medical treatment

Days of presence

For the purposes of calculation of the days of presence in Slovakia within one or more periods, any part of the day of presence is regarded as a whole day (including day of arrival and day of departure).

Split tax residency

In Slovakia, split tax residency between more countries within one tax period is acknowledged.

Personal income tax in Slovakia

Tax rate and tax period

• 19% is the applicable tax rate up to the threshold of EUR 41,445.46 in 2023
• 25% is the applicable tax rate above the threshold of EUR 41,445.46 in 2023

The tax period is the same as the calendar year. The threshold for the tax rate changes every year in Slovakia.

Based on the local tax system, salaries paid in January for the work performed in December are considered as taxable income of the previous calendar year. Income from employment concerning a previous year but paid after January is regarded as taxable income of the year in which it is paid.

Tax base and deductions

The tax base is calculated from the gross taxable income, including monetary income and benefits in-kind, decreased by the:

• social and health contributions paid by the employee
• non-taxable parts of the income, if applicable, which depend on the income, family situation and tax residence

To decrease the tax base, other tax benefits may be applicable (subject to different requirements and limitations):

• non-taxable part of the income on the spouse
• payments to the supplementary pension savings
• tax bonus on child
• home loan interests

Social security contributions in Slovakia

Social security rates and registration

• 25.2% rate for the employer
• 9.4% rate for the employee

If the employee is subject to the Slovak social security, the employer must register them. Both local and foreign employers must register, deduct and pay the respective contributions on behalf of the employee and the employer.

Social security base calculation

The social security base is calculated on a monthly basis from the monthly salary, more precisely from the gross taxable income without accord to social and health contributions decreasing the tax base.

There is no minimum base applicable for the calculation, only a maximum base, which depends on the average salary in Slovakia. Currently, in 2023, the maximum base equals to EUR 8,477 per month. The maximum base applies to the whole income of the employee from all employers. On the side of the employer, there are some minor social contributions without maximum limitation, while the maximum base is applicable to each employer separately, not jointly.

The due social security is calculated as:

• Calculation base multiplied by the applicable rate
• Example for an employee: EUR 6,678 * 9.4% = EUR 627.73

Payment and reporting of the social security

Social security contributions are not covered by the due tax, and therefore are calculated and paid separately, on a monthly basis.

The employer is obliged to file monthly reports to the social security institution, which automatically exchanges information with the tax authorities.

If the employee is employed by 2 or more employers, all employers are obliged to report and pay the social security contributions, including foreign employers.

A1 Forms

A1 forms for purposes of the Art. 12 of the EU regulation 883/2004 are generally issued only for the duration of each respective posting. A1 forms for purposes of the Art. 13 or 16 of the EU regulation 883/2004 may be issued for period of 1 to 2 years or even longer.

Slovak authorities do a thorough check of documents and conditions before issuing A1 form. Therefore, it may be lengthy process.

Health insurance contributions in Slovakia

Health insurance rates and registration

• 10% rate for the employer
• 4% rate for the employee

For health insurance, the employee needs to register as an insured person at the selected health insurance institution. Both local and foreign employers must register, deduct and pay the respective contributions on behalf of the employee.

Health insurance base calculation

The health insurance base is calculated from the gross taxable income; including also other types of income (not just income from employment). Contributions are paid on a monthly basis, as advances, whereby a reconciliation of the whole income and health insurance premium is done each year, on the basis of reported taxable incomes. There is no minimum base applicable for the calculation, however, for low-income employees there may be a deductible part decreasing the applicable calculation base. There is no maximum calculation base for the employee nor the employer.

The due health insurance is calculated as:

• Calculation base multiplied by the applicable rate
• Example for an employee: EUR 10,000 * 4% = EUR 400

Payment and reporting of the health insurance

Health insurance contributions are not covered by the due tax, and therefore are calculated and paid separately on a monthly basis, while they are also subject to a yearly reconciliation. The employer is obliged to file monthly reports to the health insurance institutions. If the employee is employed by 2 or more employers, all employers are obliged to report and pay the health insurance contributions, including foreign employers.

Slovak tax resident working in one or more other countries

Personal income tax return filing

An employee with taxable income abroad is obliged to file an income tax return. A yearly tax reconciliation by the employer is not allowed, in such case.

The tax return deadline falls on March 31, but it may be extended with written notification by up to 3 calendar months or by up to 6 calendar months with income taxable abroad.

The tax return can be filed electronically or in written form by post or personally. However, entrepreneurs are obliged to communicate with the tax authorities only electronically. Representation by tax advisor is voluntary; in such case a signed power of attorney is required.

Avoiding double taxation

In case a double tax treaty is not applicable, the income from employment taxed in the other country may be exempted from taxation in Slovakia. In case a double tax treaty is applicable, which allows the application of a set-off method, the employee can apply the exemption method, if the income was taxed abroad and it is more beneficial to them. For the purposes of avoiding double taxation, generally, a certificate on the paid tax or similar confirmation is required. In exceptional cases other evidence may be accepted.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required. Depending on the respective tax benefit, the evidence or documentation may need to be presented to the tax authorities with the tax return. In Slovakia, 2% of the paid tax may be donated to non-profit organisation; it is 3 % for volunteer workers. In general, the income is attributable to the country where the work is performed. If income or its part cannot be attributed to one country as a whole, then the ratio based on the respective time worked in Slovakia and other countries is applied. Individual parts of income may need individual evaluation and attribution ratio as they may concern different time periods or situations. This may concern, especially, the paid vacation (granted for calendar year), bonuses and benefits.

Tax resident of other country working and paying taxes in Slovakia

Personal income tax return filing

The local and foreign employers are obliged to report and withhold tax monthly. Withheld tax is due within 5 days after the date on which the salary was paid. The employer´s monthly report is due by the end of the calendar month following the month concerned. The yearly report is due by the end of April.

Employers may handle the yearly tax reconciliation, upon timely request of the employee (filed till February 15), subject to the condition that the employee has no other income taxable from Slovakia.  When these conditions are not fulfilled, the employee is obliged to file a tax return in Slovakia. Filing a personal income tax return by a foreign tax resident is highly recommended in cases when the employee needs a confirmation on paid tax issued by the Slovak tax authorities.

The deadline for filing the tax return is March 31, however it may be extended by up to 3 calendar months.

The tax return can be filed electronically or in written form by post or personally. Representation by a tax adviser is not mandatory but voluntary; in that case, a signed power of attorney is required. However, tax residents out of EU may obligatorily need representative for deliveries from tax authorities.

Tax benefits and other specifics

Entitlement to tax benefits is subject to condition of having at least 90% of the total income from sources in Slovakia. Depending on the respective tax benefit, the evidence or documentation may need to be presented to the tax authorities with the tax return.  In Slovakia, 2% of the paid tax may be donated to non-profit organisation; it is 3 % for volunteer workers. Every taxpayer has a dedicated tax account number provided by Slovak tax authorities, where the due tax is paid.

In general, the income is attributable to the country where the work is performed. If income or its part cannot be attributed to one country as whole, then the ratio based on the respective time worked in Slovakia and other countries is applied. Individual parts of income may need individual evaluation and attribution ratio as they may concern different time periods or situations. This may concern, especially, the paid vacation (granted for calendar year), bonuses and benefits.

Penalties

Penalties related to tax

• Delayed filing of the tax return: The fine ranges from EUR 30 up to EUR 16,000
• Delayed payment of the due tax: The fine is 15% p.a. from the value of overdue tax, for a period of maximum 4 years
• Delayed or missing registrations at tax authorities: The fine ranges from EUR 60 up to EUR 20,000
• Delayed or missing report on monthly salary or withholding tax from salary: The employer is obliged to report salaries and withheld tax on a monthly basis. The penalty ranges from EUR 30 up to EUR 3,000

Penalties related to social security

• Delayed report on social security: The fine can soar up to EUR 16,596.96
• Delayed payment of the social security contributions: The penalty is 0.05% per day from the overdue payment
• Delayed or missing registrations for the purposes of social security: The fine can soar up to EUR 16,596.96

There is no special penalty related to A1 forms in Slovakia. However, a missing A1 form may lead to negative implications and penalisations abroad. Similarly, foreign employee coming to Slovakia without an A1 form may lead to the following implications:

• missing registrations with respective penalties from social and health insurance institutions
• missing reports and contributions with respective penalties
• their employment may be regarded as illegal, with respective penalties applicable

Penalties related to health insurance

• Delayed report on health insurance: The fine can soar up to EUR 3,319
• Delayed payment of the health insurance contributions: The penalty 15% p.a. from the overdue payment
• Delayed or missing registrations for the purposes of health insurance: The fine can soar up to EUR 3,319

Criminal acts

The incorrect reporting of due tax or social and health insurance contributions done with the purpose to avoid or decrease them, is regarded as a criminal offence. The penalty depends on the value and may result in maximum 12 years of prison. The missing payment of due tax, social security or health insurance contributions can also be regarded as a criminal act, if the payment is avoided on purpose. The penalty depends on the value and may result also in maximum 12 years of prison.

Criminal penalisation may also concern the employer, as a legal entity. There are different penalties applicable, e.g. money penalty from EUR 1,500 to EUR 1,600,000, ban of activity or cease of assets.

Nevertheless, the later reporting or payment of due tax, social security or health insurance contributions can avoid criminal punishment.

Tax residency in Spain

Definition and requirements

According to Article 9 of Law 35/2006, the Tax Agency considers a person to be a tax resident if they fulfil any of the following 3 conditions:

• They stay more than 183 days during the year in Spain.
• They have the core of their economic interests directly or indirectly in Spain.
• If their spouse or children are habitually resident in Spain.

Days of presence

For the purposes of calculation of days of presence in Spain within one or more periods, any part of the day of presence is regarded as whole day (including day of arrival and day of departure).

Additionally, sporadic absences are also taken into account unless the individual can prove their tax residency in another country.

Split tax residency

In Spain, split tax residency between more countries within one tax period is not acknowledged.

Personal income tax in Spain

Tax rate and tax period

The personal income tax is made up of a state and an autonomous community tax. The state bracket is the amount an individual has to pay for IRPF according to their income levels, specifically 50%. This amount can change every year depending on what is approved in the Law of Accompaniment of the General State Budget.

The tax rates are as follows:

• 19% for income up to EUR 12,450
• 24% for income between EUR 12,450 and EUR 20,200
• 30% for income between EUR 20,200 and EUR 35,200
• 37% for income between EUR 35,200 and EUR 60,000
• 45% for income between EUR 60,000 and EUR 300,000
• 47% for income above EUR 300,000

The Autonomous Community bracket takes regulatory power over 50% of the personal income tax base. In reality there are differences, sometimes significant, depending on where you live. Remember that the taxation is made where you are registered.

The table above is indicative because the autonomous regions often have the power to make changes. Be that as it may, we can say that there are territories with a generally low taxation. This is the case of the Community of Madrid, which has the lowest tax rates in Spain. At the other extreme would be territories such as the Community of Valencia, which exceeds 50% overall, or Catalonia.

It is also important to note that in the Basque Country and Navarre the competences over personal income tax are transferred. In these territories, it is the Haciendas Forales that are in charge of collecting the amount. The Basque Country has a minimum rate of 23% for incomes below 15,550 euros and 49% for incomes above 179,460 euros. Navarre applies a minimum rate of 13% for income below 4,000 euros and a maximum rate of 52% for income above 300,000 euros.

The tax period is the same as the calendar year. Salaries paid in January for the work performed in December are considered as taxable income of the previous calendar year.

Tax base and deductions

In general, the tax base is calculated by integrating the different incomes from work, dividends, interest and capital gains. All persons who have received more than 22,000 euros from a single payer or 14,000 euros from several payers are obliged to file an income tax return. In this case, the sum of the income received by the second and the rest must exceed 1,500 euros per year.

Currently, deductions are allowed for social security and certain expenses associated with the economic activity, such as insurance. There is also a special regime for foreigners who move to Spain as directors of a company or for labour reasons.

Social security contributions in Spain

Social security rates and registration

• 30.50% rate for the employer (plus a variable rate for occupational accidents, for instance 1.50% office work)
• 6.45% rate for the employee (depending on the type of contract)

The employee is registered by their local employer who then deducts and pays respective contributions on behalf of the employee and employer’s part. The same applies for foreign employers.

Social security base calculation

Generally, the social security base is the sum of several factors – all the payroll items that contribute, as well as the pro rata of extra payments, if applicable. The minimum calculation base for social security is EUR 1,260 per month, while the maximum equals to EUR 4,495.5 per month.

The employee’s social security is calculated by applying a discount to the employee’s paycheck. The tax rates depend on whether the contract is temporary or permanent or whether the employee is a trainee. The company’s social security, in addition to the percentages applicable to the employee, also includes other percentages, such as FOGASA. These percentages are applied to the contribution base and it is what the company or the worker must pay, each one in its case.

In case an employee works for several employers, the maximum calculation base applies for each of the employee’s salaries. Similarly, the maximum base is applicable for each employer separately.

Payment and reporting of the social security

If an employee is employed by two or more employers the social security office must be informed in order to calculate proportionally the % of application to each of the contributions according to the days worked by the employee.

The contributions are paid monthly but may have different periods depending on the incidents or variations that are generated throughout the month.

A1 Forms

The process of issuing A1 forms is tedious and can take up to 5 days to resolve. The forms are issued for a maximum of 6 months, otherwise they would be considered as “expatriate” employees.

Health insurance

Calculation of the health insurance base

Health insurance is contracted with a private entity if the company voluntarily decides to offer the service to the employee. The calculation varies depending on the fee offered by the private company.

The employee does not need to register into the system as long as the company provides all the necessary data for the correct completion of the payroll.

It should be taken into account that according to Spanish tax law, medical insurance is tax-free for 500 euros per year per beneficiary.

There is no minimum nor maximum calculation base for health insurance.

Payment and reporting of the health insurance

In case an employee is employed by two or more employers, the employers are obliged to declare the payment to the social security and inform about the duplicity of contribution in order to adjust the contributions. Medical insurance is separate and depends on whether the employee voluntarily benefits from the service or not.

All contributions are paid on a monthly basis.

Spanish tax resident working in one or more other countries

Personal income tax return filing

In Spain you are taxed on worldwide income, which means that if you are a Spanish tax resident you must declare all income received. The due date for tax return is June 30 of the following fiscal year, without the possibility to extend the deadline.

The tax return can be filed online by telephone, and at certain government offices. Representation by a tax adviser and power of attorney is not required.

Avoiding double taxation

If there is no double tax treaty, there is a double taxation deduction. In case there is a double tax treaty, the tax actually paid abroad can be deducted, however a document of effective payment in the foreign administration is required.

Tax benefits and other specifics

To apply for available tax benefits a proof of foreign tax filing is required.

Tax resident of other country working and paying taxes in Spain

Personal income tax return filing

Both local and foreign employers are obliged to pay the monthly taxes of the employee, however it is the employee’s obligation to file their income tax return.

All persons who have received more than 22,000 euros from a single payer or 14,000 euros from several payers are obliged to file an income tax return. In this case, the sum of the income received by the second and the rest must exceed 1,500 euros per year. The tax return can be filed online without the requirement of representation by a tax adviser and power of attorney.

Tax benefits and other specifics

To apply for available tax benefits, tax residency and census documents are needed.

Penalties

Penalties related to tax

• Delayed filing of the tax return: Depends on the amount not paid
• Delayed payment of the due tax: EUR 150 plus interest for late payment
• Delayed or missing registrations at tax authorities: EUR 150 plus interest for late payment
• Delayed or missing report on monthly salary or withholding tax from salary: EUR 150 plus interest for late payment

Tax residency in Turkey

Definition and requirements

In order to be considered as a tax resident in Turkey, a person must fulfil both material and formal criteria. They are the following:

• the person has a permanent residence, permanent home or habitual stay in Turkey (working in Turkey and/or staying with family in Turkey)
• the person stays in Turkey continuously for more than 6 months in a calendar year (temporary departures are not considered as interruption)

Days of presence

For the purposes of calculation of the days of presence in Turkey within one or more periods, any part of the day of presence is regarded as a whole day (including day of arrival and departure).

Split tax residency

In Turkey, split tax residency between more countries within one tax period is acknowledged.

Personal income tax in Turkey

Tax rate and tax period

• 15 – 40% is the range of the applicable tax rates, based on the tax base

The tax period is the same as the calendar year. In Turkey, the salary income becomes taxable once the full associated economic and legal rights are entitled. Salaries are not paid in arrears, therefore the salaries for December would be taxable in the twelfth month and included in the payroll in December. However, retrospective payments can be exceptions, such as bonuses.

Tax base and deductions

In general, the tax base is calculated from the gross taxable income (including salary and all benefits) decreased by social security contributions paid by the employee, further decreased by the non-taxable parts of the income, if applicable. The non-taxable part depends on the value of income, family situation and tax residence.

In order to decrease the tax base, the following items can be deducted:

• Social and health contributions
• Non-taxable value of the income on the taxpayer, on the spouse, on the supplementary pension savings, on the health spa costs, subject to income and tax residency requirements

Social security contributions in Turkey

Social security rates and registration

• 22.5% rate for the employer
• 15% rate for the employee

The employee is registered by the local employer on the online social security portal. The employer then deducts and pays the respective contributions on behalf of the employee and the employer´s part. The registration does not apply to foreign employers (applicable for the entities in Turkey).

Social security base calculation

Basically, the gross income is the calculation base for social security, which is subject to a cap, i.e. maximum amount. It is calculated on the monthly basis, from the monthly salary and multiplied with the rate. The minimum calculation wage equals the minimum wage. In case the employee has multiple employers, the maximum calculation base applies to each salary, separately on every employer.

Payment and reporting of the social security

In Turkey, the social security institution and tax authority are separate systems. However, they automatically exchange information.

Social security is paid both by the employee and the employer, but the reporting and payment are done by the employer on a monthly basis. In case there are multiple employers, all of them are obliged to pay and report.

A1 Forms

Instead of A1 forms, the Turkish Social Security authority issue a certificate under the bilateral agreements between the countries. It may be a time-consuming process, as the authorities would check the documents and conditions before issuing the form.

Health insurance

In Turkey, health insurance is included in the social security premiums. Therefore, the same applies to them as to social security contributions.

Turkish tax resident working in one or more other countries

Personal income tax return filing

If the employee receives salary from outside Turkey (without a recharge to Turkish entity), there is an annual income tax return obligation to be submitted by the employee.

The due date for tax return is March 31, without the possibility to extend the deadline.

The filing can be done electronically, in written by post or personally. Representation by a tax adviser is voluntary but requires a signed power of attorney.

Avoiding double taxation

If there is no double tax treaty, the local legislation is applicable. In case the income from employment was taxed in the other country, the tax-credit method can be applied. The employee can use only the method that is available based on the double tax treaty. In order to do so, a certificate on paid tax or similar confirmation is required. The documents should be apostilled and translated into Turkish.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required. Depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return.

In general, the income is attributable to the country where the work is performed. If the income or its part cannot be attributed to one country as whole, then a ratio based on the respective time worked in Turkey and other countries is applied. Calendar details and physical presence is important to determine the related days in a country. Upon clarification of the days, a prorate calculation is done.

Income Tax and Stamp Tax Exemptions

As of Jan 2022, income tax and stamp tax exemptions have become applicable for wage income. The exemption amounts are equal to the income tax amount and stamp tax amount calculated over the applicable minimum wage on the related calendar year.

Tax resident of other country working and paying taxes in Turkey

Personal income tax return filing

The employer, including foreign employer, is obliged to report and withhold tax on a monthly basis. If the employee generates income subject to the annual income tax return, that should be done by the employee, whereas the submission of tax return is due by the end of the March of the following year.

The due date for tax return is March 31, without the possibility to extend the deadline.

The filing can be done electronically, in written by post or personally. Representation by a tax adviser is voluntary but requires a signed power of attorney.

Tax benefits and other specifics

To apply for available tax benefits respective evidence is required. Depending on the respective tax benefit the evidence or documentation may need to be presented to the tax authorities with the tax return.

In general, the income is attributable to the country where the work is performed. If the income or its part cannot be attributed to one country as whole, then a ratio based on the respective time worked in Turkey and other countries is applied. Calendar details and physical presence is important to determine the related days in a country. Upon clarification of the days, a prorate calculation is done.

Penalties

Penalties related to tax

• Delayed filing of the tax return: The monthly interest rate is 2.5%
• Delayed payment of the due tax: The daily interest rate is 2.5% divided by 30
• Delayed or missing report on monthly salary or withholding tax from salary: The employer is obliged to report salaries and withheld tax on monthly basis. There are various penalties depending on the case (including irregularity penalties, interest or a tax penalty equalling the tax itself, etc.)

Penalties related to social security

• Not requesting an A1 form from the respective authorities:In Turkey, there is no special penalty related to a not requested A1 form. However, a missing CoC certificate form may lead to negative implications and penalisations in other countries
• Delayed report on social security: Similar to tax penalties, there are various types of penalties including monetary penalties and social security inspection
• Delayed payment of the social security contributions: The penalty is 2% per month over the social security amount. There are also possible irregularity penalties
• Delayed or missing registrations for the purposes of social security: The penalty equals one month of minimum wage (TRY 10,008.00 for 2023)

Criminal acts

In Turkey, criminal penalisation is applicable for tax frauds. The penalty depends on the scope of case and may be as high as 5 years of prison.

The later reporting or payment of due tax and social security contributions can avoid criminal punishment.

Tax residency in the United Kingdom

Definition and requirements

An individual is considered a tax resident in the United Kingdom if:

• if they have, or have had, a residence in the UK, for all or part of the year.
• if they spend at least 183 days in the UK during the tax year.
• if they work substantial number of hours in the UK.

Days of presence

When calculating the duration of individual’s presence in the United Kingdom during one or more periods, any part of the day of presence spent within the country will be considered as a whole day (including the day of arrival and the day of departure).

Split tax residency

If you relocate to or from the United Kingdom, the tax year will typically de divided into two: a non-resident period and a resident period.  This implies that you only will be required to pay tax on foreign income based on the duration that you were living in the UK. This procedure is called split-year treatment, and it’s automatically implemented, so you don’t need to apply for it.

However, if you live abroad for less than a full tax year before returning to the UK, you won’t be eligible for split residency. Additionally, you also need to meet other requirements to qualify for this treatment.

Personal income tax in the UK

Tax rate and tax period

• 0% is the applicable tax rate for annual taxable income up to GBP 12,570
• 20% on annual taxable income from GBP 12,571 to GBP 50,270
• 40% on annual taxable income from GBP 50,271 to GBP 150,000
• 45% on annual taxable income over GBP 150,000

The tax period runs from 6th April to 5th April each tax year.

Tax base and deductions

The United Kingdom’s tax base is calculated by determining the income, profits, or capita of individuals or companies on which taxes are assessed. This includes wages, investments, and business profits, and other sources of income. The government make use of deductions, exemptions, and credits to modify the tax base and establish the final amount of taxes that must be paid. In the UK, taxes are levied in a progressive manner, implying that higher-income individuals pay a higher percentage of taxes.

In the UK, certain types of income are not subject to tax, such as:

• Personal Allowance: This is a certain amount of income that is not subject to taxation. The Personal Allowance amount changes every tax year.

• Capital Gains Tax (CGT) Allowance: When an individual sells an asset that has increased in value, they may have to pay CGT on the gain. However, there is a CGT Allowance, which is the amount of gain on which no CGT is payable.

• Dividend Allowance: Dividend income is subject to the taxation, but there is a Dividend Allowance of £1,000 for the 2023-2024 tax year, which implies that the first £1,000 of dividend income is exempt from tax.

• National Savings & Investments (NS&I) interest
• Premium Bond prizes
• ISA savings.

Certain non-cash benefits provided by employers, such as workplace parking, a company mobile phone, or a company car are not subject to tax.

It’s essential to note that this list is not exhaustive and the regulations concerning taxable and non-taxable income can change from year to year.

Social security contributions in the UK

Social security rates and registration

The rate of social security contributions paid by the employer in the United Kingdom is:

• 0% up to GBP 9,100 per tax year
• 13.8% from GBP 9,101 per tax year

Social security base calculation

On any income exceeding GBP 9,100, the employer will pay 13.8% as national insurance.

Health insurance

In the United Kingdom, employers have the choice to provide health insurance to their employees. If an employer provides health insurance, the employee will be taxed on the benefit, either through the payroll or via the submission of a P11D at the end of the tax year.

UK tax resident working in one or more other countries

Personal income tax return filing

To determine if a United Kingdom citizen is obligated to submit a tax return for the applicable tax year will need to be undertaken, utilising the UK residency tests. If it’s deemed that the UK citizen is required to file a tax return, the deadline for submission of the tax return will be on the 31^st of January.

Avoiding double taxation

The United Kingdom has established double taxation treaties with multiple countries (to see the list please click on this link). However, it is recommended to consult with one of our tax experts to ensure that the correct application of tax is applied.

Tax resident of other country working and paying taxes in the UK

Personal income tax return filing

To determine if a United Kingdom citizen is obligated to submit a tax return for the applicable tax year will need to be undertaken, utilising the UK residency tests. If it’s deemed that the UK citizen is required to file a tax return, the deadline for submission of the tax return will be on the 31^st of January.

Penalties

Penalties related to tax

If you are required to submit a tax return and fail to meet the deadline for submitting it or paying your bill, you be a subject to a penalty. A late filing penalty of GBP 100 will be charged if your tax return is up to 3 months late and additional charges will apply if it’s later, or if you pay your tax bill late. Additionally, interest is also charged on late payments.

Penalties related to social security

If you fail to make payments of social security contributions in time, interest charges will be applied as a result of the delay.

*The applicable rate for income acquired in a seafarer capacity is 1%; **Depends on the tax base; ***Additional bracket tax is paid based on the income;

*Pension funds; **Plus a variable rate for occupational accidents; ***0% up to GBP 9,100 per tax year, 13.8% from GBP 9,101 per tax year

*Additional Comprehensive Health Insurance Scheme contribution is 1% of the gross salary