10 Ways to Reduce your Personal Income Tax
Maria Demetriou Maria Demetriou

10 Ways to Reduce your Personal Income Tax

10 Ways to Reduce your Personal Income Tax

You're likely paying 25-50% in personal tax, which is the average across Europe.

Here are 12 ways to reduce it…

Below are the maximum personal income tax rates as of 2022 for every EU state (in descending order):

Finland – 56.95%

Denmark – 55.90%

Austria – 55.00%

Sweden – 52.90%

Belgium – 50.00%

Slovenia – 50.00%

Netherlands – 49.50%

Ireland – 48.00%

Portugal – 48.00%

Spain – 47.00%

Luxembourg – 45.78%

France – 45.00%

Germany – 45.00%

Greece – 44.00%

Italy – 43.00%

Cyprus – 35.00%

Malta – 35.00%

Poland – 32.00%

Latvia – 31.00%

Croatia – 30.00%

Slovakia – 25.00%

Czech Republic – 23.00%

Estonia – 20.00%

Lithuania – 20.00%

Hungary – 15.00%

Romania – 10.00%

Bulgaria – 10.00%

How to pay less? Here are 12 ways:

  1. Move: Consider living in a country with lower tax. Example: Moving from Finland (56.95%) to Bulgaria (10.00%).

  2. Tax-Efficient Investments: Put money in tax-friendly accounts like pensions. Example: Investing in a government-supported retirement fund.

  3. Income Splitting: Share income with family in lower tax brackets. Example: Transferring some income to a spouse who earns less.

  4. Start a Business: Take income as company dividends. It might be taxed less. Freelancers can benefit greatly.

  5. Deductions: Use all the tax deductions you can. Example: Deducting your home mortgage interest or business expenses.

  6. Reclassify Income: Convert regular income to capital gains. They might be taxed less. Example: Selling a property and taking profit as capital gain.

  7. Tax Credits: Use available tax credits. They directly reduce tax owed. Example: Credits for green home improvements.

  8. Trusts: Some places allow trusts or holding companies for tax benefits. Example: Placing assets in a trust to manage inheritance.

  9. Gifts: Plan your gifts and inheritance well. It can save tax. Example: Gifting assets before they appreciate further.

  10. DTAs: Know the double taxation agreements. You won't be taxed twice on the same income. Example: Earning in Germany but living in Spain.

  11. Temporary Residency: Some places offer tax breaks for new or temporary residents. Example: Getting a temporary residency in Portugal for tax benefits.

  12. Remote Work: Work from a low-tax country for a company in a high-tax one. Example: Living in Estonia but working for a Swedish firm.

In short, there are many ways to cut your tax. But remember, laws differ by country.

Always ask a tax expert before making changes.

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