Here’s a Tax Cut for London Bankers: Go to Europe

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Here’s a Tax Cut for London Bankers: Go to Europe – WSJ

Expats who move to France, Spain, Ireland, Germany and the Netherlands would pay less tax and social security, an analysis shows

€166,121

€83,879

Ireland

€158,421

€91,579

Germany

€102,824

€147,176

U.K.

€144,597

€105,403

Estimated take-home pay on a €250,000 salary

including expat tax adjustments*

Take-home pay

Employee income tax

and social security

U.K.

Spain

€187,142

€62,858

France

€77,845

€172,155

Netherlands

€166,121

€83,879

Ireland

€91,579

€158,421

Germany

€147,176

€102,824

U.K.

€105,403

€144,597

Estimated take-home pay on a €250,000 salary

including expat tax adjustments*

Employee income tax

and social security

Take-home pay

U.K.

Spain

€187,142

€62,858

France

€172,155

€77,845

Netherlands

€83,879

€166,121

Ireland

€91,579

€158,421

Germany

€102,824

€147,176

U.K.

€105,403

€144,597

Estimated take-home pay on a €250,000 salary including expat tax adjustments*

Employee income tax

and social security

Take-home pay

U.K.

Spain

€187,142

€62,858

France

€77,845

€172,155

Netherlands

€166,121

€83,879

Ireland

€91,579

€158,421

Germany

€147,176

€102,824

U.K.

€105,403

€144,597

Are you a London banker looking to move to a tax-friendly locale after Brexit?

How about…Paris!

Some of Europe’s most legendary tax-heavy countries—among them France and Italy—are cutting special deals to woo rich expats with the promise of smaller personal tax bills. (Read more about the tax breaks, here).

KPMG LLP calculated the personal tax bill of a hypothetical expatriate earning €250,000 ($306,000) a year in five European countries—France, Spain, Ireland, Germany and the Netherlands—for The Wall Street Journal. The results show that in all of them the expat would pay less in income tax and social-security charges than he or she would in the U. K.

The savings aren’t trivial. An expat living in France earning €250,000 could take home an extra €27,588 after tax and charges compared with one living in the U.K., according to the calculations. That extra pay climbs to €42,545 in Spain if all the tax breaks are applied. Even Germany, which doesn’t have an expat regime, leaves the worker some €2,500 better off than in Britain.

The findings counter a widely held view that the U.K. is an attractively taxed island in Europe’s sea of suffocating taxes. “What is less well understood is how significant the incentives and other special treatments that some locations offer can be,” said Christopher Cowell, a partner at KPMG.

London’s legion of foreign financiers is taking note. International banks in the U.K. are forming plans to bulk up in cities across the EU so that they can continue selling products to clients based there after Brexit. Around 10,000 finance jobs in Britain may disappear when the U.K. quits the EU, according to an estimate by the Bank of England.

Across Europe, fiscal red carpets are being rolled out in preparation.

Take France. In 2012, the French president at the time,

François Hollande,

called finance the “enemy” and imposed a wealth tax. But soon after the U.K. voted for Brexit, Mr. Hollande’s government extended rules that allow employees recruited abroad to claim 30% of their salary as an “impatriate premium,” which is income-tax free for up to eight years. There are further tax rebates including those for days worked outside France. In total, expats based in France can get up to half of their salary exempted from income tax.

The French aren’t alone. In Spain, expats pay a special 24% tax rate on earnings up to €600,000. The Dutch allow 30% of salary to be paid as an income-tax-free expatriate allowance. In Ireland, the tax-exemption deal extends to children’s school fees. The Belgians allow expats to deduct the cost of decorating their new house from their tax bill. Last year, Italy unveiled a deal that doles out a 50% tax break to skilled workers coming from abroad. The U.K. by comparison doesn’t offer many such generous income-tax breaks to foreigners domiciled there, advisers say.

Conditions and time limits apply to the European tax sweeteners. In France, for instance, to qualify you need to have lived abroad for the last five years. In Spain, you have to be paid from an entity outside the country to get a lower tax rate, which can prove tricky to structure. The Irish need expats to earn at least €75,000 a year to get the tax breaks. In the Netherlands, you can’t have been living within 150 kilometers of the Dutch border within the last 16 months (which bizarrely means that some people residing on the U.K.’s south coast aren’t eligible). Another issue to consider in the Netherlands is a cap on bonuses for bankers.

And to be sure the sweet deals are for personal tax, not corporate tax. The U.K.’s corporate tax rate is lower than, say, France’s. Labor laws also are far more stringent in countries such as Germany than the U.K. That has made some companies think twice about relocating big chunks of business into the continent.

Finally, money isn’t everything. Factors such as language and the availability of private-school seats also play an important role in deciding whether to move abroad. But the lower tax rate is making it easier to convince staffers to give up London for another European city, bank executives say.

“When I say ‘Go and live in Paris for a few years and pay less tax,’ people suddenly aren’t so skeptical,” says one senior U.S. banker in London.

Write to Max Colchester at [email protected]




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