Double tax treaties and equality for tax residents in the EU

24 February, 2021

For a European posted worker or expat, it is possible to be under two different tax jurisdictions at the same time. If their earnings come from two or more countries, they could owe two different national taxes.

In that case, first of all they have to find out if the country has a double tax treaty. For instance, Spain has such treaty with most of European countries granting a fictitious tax-resident status to cross-border commuters.

Usually the worker is considered a tax resident in the country where he earns all or most of his income. What constitutes “most” of the income?

  • any available family allowances and tax deductions for childcare costs, even if the costs are incurred in another EU country
  • any available tax deductions for interest on mortgages, even for a house you own in another EU country
  • joint tax assessment with your spouse, if this is possible in that country

Under some double tax treaties, the country where you earn all or almost all of your income will treat you as tax-resident, even if you don't live there. This status of fictitious tax-resident is granted by some countries to cross-border commuters.

Under EU rules, each country still has a certain latitude to decide what percentage of your income represents 'almost all'. In any event, whether the country where you earn all or almost all of your income treats you as tax-resident or not, it will be obliged to give you the same allowances and tax reliefs that it gives to a resident.

Of course, if you receive all allowances available to residents in the country where you work, you could not expect to receive all allowances and reliefs available to residents in the country where you live as well. Be aware that tax authorities will communicate with each other to ensure that you don't receive a double set of allowances and reliefs.