What is EU community tax?

EU community tax: what even is that?

The UK may have left the European Union (EU) due to Brexit, but that doesn’t mean that we don’t have close ties with the rest of Europe. Besides expats, there are also plenty of Brits who live and work within EU countries whilst retaining their UK citizen status. Crown servants are an example of this.

Like many UK citizens living and working overseas, crown servants pay tax. And one of the most important taxes to know about is EU community tax. If you work for an EU institution, it’s important to understand everything there is to know about EU community tax, and how it can affect your salary, pension and/or wages.

Who is classed as a crown servant?

In the UK, crown servants include jobs such as:

• HM armed forces
• Civil servants
• Diplomats

Crown servants might find themselves employed by a EU institution as well as The Crown.

EU Community Tax explained

As a general rule for crown servants living abroad, you still have to pay tax on anything that you earn from the UK, such as:

• Wages/salary
• Pension
• Rental income 
• When you sell residential property in UK
• Savings interest and dividends

This rule applies to anyone who works abroad. This is regardless of UK residency tax status, where they work or how long they stay overseas. 

However, if you work for an EU institution, any salary or pension payments paid to you by your EU employer are exempt from UK tax. Instead, tax will be deducted on your salaries, wages and pensions by the EU employer. This is what is known as EU community tax.

What tax do you pay if you’re a crown servant but work for an EU institution?

If you work as a crown servant but receive a salary and/or pension from an EU employer, any income you earn from them will be subject to EU community tax. Not UK Income Tax or National Insurance. 

However, if you are still receiving an income from the UK, whether it be a pension or rental income source (such as Airbnb), you must still pay Income Tax on those earnings. The amount you will have to pay is based on your UK residency status.

Does this mean I could get taxed twice?

It depends.

The money you earn from the EU institution will definitely not be taxed twice. This is exempt from UK tax and subject to EU community tax instead. But, any income you receive from the UK could be taxed by both HMRC and the EU country you’re working in.

Whether you’ll be taxed twice or not depends on whether the UK has a ​​Double Taxation Agreement (DTA) with that country. If there is an agreement between both countries, then you don’t have to pay additional tax on the same income. However, you may still have to file a tax return in both countries. 

You can find out if the UK has a DTA with the country you’re working in here.

What about National Insurance?

When you work for an European institution, you can choose to pay your National Insurance as social security contributions (what the EU calls National Insurance) in the EU or in the UK as normal. This is because UK workers who work in the EU or Switzerland only have to pay into one country’s social security scheme at a time thanks to the Withdrawal Agreement.

Confused? Don’t be!

Still can’t get your head wrapped around EU community tax? Or maybe you’re wondering what your UK residency tax status is? Not a problem. Learn more here about simple, one-off tax advice from one of our accredited accountants!