Germany Found To Have Unfavourable Expat Tax Regime

by Ulrika Lomas, Tax-News.com, Brussels

21 April 2005

Germany has one of the most punitive tax regimes for expatriate workers, according to a new study by accounting firm PricewaterhouseCoopers.

The study, carried out in conjunction with the Mannheim-based Centre for European Economic Research (ZEW), was undertaken to find out how attractive Germany is to multinational firms with expatriate workforces, compared with other nations.

The 19 other countries featured in the study included Austria, Belgium, China, the Czech Republic, Finland, France, Hungary, Ireland, Italy, Luxembourg, the Netherlands, Poland, Russia, Slovakia, Slovenia, Sweden, Switzerland, the UK and the US.

Using the hypothetical example of an American earning EUR75,000 per year, Germany was ranked 14th out of the 20 nations in terms of its tax attractiveness. However, the country's tax regime was somewhat kinder to married couples, and was consequently ranked 9th out of the 20.

According to the study, the Czech Republic, France and the Netherlands are the cheapest countries to which to send employees, while Belgium and Slovenia ranked as the most expensive.

The study also examined the costs of a German company sending its employees abroad, finding that Russia, with its 13% income tax rate, was the cheapest location, where costs for an unmarried employee are 6.7% less than for their counterpart in Germany. Next best were Switzerland and Slovakia at 5% and 2.3% cheaper than employing the same person in Germany respectively.

Belgium and Slovenia were also the most expensive locations for German employees, with costs 31.8% and 46.3% higher respectively.

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