Tax and Compliance — 9 min

Employee tax relief schemes: How do they work? (with examples)

Written by Pedro Barros

July 1, 2024

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Across the globe, different countries offer tax relief schemes that can help your employees reduce their tax rate.

As well as putting more money in your employees’ pockets, these schemes can make it easier to attract top talent in certain roles and/or certain locations. They can allow you to create a more attractive compensation package, and boost your retention rate.

In this article, we’ll look at how some of these schemes work, and touch on the ways Remote can help. So let’s jump straight in.

Jump straight to a key chapter

What are tax relief schemes?
How can Remote help?

What are tax relief schemes?

Tax relief schemes are government programs that reduce the tax burden on eligible workers. They aim to attract skilled labor or incentivize work in certain roles or industries.

These schemes vary widely by country and can target different aspects of taxation such as income tax, social security contributions, or other employment-related taxes.

Based on our own experience at Remote, though, here are some of the most commonly requested:

Spain: Beckham’s Law

Introduced in 2005, the Special Expats’ Tax Regime (SETR), or "Beckham’s Law", allows foreign workers moving their tax residency to Spain to be taxed as non-residents. This is designed to attract high-earning foreign talent.

Eligibility:

Must not have been resident in Spain during the five previous tax periods.
Must not have obtained income through a Permanent Establishment located in Spain.
Moving to Spain for employment, directorship with up to 25% equity, government-approved nomad visa, or accompanying a spouse under Beckham’s Law.

Benefits:

Flat tax rate of 24% on Spanish-sourced income up to €600,000; excess taxed at 45%.
Only taxed on Spanish-sourced income.
Applicable for up to six tax years.

Poland: Creative Tax

In Poland, programmers and developers benefit from the Copyright Tax Deduction (CTD), which reduces taxable income for those creating intellectual property.

Eligibility:

Create work protected by intellectual property rights.
Transfer intellectual property rights to the employer.
The employer must keep evidence of ‌copyrighted work.

Benefits:

50% tax deduction on income up to PLN 120,000 per annum (~€24,000).

Netherlands: 30% Ruling

Under this scheme, eligible expatriates in the Netherlands can receive up to 30% of their gross salary tax-free:

30% for the first 20 months.
20% for the next 20 months.
10% for the last 20 months

Eligibility:

Starting an employment position in the Netherlands or posted there from abroad.
Possess specific skills not available in the Netherlands.
Not lived within 150km of the Dutch border for more than 16 of the previous 24 months.
Earning at least €46,107 per year.

Benefits:

Significant tax savings over five years.
No income tax on the designated portion of salary.

Italy: Special Tax Regime for Inbound Workers

Foreign workers in Italy can benefit from a partial tax exemption on earnings from employment or self-employment.

Eligibility:

Non-tax resident in Italy for at least three years before transferring.
Commit to stay in Italy for at least four years and work mainly in Italy.
Possess high-level qualifications or specializations.

Benefits:

50% reduction in taxable income for up to five fiscal years, with a yearly limit of €600,000.
60% reduction for those with dependent children.
Additional three fiscal years for those purchasing residential property in Italy.

“In general, the SETR is usually recommended for those earning above €55,000, and those who want to reduce their Spanish Wealth Tax liabilities.”
Ana Vieira, VP Tax at Remote

Denmark: Special Tax Regime for Highly Paid Expatriates and Researchers

Denmark offers a special tax regime for inbound expatriates and researchers taxed at 27% on employment income.

Eligibility:

Work for a Danish employer.
Not a tax resident in Denmark in the 10 years preceding employment.
Monthly salary of at least DKK 75,000 (~€10,000) for employees (not researchers).

Benefits:

27% tax rate on employment income for up to seven years.

Romania: IT&C Salary Exemption

In Romania, IT employees can benefit from income tax exemption and optional pension contributions exemption.

Eligibility:

Part of a specialized IT department.
Hold a university degree or currently studying at a university.

Benefits:

0% tax on gross income up to RON 10,000 (~€2,000).
Option to opt out of pension contributions for increased net income.

Morocco: Exemption for New Hires

Morocco provides a personal income tax exemption for salaries paid to newly recruited employees.

Eligibility:

Hired for the first time under a permanent contract between 1 January 2021 and 31 December 2026.
Age not exceeding 35 years on the hiring date.
Not previously registered with the Social Security Authority.

Benefits:

100% exemption from ordinary taxation for the first 36 months.

France: Expatriate Tax Regime

France offers a tax regime for individuals not resident in France for five years prior to recruitment.

Eligibility:

Recruited by a company linked to an original company abroad or directly recruited abroad.
Expatriate bonus exempt from payroll tax, limited to 30% of the salary.

Benefits:

Exemptions on compensation related to foreign activities, foreign-source investment income, intellectual property rights, and capital gains from securities.

Belgium: Expatriate Regime

Belgium has a new special tax regime for foreign executives and researchers arriving from 1 January 2022.

Eligibility:

Directly recruited abroad or assigned to Belgium.
Not a Belgian resident or lived within 150km of Belgium for five years before employment.
Gross taxable income over €75,000 (excluding researchers).

Benefits:

30% of gross salary treated as "expenses proper to the employer", tax-free.
Additional refundable expenses for moving, furnishing, and schooling.

Portugal: NHR 2.0, Programa Regressar, and IRS Jovem

Portugal offers a new tax benefit program, NHR 2.0, for researchers and highly qualified professionals.

Eligibility:

Not a tax resident of Portugal in the past five years.
Work in research, education, startups, or for certain qualified companies.

Benefits:

20% income tax rate on specific earned income for 10 years.

Programa Regressar

Portugal’s Programa Regressar offers tax benefits for Portuguese emigrants who come back to Portugal and become tax residents again.

Eligibility:

Become a tax resident in Portugal until 2026.
Not have been a tax resident in Portugal in any of the previous five years before your return (specific requirements apply depending on the return year).
Have your tax situation regularized in Portugal.
Not currently hold Non-Habitual Resident (NHR) status.

Benefits:

Up to 50% exemption on income from employment and freelancing for up to five years.
Maximum tax exemption capped at €250,000.

IRS Jovem

Portugal's IRS Jovem offers a partial income tax exemption for young individuals entering the labor market.

Eligibility:

Apply until 26 years old (or 30 with a doctorate).
Cannot qualify as a dependent.

Benefits:

100% exemption in the first year, scaling down to 25% in the fifth year.

Cyprus: First Employment Exemption

Cyprus provides two tax exemption schemes for first-time employment: 20% and 50%.

Eligibility:

Depends on the period of non-resident status, annual salary, etc.

Benefits:

20% exemption up to €8,550 per annum for seven years.
50% exemption for individuals not resident in Cyprus for 15 years before employment above a certain level of annual salary.

These schemes illustrate the diverse approaches countries take to attract and retain skilled workers through tax incentives. Each scheme has specific eligibility criteria and benefits, helping employees reduce their tax burden and employers create competitive compensation packages.

How can Remote help?

A global HR platform like Remote can help your team members apply for these schemes.

When you relocate an eligible team member through our platform, we can work with them to navigate the complex application process, including the completion and submission of all forms and required documentation.

Many of these schemes also add a significant administrative burden to your payroll and HR processes. We remove this burden from your plate, allowing you and your people to reap the benefits headache-free. We do all the calculations and ensure you are fully compliant at all times, giving you peace of mind. To learn more about how ‌we can help, speak to one of our friendly experts today.