Taxes in Europe in 2026: country-by-country comparison of what you actually pay

Income tax, corporate tax, VAT and special expat regimes across 12 European countries - plus where to look if Europe isn't the answer

Bulgaria and Romania tax personal income at 10%. Denmark takes up to 60.5%. That is a sixfold gap inside a single European Union with free movement between its members. Yet the lowest headline rate rarely produces the smallest tax bill: what decides it is how you earn - salary, a company of your own, or dividends.

The European tax map shifted noticeably in 2026. Cyprus raised corporate tax from 12.5% to 15% but cut the dividend levy for Cyprus-domiciled residents from 17% to 5%. Italy lifted its flat tax for wealthy newcomers to $340,000 a year. Romania raised its dividend tax from 10% to 16%, and Estonia now lives with the 24% VAT it introduced in mid-2025. Below are the rates for 16 countries, the special regimes for new residents and a candid read on who wins where. Detailed country pages live in our tax section.

Which European country has the lowest taxes?

The lowest personal income tax in Europe is in Bulgaria and Romania: a flat 10% at every income level. The lowest corporate tax in the EU is Hungary's 9%. And the softest rules for investors are in Cyprus and Malta, where foreign dividends and capital gains can go untaxed altogether under the right status.

So the short answer depends on the type of income:

• Employees keep the most in Bulgaria and Romania (10%), followed by Hungary (15%). For high earners relocating for a job, the expat regimes of Spain, Portugal, the Netherlands or Cyprus can beat them.
• Business owners - Bulgaria (10% on profit plus 5% on dividends), Estonia (0% until profits are paid out), Hungary (9%) and Ireland (12.5%).
• Investors and people living on capital - Cyprus with non-dom status (non-domiciled: a tax resident whose family roots, or domicile, are not in Cyprus) and Malta, which taxes only the foreign income you bring into the country.
• Retirees with a foreign pension - Greece and southern Italy, both at a flat 7%.

Outside the EU, Andorra caps income tax at 10% and Monaco charges its residents no income tax at all (French nationals excepted). But living costs there are so high that the savings only pay off on a very large income.

Taxes in Europe by country: 2026 comparison table

The table shows the top personal income tax rate including mandatory surcharges for 2026, the corporate tax rate, the standard VAT rate and the main regime for new residents. Countries run from the lowest income tax rate to the highest.

Three things the table does not show. First, social contributions: Czech employers pay roughly 33.8% on top of gross salary, and Hungary withholds another 18.5% from the employee. Second, local taxes: Germany's trade tax (Gewerbesteuer) adds roughly 7-20 percentage points to corporate tax depending on the city, and Hungarian municipalities levy up to 2% of adjusted turnover. Third, where the top rate kicks in: Ireland's 40% starts at $50,000 of income, Portugal's 48% only above $98,000.

How much income tax do you pay on a salary in Europe?

On a $68,000 salary, a Bulgarian resident pays $6,800 in income tax, an Estonian resident more than $13,000. That is almost double on the same pay, before a cent of social contributions. The worked example below covers income tax only, without social contributions, child allowances or other reliefs.

Cyprus is the surprise here. Since its tax reform took effect on 1 January 2026, the first $25,000 of income is tax-free (up from $22,000), and on a $68,000 salary the Cypriot bill is only $1,100 above Hungary's. Cyprus adds a separate perk for newcomers: in a first job on the island paying more than $62,000, half the salary is exempt for 17 years, provided the person had not lived in Cyprus for 15 consecutive years before starting.

Estonia scrapped its so-called tax hump in 2026, under which the tax-free allowance shrank as income grew: the allowance is now the same for everyone - $790 a month, $9,500 a year. The rate stays at 22%; the government dropped plans to raise it to 24%.

Count the employer's side too. A Czech company pays around 33.8% on top of salary for pension, social and health insurance. When you negotiate a move, compare take-home pay and the full cost of employing you, not the headline tax rate.

Which European country has the highest income tax?

The 2026 record holder is Denmark: with a new surcharge on the highest incomes, its top rate has reached 60.5%. Next come France (55.4%), Austria (55%), Spain (up to 54% in some regions), Belgium (53.5%) and Portugal (53%). All figures are for 2026 and include mandatory surcharges.

A high top rate looks frightening, but it mostly bites above $91,000-120,000. What hurts the middle class more is a low threshold. In Ireland a single person hits 40% at $50,000, with the Universal Social Charge of up to 8% on top. In the Netherlands, 49.5% starts at $89,000.

High taxes also buy something: public healthcare, education and benefits. For a family with children who use all of it every day, the real arithmetic can be less alarming than the rate in the table. For a single remote worker with foreign clients, it is the opposite.

Outside the EU, northern Europe is no cheaper: taxes in Norway reach 47.4% on salary and taxes in Iceland 46.29%, although Iceland taxes capital income at a flat 22%.

Lowest taxes in Europe for business owners and the self-employed

Hungary charges companies 9%, the lowest corporate rate in the EU. But an owner cares less about corporate tax on its own than about what reaches a personal account after dividend tax. On that full chain, the leader is someone else.

This is a worked example for a simple case: the company and its owner are resident in the same country and all profit is paid out as dividends. In real life you add contributions, local taxes and accounting costs.

Estonia wins on timing rather than rate: while profit stays in the company and is reinvested, no tax is due at all. The 22% applies only when dividends are paid, calculated as 22/78 of the amount distributed. For a business that reinvests everything, it works like an interest-free loan from the state with no repayment date. Estonian e-Residency (a digital ID for running an Estonian company remotely) helps you manage such a company from abroad, but it is neither a residence permit nor tax residency: if you live elsewhere, that country may claim the profit.

Ireland keeps 12.5% on trading profits; the 15% rate applies only to groups with revenue of $850 million or more under the global minimum tax the EU adopted from the OECD agreement (Pillar Two). Malta's headline rate is 35%, but most of it is refunded to shareholders on distribution, bringing the effective rate down to around 5%. Since September 2025, Maltese companies can instead elect a final 15% tax with no refunds (Final Income Tax Without Imputation), locked in for at least five years.

Germany remains one of the most expensive at roughly 30% including trade tax. But the law is already passed: federal corporate tax falls by one percentage point a year from 2028, reaching 10% in 2032. Portugal cut its rate to 19% in 2026, with small businesses paying 15% on the first $57,000 of profit.

For sole traders and freelancers, the Czech Republic stands out: its lump-sum tax (paušální daň) is a single fixed monthly payment that replaces income tax and pension and health contributions. It suits those with low expenses and turnover within the regime's limits. For choosing where to incorporate, see our guide to setting up a company abroad.

Lowest taxes in Europe for expats: special regimes in 2026

A special regime can cut your tax more than moving to a low-rate country. In Spain the top rates of the regular scale reach 47-54% depending on the region, while a newcomer under the Beckham law pays a flat 24% on income up to $680,000. But nearly every regime is tied to a narrow profile, a fixed term and a condition that you did not live in the country before.

Cyprus non-dom is still the EU's most generous regime for passive income, but the 2026 reform narrowed its edge. The gap between statuses on dividends used to be 17%; now it is 5%. In return, one hurdle is gone: from 1 January 2026, the 60-day residency route no longer requires proving you are not tax resident anywhere else. The other conditions stand: at least 60 days in Cyprus, no more than 183 days in any other single country, a job, business or directorship in a Cypriot company, and an owned or rented home on the island.

Portugal's IFICI (Incentivo Fiscal à Investigação Científica e Inovação) replaced the famous NHR (Non-Habitual Resident) regime, which is closed to newcomers. The uncomfortable truth: pensions are excluded, and access is limited to work in research, IT, startups and qualified roles at companies on approved lists. You must apply by 15 January of the year after you become resident.

Spain's Beckham law (the inbound worker regime in Article 93 of Spain's income tax law) has been open since 2023 to remote workers on Spain's digital nomad visa too. It rarely fits a classic freelancer with a dozen clients.

The Dutch 30% ruling works only through an employer. In 2026 it applies to salary of up to $300,000, and from 2027 the rate drops to 27%.

The UK, which drew wealthy foreigners with non-dom status for decades, abolished it on 6 April 2025. In its place is a four-year exemption on foreign income and gains (the FIG regime) for people who have not lived in the UK for 10 years.

Capital gains and dividend tax in Europe: where investors pay least

A worked example: an investor with a $2.3 million portfolio yielding 5% earns $120,000 a year. The Netherlands taxes a deemed return on that portfolio at 36%; Ireland taxes capital gains at 33%. In Cyprus, a non-dom pays nothing on those dividends and interest, and gains on shares and bonds are exempt for every resident.

• Cyprus is the best fit for those willing to actually live on the island for at least 60 days a year and set up a job, business or directorship there. Dividend tax for a non-dom is 0%; capital gains tax on securities is 0% for everyone. What remains is a 2.65% contribution to the state healthcare system GESY (General Healthcare System) on dividends and interest, charged on income of up to $210,000 a year.
• Malta suits those who can keep income abroad. Foreign dividends are taxed only when brought into Malta, foreign capital gains never. The price is a minimum tax of $5,700 a year.
• Italy and Greece are for the very wealthy. A flat $340,000 or $120,000 a year pays off only when foreign income runs into millions.
• The Netherlands taxes savings and investments in Box 3, on a return the state assumes rather than the one you actually made: 36% of that deemed return.
• Romania is surprisingly gentle on retail investors trading through local brokers: 3% on gains from securities held longer than a year, 6% for shorter holdings. Through a foreign broker, it is 16%.

How this compares with home matters for Americans in particular: the US taxes its citizens wherever they live, so a move to Cyprus or Malta does not switch off US capital gains tax. More on that in our overview of US taxes.

Lowest taxes in Europe for retirees

Greece taxes foreign pensions at 7% for 15 years, the clearest retirement regime in Europe in 2026. The key condition is not having been Greek tax resident for 5 of the 6 years before the move. Italy offers the same 7% for 10 years, but only if you move to a small town (up to 20,000 people) in the south: Sicily, Calabria, Sardinia, Puglia and several other regions.

Portugal no longer works for retirees. The old NHR taxed foreign pensions at 10%, but it is closed to newcomers, and the new IFICI explicitly excludes pensions. If you read about Portugal as a pensioner's paradise five years ago, that chapter is over.

Taxes in Europe vs the US

The biggest difference is not the income tax rate but VAT. The US has no federal value-added tax; states and cities charge a sales tax that is usually in the single digits. European VAT runs from 17% in Luxembourg to 27% in Hungary and is built into almost every price you pay.

For a high earner in New York or California, Western Europe's income tax is often in the same range once state and city taxes are added. Where Europe is clearly more expensive is on the middle class: top brackets start lower, and VAT takes a bigger share of spending. Where parts of Europe are clearly cheaper is Eastern Europe's flat taxes and the investor regimes of Cyprus and Malta. The catch for Americans is citizenship-based taxation: moving to Sofia or Limassol does not end your US filing obligation.

The 183-day rule: why it is not enough to avoid tax

The most expensive myth among people who relocate is that spending fewer than 183 days in a country means no tax there. In reality, 183 days is just one test, and almost every European country adds its own.

• Spain treats you as resident if your centre of economic interests is there, and presumes residency if your spouse and minor children live there permanently. There is no split year: you are resident or non-resident for the whole year.
• Germany latches onto any home you can use at any time, even if your stays are short.
• Cyprus, in contrast, can make you resident after just 60 days, subject to the conditions above.

The opposite danger is ending up resident nowhere. Under CRS (the Common Reporting Standard, the automatic exchange of financial account data between countries), banks and brokers ask for your country of tax residency, and someone without one risks losing accounts. Your former country may also keep treating you as its taxpayer. The residency tests are covered in detail in our guide to the 183-day rule.

Hidden costs that eat the tax savings

A move for a 10% rate does not always pay off. These are the things that most often turn a pretty number in the table into an ordinary bill.

• Social contributions. Bulgaria and Romania have low income tax, but contributions on salary do not disappear. For the self-employed and company owners they often matter more than the tax rate.
• CFC rules. Under the EU Anti-Tax Avoidance Directive (ATAD), every member state taxes the profits of controlled foreign companies (CFCs) in low-tax jurisdictions. Passive income of a UAE company owned by a German resident will still fall under German tax.
• Substance requirements. Tax residency without a real life in the country rarely survives a bank or tax audit. Cyprus wants 60 days and business on the island; Spain's Beckham law wants genuine work.
• Taxes on wealth and savings. Spain levies a wealth tax plus a separate solidarity tax on large fortunes; the Netherlands taxes a deemed return on savings. The income tax rate shows none of this.
• Regimes close. In the last three years Portugal's NHR and the UK's non-dom status disappeared, the Netherlands started trimming its 30% ruling, and Italy tripled its flat tax from $120,000 to $340,000. A plan built on a special regime therefore needs a fallback.

Who Europe's low taxes will not suit

US citizens. America taxes its citizens wherever they live, and a move to Bulgaria does not cancel the US return.

People not ready to live in the country. A 10% rate does not help if the country where your family, home and business remain still treats you as its tax resident.

Retirees dreaming of Portugal. The pension perk is gone there; look at Greece and southern Italy.

Those who need high salaries and a deep job market. Low taxes in Eastern Europe come with salaries well below Germany or the Netherlands. Take-home pay is sometimes higher in the high-tax country.

Anyone counting on e-Residency or a Cypriot company without moving. A company does not make its owner resident. The country where the owner lives may tax its profits.

If it does not have to be Europe: Paraguay, the UAE, Georgia

No EU country exempts the foreign income of an ordinary resident without a special status. Outside Europe, that is the norm.

• Paraguay taxes only local-source income: foreign income is exempt, local income is taxed at 8-10%.
• The UAE has no personal income tax. Corporate tax is 9% on profits above $110,000, and VAT is 5%. The downside is the cost of living.
• Georgia exempts individuals' foreign income and offers sole traders with small business status a 1% tax on turnover within a cap.

Bottom line: which European country fits your income

Salary and freelancing - Bulgaria, Romania, Hungary, or for high earners relocating to an employer, Cyprus, Spain or the Netherlands with their regimes. Your own company - Bulgaria, Estonia, Cyprus, Ireland. Dividends and capital - Cyprus and Malta. A foreign pension - Greece and southern Italy. Before deciding, cost out the whole chain: tax, contributions, local levies and cost of living; rates for each country are in our tax section. Ask an expert which country works best for your income.

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