This is a short story of my personal experience of moving to different countries in the EU, seen through a legal lens.

Second lesson: be sure to take care of your residence

No, residence it is not the same as a permanent address, but it’s close. Imagine an umbilical cord that stretches from your purse to the country’s treasury, which you need to sever if you meet the prerequisites. Residence is the umbilical cord connecting you to your home country. Don’t attempt to artificially avoid taxation; instead, if you are moving abroad with your family, handle it properly and comprehensively.

When you move to another country, accept that you complicate your life just a little bit more also in the tax field. Why? Because of the principle of worldwide income and the status of tax residency. All EU countries have adopted the “worldwide income” principle for their tax residents, meaning that all the income you earn across the world is subject to tax in the country of your fiscal (tax) residence. Therefore, better check how much tax you will have to pay on this income in your home country if you remain a resident there, and subtract this amount from your net pay (gross minus the tax and contributions in the country of work). This can lead to the double taxation of your income, which you will need to solve. In the meantime, you will have to bear the increased burden of double taxation until it is resolved.

A very interesting case, again, is the Humboldt Scholarship given by the German government. This scholarship is expressly exempt from taxation in Germany but would probably be taxed in Slovenia because it is not a scholarship in the traditional sense of payment for furthering your formal education and therefore not exempt under the Slovenian Income Tax Act. These things are important when calculating your monthly income. For those who will move to another country for a longer period (like 24 months or longer), you have the option to change your fiscal residence, especially if you do not plan to return to your home country after this period.

If you face paying taxes in both your home country (which doesn’t want to grant you a transfer of residency) and the country where you work (the source of your income), then (in most cases) you have the right to avoid double taxation. Double taxation is an international term that refers to paying taxes in two countries: one where you earn your income (income source principle) and the other where you are considered a resident (worldwide income principle). This situation is usually resolved in one of two ways: either through the national law of your resident country or by double taxation treaties (you have to check if a double taxation treaty exists between your country of residence and the country where you work, i.e., the income source country).

Here's how it typically works: in your home country, where you are considered a resident, you will have to apply for a tax deduction to the amount of tax paid in the country where you work. In the country where you work (the income source country), you will have to check how much tax you must pay under the double taxation treaty. Some types of income, such as dividends, interest, and property rights, may be subject to a lower tax rate under these treaties. You can then request this lower tax rate or a refund from the income source country.

But even when double taxation can be remedied by double taxation treaties, you’d have to consider that it takes at least a year, if not more, to receive a tax refund. That is a long time when your monthly budget is stretched as it is. Also, you could find yourself in a difficult situation if you base your monthly budget on the tax due in your country of residence (country of origin), but the country of work imposes a higher tax rate. Your country of residence will only recognize and deduct the amount of tax that would be due under its tax regulations. Any excess tax paid to the country of work would remain, effectively causing you to pay more tax than you initially planned. So, be careful.

Third and final lesson: calculate your net pay and living costs for the specific country

When planning your life abroad, nothing is as important as the monthly budget. Be extra careful and use a pessimistic approach when calculating your net pay. It’s better to be pleasantly surprised with some leftover money each month than to realize that you were overconfident regarding your income. And when doing so, there is no way around the fact that you need to have a basic understanding of the tax system in your destination country. Knowing some crucial things can help you save enough on taxes to ease your concerns about your monthly budget. I know it’s a very confusing topic, but it’s worth investing extra effort to understand it before you decide if you are going to leap into the wonderful world of migration. If you are really and genuinely put off by the subject of taxation, browse your phone contacts for a friend who could give you some advice. Or invest a few hundred euros in professional tax consultation. To illustrate the impact that proper tax advice can have on your monthly budget, consider the complexity of the German tax system. Germany’s tax brackets can be very confusing and depend on your family situation. Generally, married couples benefit from more favorable tax rates due to the promotion of traditional family structures in Germany. As a result, a couple filing jointly under the married couple tax bracket will pay less tax than they would individually. So, if you’re planning to move to Germany and haven’t proposed yet, maybe now is the right time. What’s love got to do with it?! In this case, it might mean significant tax savings! In contrast, Slovenia does not offer similar benefits for married couples, as this sort of discrimination is not allowed under Slovenian constitutional law.

Conclusion

There you have it – some general advice on how to not lose your mind and plan ahead. We planned our migration carefully and had a bang of a time without serious financial worries. But the key is good planning. If you go just jump into the opportunity without preparation, you have a 50-50 chance it will work out, much like in any life situation. However, with proper planning, you will significantly increase your odds of success. Start by planning your finances and work from there. And don’t forget to have a good time living in a strange and interesting new country.

Disclaimer: The views expressed in this post are not the organization's official positions where the author is employed.