With each new year, we see shifts in taxes, savings rates, consumer costs, and governmental allowances. This year also introduces significant tax changes that will affect both current expatriates and those considering a move. Below, we provide a detailed look at the most favorite expat countries.
Sweden lowers tax rates
Great news for foreign workers in Sweden! The government has confirmed a tax reduction in its 2025 Finance Bill (PFL 2025). Announced on September 19, 2024, by Finance Minister Elisabeth Svantesson, the Swedish PFL 2025 is designed to rejuvenate growth, which has been sluggish for the past two years, through tax cuts. Notably, investment-savings accounts will see increased profitability, thanks to a tax exemption on returns up to 150,000 crowns, allowing savers to earn more without paying taxes on the interest.
The economic downturn has particularly affected small and medium-sized enterprises (SMEs), which will benefit from tax relief. The overarching aim is to foster growth and employment by easing the tax load. Additionally, the government plans to streamline administrative processes, offering reductions in employer contributions to SMEs that create jobs.
The new budget allocates 60 billion crowns (approximately 5.3 billion euros), with half earmarked for financing these tax reductions. However, the tax cuts include reductions in gasoline, diesel, and air transport taxes, posing a dilemma for environmentalists. While some expatriates may find these cuts at odds with Sweden's strong environmental stance, others see them as crucial for managing the rising cost of living. Nevertheless, the government remains committed to environmental goals, proposing incentives for the adoption of green technologies. These incentives include simplified applications for tax reductions available to both local and foreign individuals, with applications due until January 31 of the year following the full payment for the installation. These tax incentives will focus on aiding low-income households, with an even larger deduction available to individuals aged 66 and over.
Spain: Tax on real estate purchased by non-Europeans
In response to its ongoing housing crisis, the Spanish government has set its sights on foreign investors. A new tax reform proposal suggests imposing a 100% tax on real estate purchases made by non-Europeans. Historically, buyers from America, Morocco, Mexico, and Britain have been attracted to Spanish properties. However, following the discontinuation of the Golden Visa, this new tax initiative might deter foreign investments. Some Spanish experts argue that the influence of affluent expatriates on the real estate market is overestimated and view this move as a "sanction" tax intended to demonstrate the government's commitment to taking action.
In addition to this, locals and expatriates will be subject to three new taxes: a waste tax, a tax on tobacco-related products, including electronic cigarettes starting in April, and a diesel tax. The waste tax will be collected by local municipalities, with expatriates expected to pay between 165 and 200 euros annually. Despite these changes, the Spanish government has not extended the VAT reduction on basic necessities, which remains at 4% since January. Meanwhile, the VAT on electricity has been increased to 21%, resulting in expatriates facing an additional annual cost of approximately 110 to 120 euros.
For self-employed individuals, social contributions will now be calculated based on actual income, affecting their financial obligations differently depending on their earnings. Those with lower incomes will see a slight reduction, while entrepreneurs earning more than 1,700 euros per month will face higher contributions.
United Kingdom: Tax on overseas transfer fees
+40 billion pounds of tax increases per year. +100 billion pounds over 5 years to finance public investments. Presented on October 30, 2024, the Labour Party's budget wants to embody a break, after years of conservatism. According to the government, the announced increases are unprecedented but essential to save the health system, school, transport, and infrastructure and stimulate growth, notably through foreign investments. Regarding taxes, the increases will be mainly borne by companies.
However, the budget also plans to reduce certain benefits granted to British expatriate retirees. This is the case with exemptions related to the tax on overseas transfer fees (OTC). Established in 2017, the OTC requires British expats who transfer their pension to a recognized and eligible overseas pension scheme (QROPS) to pay a tax of 25%. But the tax only applies to certain transfers. British expatriates benefit from an exemption if they transfer their pension within the European Economic Area (EEA) or to Gibraltar while living in these geographical areas. Expats could thus plan a more favorable retirement savings plan by living in an EEA country while transferring their pension to another EEA country or to Gibraltar. They could also remain British residents and transfer all or part of their pension to an EEA country.
2025 budget limitations
The 2025 budget changes the game. From now on, British retirees living abroad will have to pay the OTC even if they live in the areas covered by the traditional exemption. Whether they are residents in the United Kingdom or expatriates in an EEA country (or Gibraltar), British retirees will have to pay 25% in the event of a pension transfer to a QROPS from another EEA country. The exemption is now limited to transfers to a QROPS in the EEA country where the expatriate resides.
As of April 6, 2025 (the date the extensive tax reform takes effect, with the end of non-domiciliation), the rules regarding recognized overseas pension schemes (ROPS) and overseas pension schemes (OPS) established in the EEA will be the same as those in effect in the rest of the world. An OPS set up in an EEA country will be subject to the pension scheme regulations of that country. A ROPS can only be valid in a state that has concluded a double taxation treaty with the United Kingdom. This agreement will notably frame the exchange of tax information.
What are the consequences for British expatriates?
The British government reminds us that the new measure does not impact British expats who receive their retirement pension. However, it will affect expatriates whose pension scheme or the scheme to which the pension transfer is made no longer meets the criteria of the OPS (foreign pension scheme) or QROPS (recognized and eligible foreign pension scheme).
Tax advantages are now limited and could challenge the benefits of a pension transfer to a QROPS. This particularly concerns Britons planning to move overseas and who hold significant retirement savings. The 25% tax could make their project less financially advantageous. For example, they could keep their retirement in the United Kingdom instead of transferring it abroad. Retirees already living abroad are also invited to reconsider the costs/benefits of moving abroad to preserve their retirement savings. This is precisely the government's objective: to discourage pension transfers abroad and limit the tax advantages of expatriates to keep their retirement assets under British taxation.
In addition, the government has announced that from 2027, retirement pensions will be subject to inheritance tax (IHT) regulations, with a tax rate of 40% on estates over 325,000 pounds. Previously, pensions were one of the few solutions for transferring wealth while escaping IHT. This reform, which adds to the fees concerning transfers abroad, forces British expatriates to review their retirement savings plan now if they want to protect their assets.
Portugal: New tax incentive to attract foreign talent
Portugal's 2024 Finance Law introduced the Tax Incentive for Scientific Research and Innovation (IFICI), designed to attract highly qualified workers, foreign talent, startup founders, and innovative entrepreneurs. This incentive is set to replace the previous Non-Habitual Resident (NHR) regime, with detailed application guidelines provided in the ministerial order published on December 23, 2024.
While the IFICI primarily targets scientific research and innovation, its scope is notably broader, encompassing all non-tax residents who have not been tax residents in Portugal for the last five years. These individuals must be engaged in highly qualified professions, work in higher education and scientific research, or be involved in the research and development of personnel. Critical to the eligibility is the relevance of the professional role to the Portuguese economy; for instance, the qualified foreign worker must be employed by a company recognized by either the Portuguese Agency for Investment and External Trade or the Agency for Competitiveness and Innovation.
Professions covered by the Ministerial Order
The ministerial order lists specific professions eligible for IFICI, including doctors, ICT experts, industrial designers, general managers, executive directors, directors of administrative and commercial services, directors of production and specialized services, and experts in physics, mathematics, engineering, and related fields.
Eligible foreign talents must hold at least a bachelor's degree or a doctorate and have at least three years of professional experience. The Portuguese administration may request any documents necessary to verify the applicant's qualifications. Moreover, Madeira and the Azores regional governments can set their own criteria for companies based in their regions.
Benefits for foreign workers and entrepreneurs
IFICI offers a flat tax rate of 20% on the income of eligible professionals and entrepreneurs for ten years from the date the individual registers as a resident in Portugal. A designated organization will be responsible for verifying the eligibility of candidates, ensuring that their profession aligns with the scope of the IFICI.
Applications must be submitted by January 15 of the year following the one in which the applicant became a tax resident of Portugal. A transition period is available for new tax residents registered in 2024, extending their deadline to March 15, 2025.
Beneficiaries will continue to enjoy these advantages as long as they maintain their professional status. Nearly all non-Portuguese incomes are exempt from tax, excluding pensions. International investors will find the exemption from capital gains and dividends particularly appealing. However, incomes from countries listed on Portugal's blacklist of non-cooperative jurisdictions will be taxed at an increased rate of 35%.
With the Golden Visa still operational for non-real estate investments, IFICI aims to further enhance Portugal's appeal as a destination for innovative entrepreneurs and investors. Lisbon, crowned the European innovation capital in 2023, has seen startup investments grow by +30% annually for nine years—double the rate of other European capitals. This tax incentive is expected to significantly boost these impressive performances.
France: Comprehensive unemployment insurance reform
The unemployment insurance reform in France, effective from January 1, 2025, brings significant changes but will only impact those registered with the public agency France Travail (formerly Pôle emploi) starting in 2025. There are no retroactive effects, except for specific exceptions. French nationals returning from expatriation and foreign residents who registered with France Travail before January 1, 2025, will continue under the old regulations. An important note: while the reform was activated on January 1, some provisions won't take effect until April 1, 2025, and it is set to last for four years. France Travail requires that registration occurs post-cessation of activity abroad and upon returning to France, with returning nationals needing to present a form (form U1) from their foreign employer attesting to their overseas activity.
New provisions regarding compensation
Unemployment benefits, now termed "return to employment allowance (ARE)," are calculated monthly based on a 30-day period, standardizing the payment amount. Previously, the allowance varied slightly as it was dependent on the number of days in a month. This new method mainly affects those who secure employment before their benefits expire, as they might lose a few days of compensation. It's important to note that the monthly payment of the ARE is retroactive and applies to all job seekers, irrespective of their registration date.
Unemployment rights for seasonal workers
Seasonal workers, including foreigners, are particularly vulnerable in the labor market. Effective April 1, 2025, the reform reduces the required work duration for compensation eligibility from 6 months within the last 24 months to 5 months. This change also shortens the minimum duration for receiving the ARE from 6 to 5 months.
Eligibility for resigning foreign workers
Under normal circumstances, the ARE is not payable to those who voluntarily leave their jobs. It is typically reserved for those who are unemployed due to contract termination or economic layoffs. However, legitimate resignations under certain conditions, such as resigning shortly before starting a new job, are exceptions. Before the reform, resignation needed to occur less than 3 months before new employment for eligibility; this period has now been extended to 4 months, starting April 1, 2025.
Canada maintains tax exemption on consumer products
In response to inflation, Canada has not altered its tax rates but has adjusted the income thresholds for each tax bracket to lighten the financial load for many Canadians and expatriates, particularly those with modest incomes. To counteract the cost of living increase (estimated at 3 to 5% this year), the government has extended the tax exemption on specific consumer products until February 15, 2025. Details about the exempted products can be found on the government's official website.
In an effort to preserve purchasing power, the government also decided on January 31 to delay the increase in the capital gains inclusion rate until January 1, 2026. This rate, which determines the taxable portion of capital gains, will rise to 66.67% for both companies and individuals on gains exceeding $250,000. Although this postponement provides temporary relief for taxpayers, it places additional strain on government finances. This delay has frustrated many stakeholders, as the increase was initially heralded as a key element of the 2024 tax reform, prompting many companies and investors to accelerate asset sales to benefit from the current lower rate of 50%.
Conversely, there is less favorable news regarding electricity rates in Quebec. They will likely rise on April 1 for all residents (+3%), commercial businesses (+3.9%), and large industries (+3.3%). The final decision on these increases will be made by the Energy Board in March.
For senior workers in Quebec, the tax credit for career extension will now only be available to those aged 65 and over. Previously, individuals aged 60-64 were also eligible. This change has been met with criticism from those affected, who argue that it could worsen their financial security as they approach retirement.
The United States suspends customs tax increase project
Donald Trump has exited an international agreement on multinational taxation, halting years of negotiations and the OECD's tax reform efforts. In a further unexpected move, he announced a one-month suspension of proposed customs taxes on imports from Mexico and Canada.
Previously, Trump pledged to hike these taxes by 25%, which has raised alarm among foreign companies given the brief nature of the reprieve.
China faces a looming threat of a 10% tax increase on top of existing tariffs, with the European Union also targeted by similar measures. This brewing situation marks a potential trade war, deemed risky for both global trade and the American economy itself. In retaliation, Canadians have begun boycotting American products, and China has ramped up tariffs on certain American goods. Further escalating the situation, the United States, as of February 4, has banned all imports from China and Hong Kong, a measure criticized by Chinese businesses as excessive.
Despite the market instability triggered by these announcements—which could deter investment from both foreign and domestic companies—Trump continues to promise significant tax reductions. He proposes cutting taxes from 21% to 15% for foreign companies that relocate their production to the U.S. However, these ambitious plans are overshadowed by the challenges posed by the rising American public debt, casting doubt on the feasibility of these tax cuts.
