Small Business Taxes in Europe: A Complete Beginner's Guide

The European Tax Mosaic

Europe doesn't have a single tax system — each country has its own rules. But understanding the common frameworks can help you navigate taxes whether you're in Germany, France, the UK, or elsewhere.

European tax rates vary dramatically. A freelancer earning €100,000 might pay €50,000 in Belgium but only €20,000 in Bulgaria. Location matters.

VAT: The European Sales Tax

Value Added Tax is the one constant across Europe. Every EU country has VAT, and the UK retained it post-Brexit.

VAT Rates by Country

Standard rates:

• Hungary: 27% (highest in EU)
• Denmark, Sweden, Norway: 25%
• UK, France, Austria: 20%
• Germany, Netherlands: 19%
• Luxembourg: 17% (lowest in EU)

Reduced rates apply to food, books, and other essentials in most countries.

Calculate your VAT with our VAT calculator on Tuble.net.

VAT Registration Thresholds

Thresholds vary significantly:

• UK: £90,000
• Germany: €22,000
• France: €36,800 (services), €91,900 (goods)
• Netherlands: No threshold (must register from €0)
• Spain: No threshold
• Ireland: €37,500 (services), €80,000 (goods)

Cross-Border VAT

B2B Sales: Generally zero-rated (reverse charge applies)

B2C Sales: VAT charged at customer's country rate above €10,000 threshold

OSS (One-Stop Shop): Single registration for EU-wide consumer sales

Income Tax: Country Comparison

United Kingdom

2024-25 Rates:

• 0%: £0 - £12,570
• 20%: £12,571 - £50,270
• 40%: £50,271 - £125,140
• 45%: Over £125,140

Plus National Insurance: 6% for self-employed (Class 4)

Germany

2024 Rates:

• 0%: €0 - €11,604
• 14-42%: €11,605 - €66,760 (progressive)
• 42%: €66,761 - €277,825
• 45%: Over €277,825

Plus Solidarity surcharge (5.5% of income tax) for high earners

France

2024 Rates:

• 0%: €0 - €11,294
• 11%: €11,295 - €28,797
• 30%: €28,798 - €82,341
• 41%: €82,342 - €177,106
• 45%: Over €177,106

Plus social contributions (around 20-45% depending on status)

Netherlands

2024 Rates:

• 36.97%: €0 - €75,518
• 49.5%: Over €75,518

Simple two-bracket system, but high overall rates

Low-Tax Options in Europe

• Bulgaria: 10% flat tax
• Romania: 10% flat tax
• Hungary: 15% flat tax
• Estonia: 0% on retained corporate profits

Social Contributions: The Hidden Tax

European countries often have significant social security contributions on top of income tax.

Self-Employed Contributions

• France: 40-45% of net income
• Germany: 18.6% pension + 14.6% health
• UK: Class 2 (£3.45/week) + Class 4 (6-2%)
• Netherlands: Integrated into income tax
• Spain: Fixed monthly rates based on income bands

These contributions fund healthcare, pensions, and unemployment benefits.

Business Structures and Tax

Sole Trader / Self-Employed

Available in all countries. Simple to set up, personal tax rates apply.

Best for: Small operations, testing a business idea, low-risk activities.

Limited Company

Separates personal and business liability. Corporate tax rates apply.

Corporate Tax Rates:

• Ireland: 12.5% (lowest in Western Europe)
• UK: 19-25%
• Germany: ~30% (including local trade tax)
• France: 25%
• Netherlands: 19-25.8%

Best for: Higher earners, liability protection, investors.

Country-Specific Regimes

UK: Self-Assessment

Self-employed register with HMRC, file returns annually, pay tax January 31 and July 31.

Germany: Kleinunternehmer

Small businesses under €22,000 revenue can opt out of VAT (simplified regime).

France: Auto-Entrepreneur

Simplified regime with turnover limits (€77,700 services, €188,700 goods). Pay fixed percentage on revenue.

Spain: Módulos

Simplified estimation system for certain activities — pay tax based on business characteristics, not actual income.

Netherlands: KOR

Small business exemption from VAT if turnover under €20,000.

Record Keeping Requirements

Standard Requirements

Most European countries require:

• Invoice records (issued and received)
• Bank statements
• Expense receipts
• VAT records
• Annual accounts

Retention Periods

• UK: 5-6 years
• Germany: 10 years
• France: 6-10 years
• Netherlands: 7 years

Digital Requirements

E-invoicing is becoming mandatory:

• Italy: Already mandatory
• France: Rolling out 2024-2026
• Germany: 2025+

Common Mistakes

Mistake 1: Ignoring VAT Thresholds

Exceeding the threshold without registering creates immediate liability for VAT you didn't collect.

Solution: Monitor turnover carefully, register proactively.

Mistake 2: Cross-Border Confusion

Selling to other EU countries without understanding place-of-supply rules.

Solution: Understand B2B vs B2C rules, consider OSS registration.

Mistake 3: Underestimating Social Contributions

Focusing only on income tax rates without considering social security.

Solution: Calculate total tax burden including all contributions.

Mistake 4: Missing Deductions

Each country has specific deductions many businesses miss.

Solution: Work with a local accountant.

Tax Planning Strategies

Choose Your Structure Wisely

In high-tax countries, incorporating can reduce effective rates significantly.

Claim All Deductions

Home office, travel, equipment, professional development — track everything.

Consider Location

Digital nomads and location-independent businesses may benefit from lower-tax jurisdictions.

Use Tax Treaties

Operating across borders? Tax treaties prevent double taxation.

Getting Professional Help

When to Hire an Accountant

• Setting up in a new country
• Cross-border operations
• Income exceeds €50,000-100,000
• Complex VAT situations

Find accounting professionals on Tuble.net.

Country-Specific Resources

• UK: HMRC website, gov.uk
• Germany: ELSTER, Finanzamt
• France: impots.gouv.fr
• Netherlands: Belastingdienst

Use the working days calculator to track tax deadlines across different countries.

Create your business profile on Tuble.net to connect with European business service providers.

Summary

European taxes vary dramatically by country. VAT registration thresholds, income tax rates, and social contributions all differ. The key is understanding your specific country's rules while being aware of EU-wide frameworks like cross-border VAT. Work with local professionals — the cost is minimal compared to potential penalties and missed opportunities.