Tax incentives are the concessions in tax codes that mean a conscious loss of government budgetary revenue because they reduce either the tax base (tax allowance) or the tax due (tax credit). Concerning tax incentives for the purposes of personal income tax, they may allow adults to deduct their costs for continuing vocational training or adult learning related to their current or future occupation from their individual income tax base or tax due.
Adults with low or no income, paying no personal income tax, cannot profit from the tax deduction. Only if a negative income tax is implemented correcting this imbalance, low wage earners could profit from education and training related tax incentives.
When income tax is progressive, adults in higher tax classes profit more from the tax deduction from the tax base than adults in lower tax classes.
In some countries, adults can deduct educational costs for members of their households, in particular for their children; yet, the maximum deductible amount then applies to both costs for their own training and the costs for their household’s members training (as, for example, in Estonia).
Tax incentives vary across EU countries in relation to the types of education/training activities supported (e.g. for current employment/occupation or for individuals intending to start a new career). Occasionally, specific tax incentives for individuals are provided for supporting particular policies in lifelong learning, for example, tax credit for expenditure on the accreditation of prior learning provided in the Czech Republic.
Companies may cover the costs of educational and training activities (mainly) in the interest of their employees, which could be regarded as taxable income (fringe benefits). A particular tax exemption can be granted for these benefits within certain limits (as, for example, in Malta). This type of tax incentives are not reported in this database.
Exceptions from value added taxes for some training activities or types of training providers are also present in some Member States (for example in Austria and Italy), potentially reducing the costs of services for individuals (see CEDEFOP 2009). However, they are not reported in this database.
Distribution of tax incentives for individuals in the EU