Tax Implications for Working Abroad

Summary: The tax implications for working abroad depend a great deal on the amount of time an individual spends working overseas, their main country of residence and also on domestic tax laws and international tax treaties - here's a quick guide to getting to grips with your taxation situation when working abroad.

Expatriates or contractors who work abroad for any length of time need to get to grips with their taxation situation quickly in an effort to understand their liabilities but also in a bid to reduce their overall taxation burden.

The tax implications for working abroad depend a great deal on the amount of time an individual spends working overseas, their main country of residence and also on domestic tax laws and international tax treaties - now, we understand that talking about tax for too long can bore anyone into a stupor so here’s a quick guide to getting to grips with your taxation situation when working abroad.

Assuming you’re working abroad but herald originally from the UK, if you spend more than 183 days in the UK in any one particular tax year then the UK consider you ‘theirs’ for all taxation purposes!

Alternatively, if you habitually leave the UK to work overseas then the UK will consider you ‘theirs’ for taxation purposes if you spend less than 183 days a year in the UK but you’ve consistently spent 90 or more days in the UK every year for the past four years...this rule then kicks in in the fifth year.  For more information about determining residence click here.

Most people who move abroad to work actually take up official residence in their new country and this makes things far more straightforward.  Contact the Inland Revenue in the UK and they will send you a form to complete advising them of your new country of residence and your new address - then, assuming you don’t owe back tax they’ll leave you alone until you repatriate!

Now you have to get to grips with taxation of your salary abroad.  Laws and rules and rates and exemptions change on a country by country basis so it is imperative you take a little time learning about what your liabilities are, whether or not you PAYE, whether or not you have to fill in a tax return and if so when does it have to be in by...and far more importantly you need to find out about what you can claim back, what exemptions you’re entitled to and how you can save tax when working abroad.

For high net worth individuals, high earners and global executive travellers, international taxation planning advice can be sought from professional companies who can assist with filing global tax returns, utilising offshore rules for taxation reduction and overall wealth management assistance.  Many companies advertise on the internet and in publications like the Economist for example.

For the rest of us expatriates, the tax implications for working abroad have to be tackled head on perhaps with the assistance of a local accountant who can explain the taxation system in our new country of residence.

The main thing is to find out about whether you can take advantage of your overseas residency status to go offshore - particularly when saving or investing your income and of course when banking - and to determine whether you have any additional rights to tax breaks as an international worker.  In some countries international workers and expats can claim tax back against the maintenance of a family or residence ‘back home,’ they can claim against travel and even reduce any capital gains taxation burden from their originating country just by remaining overseas for a fixed period.

The tax implications for anyone working abroad change on an individual, case by case basis - so firstly determine your country of residence and then go forward from there and get local applicable taxation advice and learn about how you can make the most of your expatriate status by going offshore and how you can save tax by claming back all you are entitled to.

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