Working Remotely Abroad: What Are The Tax Implications

| 15th March 2023

Are you considering working remotely abroad but are unsure of what the tax implications may be?

As remote work continues to gain popularity even after the pandemic, more people are choosing to work remotely abroad.

This blog will explore the various tax implications for digital nomads and those working remotely abroad.

Digital nomads

The term, ‘digital nomad’ refers to an individual who works remotely and typically makes money online.

People often opt for remote working, as it can allow you more freedom in your daily life.

However, this lifestyle does come with challenges and it’s important to be aware of any implications that this involves.

Tax obligations and residency issues

When working abroad, your residency status is one of the most important factors to consider.

Residency differs from country to country and is determined according to the amount of time spent there per year.

You can either be a temporary or permanent resident. You can also be a dual resident of two countries.

Many countries consider you a resident if you spend more than 183 days in the country.

For example:

  • If you visit the UK for more than 183 days out of the year, you will be considered a UK tax resident and will be liable to pay UK residency tax.

Depending on the residency status of the country you are working in, you may still have to pay UK income tax.

It is vital that you research the tax laws of the place you are planning to work in, as they vary from country to country.

Double taxation

If you are a resident of both the UK and an overseas country, you may be taxed twice.

However, if your country of residence has a double-taxation agreement with the UK for example, you may not have to pay twice.

If the UK and the host country have a Double Tax Treaty (DTT), you may be eligible to apply for relief.

You may be able to apply for either:

  1. A refund after being taxed
  2. Full or partial relief before being taxed

According to the UK government, your double-taxation agreement will state:

  • The country in which you are a tax resident
  • The country in which you are applying for tax relief
  • The amount of tax relief you receive

If the two countries have varying tax rates, you will be liable to pay the higher of the two.

It is also important to be aware of the different tax year dates of the relevant countries.

Income tax you can claim for

You may be able to claim income tax on:

  • Bank interest
  • Wages
  • Pensions
  • Dividends

Again, this is very much dependent on your specific employment contract and the agreement the UK has with your country of residence.

Self-employment taxes for people remotely working abroad

Self-employed individuals may also be liable for social security implications.

The UK requires individuals who are self-employed and earn more than £11,908 per year, to make contributions to the National Health Service (NHS) and state pension.

Similarly, if you are self-employed and working remotely abroad, you may have to pay social security contributions.

It is important to check whether the overseas country you are working in has a social security agreement with the UK.

This social security agreement may protect you from double-taxation.

You can find out more about the countries that have a social security agreement with the UK.

Tax deductions for digital nomads

While working remotely abroad, you may be eligible for certain tax deductions on business expenses.

These expenses may include things such as:

  • Equipment
  • Travel expenses
  • Home office expenses
  • Gas and electricity bills

If you are wanting to claim tax deductions on business expenses, regardless of in the UK or overseas, you must keep a record for proof.

If you are unsure of whether you can claim tax deductions on business expenses in the country you are working from, it is beneficial to seek local legal advice.

Tax planning for digital nomads working remotely abroad

Before making the decision to work remotely abroad, it is important to do your research and plan accordingly.

Ensuring that you are complying with the tax laws of both the UK and your host country is vital.

Planning ahead may also help you minimise your tax liability and protect you from paying more than necessary.

There are many ways to reduce your taxable income if you are working as a digital nomad.

Another way of avoiding additional tax implications abroad is to make appropriate tax declarations.

If you are still unsure of all the rules and regulations surrounding working remotely abroad, you may want to contact a tax professional.

Tax professionals who specialise in international tax law will be able to guide you through the tax laws of various countries.

Tax implications for working remotely abroad: final thoughts

While each overseas working arrangement is unique, it is important to be aware of these aspects:

  • Residency status and tax obligations
  • Foreign tax laws
  • Double-taxation agreements
  • Income taxes
  • Self-employment taxes
  • Tax deductions

Becoming a digital nomad can be a very exciting transition and seems to be appealing to more and more people.

We hope this article has provided helpful insight into this matter.

If you are interested in learning more about the HMRC fuel rates for company cars, we have the article for you.

For any other queries you may have, contact us at Howlader & Co.

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