Employment Tax Myth-busting

I definitely don’t need to pay tax – I’m in the country for less than 183 days – MYTH

The facts:
Most tax treaties do include a clause that income tax is not due on non-residents working in a country for less than 183 days.  However, this comes with some important distinctions:

  • Who is actually paying and employing the worker?
  • What field of work are they in – some countries demand income tax from day one for oil & gas workers, for example.
  • What counts as “working in the country” – for example, some treaties include periods on leave as part of the count.
  • What reporting exists – the absence of a liability does not automatically mean no tax is due on account or that there are no reporting requirements.
  • Do you know if there is actually a treaty in place that provides cover?

I’m at sea for most the year, I don’t need to worry about tax. – MYTH

The facts:
If you are a UK resident taxpayer then it is possible to claim the Seafarer’s Earnings Deduction for qualifying sea time. However:

  • Not all sea service counts for the SED.
  • You may still be required to pay tax and claim a refund
  • Depending on where you work and on what, you may have other countries’ tax liabilities to face.
  • You will still be required to complete a tax return.

I pay voluntary NI contributions at home. I don’t need to worry about employee’s NI when abroad. – MYTH

The facts:
You may be eligible for full social coverage – pensions, healthcare, sick pay – with voluntary contributions. However:

  • There can be situations where you are not allowed to by VCs in your home state. There have been cases of countries refusing to cover voluntary contributors claiming social support on the basis they were not eligible to pay in the first place.
  • Your VCs may not provide full social cover.
  • Your contributions into one country’s social fund may not be recoverable in the country to which you intend to live/retire.
  • You and your employer may still be considered liable for social security contributions in the state you are working in (including  on a vessel carrying a foreign flag).  Non-payment without the right exemptions could result in fines and penalties.

My employer will take care of it all. – MYTH

The facts:
Income tax is ultimately a personal matter. Although employers have legal responsibilities around income tax and social security, those only extend so far. At the end of the day your tax and social security is still your problem.

All accountants charge a fortune, for advice that might as well be in Martian. – MYTH

The facts:
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