Contractors' Questions: overseas tax liabilities
Question I left the UK and am now a UK non resident and therefore not liable to tax on income from work abroad even though the money gets paid in my UK bank account. I also do not get residence status in the countries I work in as I move around often..thus not paying tax there. Is this possible? Is this a tax loop hole perfectly valid ? Also, am I obligated to take tax residence in a country if I stay there less than 183 days?
Answer.. Kindly provided by Global K
The answer to your question is that - as you may have anticipated - there is no black and white answer to your question.
International tax law, as it defines residence, can indeed leave you in a grey area as regards tax residence, where, as you described, you don't spend enough time in any country to qualify as resident under the "days" rule. I have come across many contractors who have benefited from this lack of tax harmonization, where each tax authority will look only at the circumstances as affected by their own legislation.
However, in such situations a number of other factors may be taken into consideration to determine your residence status: -
a) Where does (do) your wife (and children) live?
b) Where do the children go to school?
c) Where is your "permanent home" (i.e. do you own property anywhere which you return to after each contract)?
d) Where are your "vital financial interests" (main banking, investments, pension arrangements etc.)?
e) Where do your parents live, or, believe it or not, if deceased, where are they buried?
These are just some of the considerations which can be taken into account in determining tax residence / domicile, where the number of days does not automatically qualify you for residence in any one place.
If you are a genuine nomad, with no fixed abode, then possible you can avoid tax by remaining constantly on the move, but one last word of warning. Tax offices (including the UK Revenue and Customs) are increasingly asking for evidence that tax on the income has been paid elsewhere before allowing tax exemption, so your chances of continuing as a tax-free nomad will certainly be restricted by changing attitudes of tax offices, if not by changing legislation.
Answer provided as general guidance only. Global K are happy to answer any initial questions but subsequent follow up advice will incur charges.