Of Course TEAM Members Know About the 183-Day Rule!
TEAM Members are right to understand the 183-Day Rule determines tax liabilities for their contractors on assignments in countries where those contractors are not normally resident. It works where there is a DDT (Double Tax Treaty) existing between 2 countries – normally your contractor’s home country and their country of work. It means your contractor does not pay tax on the same income in each country.
As a rule of thumb, if your placement works in a foreign country for less than 183 days (either in a tax year or in a consecutive period of 12 months), he or she is deemed non-resident for tax purposes in that country providing other criteria are met. However, there are circumstances where non-residents do pay tax from Day 1 on their locally-sourced income – especially if they are self-employed or operating through their own PSC’s (personal service companies). As I am sure you are aware, there is a growing number of European countries attacking foreign PSC’s because they are not registered in the country of work and not operating in the style of local PSC’s.
In most countries, working more than 183 days within the aforementioned, 12-month periods normally makes your placement resident for tax purposes and liable to declare worldwide income for local tax purposes.
Do not presume all DDT’s are the same. Do not automatically assume your placements are correctly relying on them. Remember the 2017 Criminal Finance Act and subsequent legislation has made you and your client more accessible and potentially accountable to local tax offices regarding investigations they carry out on contractors (but hopefully not yours!).
Want to know more? As a TEAM Member you have free access to the TEAM International Helpline for a complimentary consultation to support your business. Either email TEAM@itsinternational.ltd.uk or call 020 7477 2660. We’re here to help you.