I work from another country for my home employer, where do I pay tax?
Three questions decide it, and they have to be taken in order. Where are you resident, which is a matter of facts rather than of where you have told people you live. Where is the work performed for treaty purposes, which is usually where you physically sit while doing it. And does your presence give your employer a taxable presence in that country, which is the question that turns a personal arrangement into the company's problem. Answer them in that order and the payroll, the returns and the credits follow. Answer the payroll question first and you will do the work twice.
Does my employer owe anything in the country I am working from?
Possibly, and it is the part nobody raises before departure. The company's income does not become foreign because one of its people is sitting abroad, and an employee working in a country can create obligations there for the employer: registration, withholding, social security, and in some arrangements a taxable presence of the company itself. What decides it is what you do there rather than where the contract was signed. Someone with authority to negotiate or conclude business is a different case from someone doing back-office work, and that distinction is worth establishing before the move.
I left the country, am I automatically a non-resident now?
No. Leaving a country does not by itself end its claim on you. Residence is decided on facts, and the facts that keep a country interested are usually the ones you left behind: a home available to you, a family that stayed, days spent back, and where your economic life is centred. A departure can also trigger obligations of its own in the year you leave. Establish the position for the year of departure and for the first full year abroad separately, because they are often different and the documents supporting each are different too.
Which country should my salary be on payroll in while I am abroad?
Answer that one last. Payroll follows the conclusions on residence, on where the work is performed, and on the employer's own exposure in that country; it does not decide them. Taken in that order the outcome is usually clear, and it sometimes involves two payrolls, or a withholding relief supported by a document, rather than one office simply stopping. Taken the other way round you get a year of deductions in the wrong country and a credit claim to unwind. The employer has to agree the answer, because the obligation is often theirs rather than yours.
Should I tell my employer which country I am working from?
Yes, and the reason is self-interested as much as honest. The obligations arising where you sit are largely the employer's to discharge, and a company that finds out afterwards has a compliance failure to correct and a reason to end the arrangement. A company told in advance can price the arrangement or decline it. The other reason is documentary: the payslips, the statement of where the work was performed and the day records you will need for a treaty position or a credit claim only exist if somebody knew to create them.
What should I sort out before I start working from abroad?
The documents, and they are cheap to collect while you are still at home. Fix the departure date and keep evidence of it. Record what you are keeping in the country you are leaving, a home, a family, memberships, because that is what its residence test will look at. Get your employer's written position on where the work is treated as performed and who is running payroll. Keep a day count from the first day, in a form you can produce later. Almost every one of these files is decided by a date and a document.
What is a permanent establishment?
The threshold at which a country may tax a foreign company's business profits. It is met by a fixed place of business — an office, a branch, a workshop — and also by a dependent agent habitually concluding contracts on your behalf, with separate rules for construction sites and, in some treaties, for services performed over a period. Cross it unnoticed and you owe returns and tax in a country you never registered in. See permanent establishment risk.
What foreign taxes qualify for the foreign tax credit?
A levy qualifies if it is an income tax, or a tax in lieu of one, that you were legally required to pay and actually paid or accrued, and that is not refundable to you. That rules out value-added and sales taxes, property taxes, and social security contributions covered by a totalization agreement. It also rules out tax you could have avoided by claiming a treaty rate and did not — the credit does not cover voluntary over-withholding. See Form 1116.
