Top ten quirks of IT contracting overseas
Three queries about contracting overseas being submitted by ContractorUK readers in about as many days chimes with our belief that the tide is increasingly turning towards working both independently and abroad, writes Michelle Reilly, managing director of CXC Global.
However as the questions about IT contracting in France, Italy and the USA demonstrated, contracting outside the UK creates a number of regulatory challenges which British-born tech freelancers need to be aware of, to ensure they don’t fall foul of legislation. And as these 10 examples show, such legislation can be in place in or around what may seem to be the strangest of situations.
1. Germany is an increasingly attractive option for many contractors. But if a freelancer operating in Germany belongs to the Roman Catholic or Protestant communities – and declares their religion - then they will have to pay an amount equal to 8-9% of their income tax to support their particular church! Want to avoid this? Consider becoming an atheist.
2. When you think of Sweden you may not necessarily think of an overly harsh tax authority. However the Scandinavian nation is definitely not a place you want to be a non-compliant contractor. The domestic tax agency has more powers than the police in many ways, and can enter a home without a warrant if they suspect non-compliance. While they’re not armed, they are enthusiastic and it’s not just contractors who should be afraid; the headquarters of telecoms firm Ericsson was surrounded by agents in 1999 after reports of unregistered workers were made.
3. Any UK IT contractor wanting to work in Singapore must sit an exam in order to receive a renewable employment pass, which allows them to work in the country for up to two years. In addition, Singapore is home to a number of highly unusual and quirky laws, including the fact that all chewing gum must be prescribed by a GP, so remember to leave the Wrigley’s at home!
4. The USA is one of the most attractive and popular settings for UK contractors to operate. However, American citizens working overseas must continue to pay domestic tax rates for the rest of their lives, regardless of where they’re based. The IRS can therefore be your friend for life, unlike for this UK contractor who won’t have the privilege!
5. If you’re considering taking an IT contract in Switzerland, you should be aware that the country is made up of 26 different cantons, or regions, each of which has different rules and regulations regarding employment. Even moving to a neighbouring street could mean you’re exposed to a completely different system of complex tax law!
6. One of the main perks of operating in Spain, aside from the weather, is that professionals generally receive bonuses in July and at Christmas that equate to being paid an additional 13th and 14th months’ salary! This may come as a surprise to those who aren’t aware of the country’s regulations, so make sure you don’t try and hand this pay bump back to the relevant authorities.
7. Anyone considering Aruba as their next working location is likely to think of the sun, sea and sand, not the taxes. But be ready to sacrifice much of your take-home pay in the Caribbean nation, unless you take your partner with you. Professionals operating there who earn more than $171,149 are subject to income tax at a hefty 58.95%, although this is reduced by 3% for married couples.
8. Brazil is home to some very contractor-friendly taxation laws, not least that professionals are considered as non-residents for a total of 183 days, or six months, out of a 12-month period, regardless of whether these days run consecutively or not. However, following the completion of this period, contractors are expected to pay full taxes and manage the (often extremely complex) Brazilian labour laws so ensure you’re well prepared for this period coming to an end.
9. Foreign contractors are so welcome in Russia that they even pay less tax than the locals do. In the country, companies do not need to pay social security taxes (30%) for foreign, highly-qualified specialists. That’s why it is more tax-efficient for employers to recruit professionals from overseas. It is of course probably best to keep this fact from your Russian colleagues!
10. Working as an IT contractor in Belgium isn’t always easy. Professionals must possess a degree-level qualification, or have a family member who does, and is willing to support their application. Alternatively, contractors may be forced into completing an arduous test before being allowed to work or could even have to be registered as a full-time employee of the organisation they’re working for.