Carry on contracting abroad! Oddest overseas work rules of 2019
How far from the border you have lived. An automatic multiplier of your tax liability. And a visa for the country that won’t actually permit you to do any work! Whoever said that Brexit, and contracting overseas after it, is going to be boring?!
While these three foibles of contracting overseas, in the Netherlands, France and Nigeria respectively, do not stand to be altered once the UK leaves the EU, it does not make them any less important to be wary of, writes Michelle Reilly, chief executive of overseas contracting advisory 6CATS.
That said, the nuances in employment and other legislation overseas aren’t all negative -- far from it in fact. Here’s a look at the weird and wonderful that UK nationals can encounter when working abroad temporarily. Visas that don’t actually let you do any work included!
- Contractors in the Netherlands are eligible to apply for a special ‘30% ruling’, a Dutch tax exemption for employees who were hired abroad to work in the country. If a number of conditions are met, the employer is allowed to pay 30% of a contractor’s salary as a tax-free allowance.
However, this comes with some strict requirements, and the ‘30% ruling’ is only applicable if the employee has not lived within 150km of the Dutch border for the last 16 out of 24 months at the time of hiring, and has a salary of at least € 53,280 per annum.
- In Hungary, contractors are very much welcome. So much so that the government has aimed to make life as easy as possible for them. Cue the ‘KATA Small Business Tax’ scheme, which frees contractors from the obligation of paying corporation and, personal income tax, as well as social security, pension, employment, and healthcare contributions!
This is all achieved by paying an initial lump sum of tax. The KATA system provides tax relief on the first €38,630.08 per annum. Any earnings above this threshold are taxed at 40%.
- In France, by joining the ‘Centres de Gestion Agrees’ (CGA) for an annual cost of approximately €292, professionals can make life far more straightforward.
This is because joining the CGA will grant an individual a more accurate and fair tax calculation. If a contractor does not join, their income will be multiplied by 1.25% for tax purposes!
- In Singapore, high-earning foreign professionals can apply for a Personalised Employment Pass (PEP). PEP holders have greater job flexibility than with any other work pass. However, the last drawn fixed monthly salary of a PEP applicant must be at least SGD18, 000, and a PEP holder must earn a fixed salary of at least SGD £82,564 per calendar year to keep the PEP.
Authorities are strict about this, and any contractor without a job for a continuous period of six months will have the PEP cancelled and be sent home! As we said, the legal nuances of contracting overseas aren’t all negative – but some definitely are!
- In Portugal, contractors can take advantage of an attractive tax scheme for non-residents. Individuals who have become a temporary tax resident in the country and have not been taxed as resident for any of the previous five years may apply for this scheme.
This means they are taxed at a flat rate of 20% compared to rates potentially as high as 48%. In fact, they have the right to be taxed as a ‘non-habitual resident’ for a period of up to 10 consecutive years!
- In Sweden, often considered to be one of the most liberal countries in the world, tax authorities are actually very strict. For instance, parents are required to have their child's name approved by the Swedish tax agency before the child turns five to avoid a fine.
Contractors contracting in Sweden should be aware of the fact that the domestic tax agency has more power than the police in some cases, and has legal permission to enter a home without a warrant if they suspect non-compliance! Ouch.
- The one you’ve been waiting for! In Nigeria, a country where witchcraft still carries a prison sentence, the visa system can be equally as baffling.
Here, a Business Visa (BV) won’t actually permit a contractor to do any work! In fact, it is only to be used for meetings, interviews and seminar purposes. Being caught doing anything more than this on a BV could lead to serious trouble. For a full work permit, contractors will need to enter Nigeria with an STR (Subject to Regularisation) Visa. If they arrive with any other entry visa, they will be sent packing.
Clearly, international tax legislation can be confusing. While these examples demonstrate some of the more light-hearted aspects of foreign regulations, in reality, authorities around the world are getting far stricter, even when enforcing the eccentric rules. So it’s case of smirk at your peril!
The move towards tougher tax systems has been underway for a while now, and contractors can expect to face increased scrutiny wherever they choose to work. That’s not going to change post-Brexit, and may even increase. Avoiding any potential mistakes and miscalculations, and being on the right side of the law, is set to become more important than ever.