Expat Taxes: An Important Factor when Working Abroad

Posted by on Mar 11, 2015 in live abroad, moving abroad | No Comments
Expat Taxes: An Important Factor when Working Abroad

If you are thinking about moving somewhere for a long period of time (long enough to become a resident for tax purposes), you may want to choose your destination carefully.

Common factors for remote workers when deciding on a destination include the variety of things to do, the presence of an active expat community, the internet access and speed, and the cost of living. But you should consider adding taxes onto that list.

New Report Reveals Best and Worst Expat Taxes

AIRINC, which is based in Massachusetts, recently released a new report that reveals the best and worst countries when it comes to charging taxes to expats. The research, which was reported on in the Wall Street Journal, analysed 125 countries in total and compared the marginal tax rates in each, applying them to married expats on high incomes.

The results showed that some countries offer lower tax rates to expats to actively encourage them to settle down there, whereas others charge very high rates.

It produced a chart showing the best and worst 10 countries, and the best countries turned out to be Kazakhstan and Bulgaria, which both have a marginal rate for married tax payers of 10%.

Compare this to the worst country, Slovenia, which has a marginal tax rate of 61.10%, and you can see just how much of an impact your choice of country could have on how much you are earning.

After Kazakhstan and Bulgaria, the next best countries are:

  • Guatemala, 11.5%
  • Russia, 11.7%
  • Bolivia, 14.2%
  • Mauritius, 15%
  • Hong Kong, 15%
  • Serbia, 15%
  • Madagascar, 18%
  • Paraguay, 18.1%

At the other end of the list, the worst countries after Slovenia are:

  • Belgium, 59.60%
  • Portugal, 59.1%
  • Finland, 56%
  • France, 54.1%
  • Sweden, 52.9%
  • Ireland, 52%
  • Spain, 51.9%
  • Zimbabwe, 51.5%
  • Japan, 51.1%

Find Out About Taxes Before You Book Your Flight

Clearly taxes are not the only thing to consider before you choose a destination. There is no point choosing a country with a low expat tax rate if you are not going to enjoy living there. But you should certainly take them into account.

As well as finding out about the tax rates, find out when you may have to start paying taxes. Many people who are working remotely will pass through countries and stay for a few months, and they are not usually considered tax residents. However, some countries will state that after residing in the country for six months or so, you become a tax resident even if you do not have residency.

Consult expats in each destination, and also consult a professional accountant if possible who can advise you on your tax obligations. If you will have to pay taxes, find out how much you can expect to pay. A destination with a low cost of living may be tempting, but if a large amount of the money you earn will go on taxes, there may be fewer incentives to move there.

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