By Linda Kidd
There is no doubt the north-east energy sector is operating on an increasingly global basis.
This not only opens a whole new world of opportunities, but also challenges and risks, particularly on the tax front.
Many businesses find it difficult to manage their overseas tax responsibilities, while others are blissfully unaware overseas tax obligations exist at all.
Common misconceptions relating to overseas taxes can prove very costly. Here are some typical questions and the answers:
It’s only a short-term assignment, so I assume we don’t need to worry about overseas social security costs?
Not all countries have a social security agreement with the UK and, where no agreement exists, it’s likely that both employee and employer will be subject to social security charges in both the UK and overseas.
If our employees are in-country for less than 183 days, surely they won’t be taxable there?
The number of days presence in-country is not the only condition to be met to be exempt from local income tax. Other conditions apply; not all treaties allow for 183 days presence before tax liabilities are created. In certain situations, taxes can arise from the outset. More restrictive rules for offshore working may apply. Also the UK does not have tax treaties with all countries.
If the employee must pay income tax overseas, do we need to deduct UK PAYE?
Most likely. To avoid double wage tax withholding, firms must obtain HM Revenue and Customs approval to use the net of tax credit arrangement.
Linda Kidd is a senior manager in the employer and employee expatriate tax team at Anderson Anderson and Brown