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Paying Tax Overseas

An introduction to the kind of tax you can expect to pay on money that you earn overseas

The guidance below is about money you earn from performing overseas. Money earnt that relates to recording or publishing overseas (royalties or similar), will be treated differently and this advice may not be applicable.

Most of the time when you perform overseas, you will need to pay a tax on what you earn in the country that you are visiting. This is known as a ‘withholding tax’. The rate of withholding tax will depend on the country you are performing in.

If you are tax resident in the UK, you will also pay tax on your earnings in the UK, regardless of where the performance takes place. This can lead to ‘double taxation’, which means that you may be asked to pay tax in both the UK and the country that you are visiting.

Paying tax can’t be avoided – but you can take steps to minimise any problems with your UK tax return and ensure that you don’t end up paying over the odds in both countries.

Credit for taxes paid overseas

To counteract the problem of double taxation, you can claim credit in the UK for the taxes which you have paid overseas. This should mean that your combined tax bill ends up being no more than the amount you would have to pay in the country where the higher tax is charged.

For example:

If the overseas tax is at 15% and your UK marginal tax rate is 20%, the UK would credit you for the overseas tax, and you would just need to pay the difference of 5% to the UK tax authorities. This means that you have paid no more than 20% tax on your income, overall.

 

This can either come in the form of a double taxation treaty between the UK and the country you’re performing in, or in the form of a unilateral relief claim from the UK Government.

Certain double tax treaties also have exemptions for earnings under a certain amount, you can find further details about the specific country you are travelling to on the GOV UK website.

Making sure you can claim

In order to claim the tax credit you are owed, you must get a certificate of tax deducted from the country in which you are performing. When being paid for overseas performance, you should insist on a certificate written in English in order to prove to HMRC that the tax was paid.

Without a certificate, claiming credit on any tax paid can be challenged by HMRC and result in double taxation.

The people paying you should be responsible for making sure that you are taxed correctly under the laws of the country you are performing in. They should let you know in advance the rate of the withholding tax you will be paying, and you should take independent advice to make sure it’s correct.

Claiming expenses overseas

Generally, withholding tax will be applied to your total (gross) earnings, not to your net profit. This can cause issues when a lot of your earnings are going towards expenses, travel and hotels for example.

Where the UK tax you are paying is less than the withholding tax you are paying, it won’t be possible to claim back the excess tax you have paid on your expenses, unless you file a tax return in the country you visited.

For example:

If you are paying a UK tax rate of 20% in a country where the withholding tax is 25%, you will not be able to claim tax relief for your expenses on your UK tax return. To claim back the expenses, you would need to file a tax return in the country you visted.

 

However in most jurisdictions, you can make a claim ahead of time for a reduced rate of withholding tax to be applied, which takes into account the expenses that you are incurring.

We strongly recommend taking independent tax advice before signing any overseas work contract. MU members are entitled to advice from our preferred financial partners, HW Fisher and Company – contact your regional office for further details.

Further information