We are often asked by our clients, “How long can I have someone in-country before I have to start paying taxes and get a work permit?”. The answer is… it depends. But in most cases, the rule is 183 days or more in the course of a year. Meaning, if you send one of your employees into a market for 183 days or more in the course of a calendar year that individual is considered a resident for tax purposes – which means both you and the employee are liable for tax filings associated with that employment.
If you’ve had any experience with multiple foreign jurisdictions you’ll know that every country is a little different. The US is very stringent and the 183-day rule is over the course of a three year period; in China, it’s a 90-day rule but there are a dozen variations to that rule; the UK follows a relatively straightforward 183-day policy.
The next question we are asked is “well, will we get in trouble if it’s 7 months?” The answer is… it depends. If your employee is traveling in and out of the country, the immigration officials at the airport are the most likely to trip up your employee. If the number of days in the country exceeds the statutory maximum you’ll start getting questioned. In the lightest of cases, we’ve seen the employees just sent back home on the spot and not allowed to enter the country. In the most aggressive cases, we’ve seen employees sent to prison for weeks until the matter is sorted out. The latter is extremely rare and we don’t want to exaggerate the possibilities, but then again we’ve seen it happen. Either way, your strategy in-country is rather shot when your employee is not present and working – and that can be really costly.
Now, this doesn’t take into considerations the work permit/visa considerations. That’s a topic for another time and blog post, but pay particular attention to the duration of the work permits you’ve applied for and don’t let them lag.
The last question we are asked is “How can you help?”. Short answer, if you plan to have employees in a country for a period of time that triggers taxable residency and/or requires a work permit or visa, that’s where we can help. Velocity Global can help you hire that individual compliantly in country while you finish out the project/assignment. We can even sponsor the work permit on your behalf so you don’t experience business disruption due to noncompliance. And the good news is that we cost a lot less than fighting the local tax authorities and the business disruption of an exiled employee.
Shoot me an email if you want to talk about your particular case.
– Ben Wright
CEO ~ Velocity Global