Being paid in one country and living in another creates three separate questions

Three questions that look like one

Somebody living abroad while being paid from elsewhere tends to think of their arrangement as a single fact. It is at least three. There is the question of where the work is legally performed and whether your permission to be in the country allows it. There is the question of which country or countries have a right to tax the income. And there is the separate question of which country’s social security system the earnings belong to.

These are decided by different bodies under different rules, and they do not have to give the same answer. It is entirely possible to be lawfully present, correctly taxed in one place and non-compliant in another, all at the same time, without anybody having done anything obviously wrong.

This piece describes the structure of the problem only. It contains no rules, no thresholds and no advice, because those depend on the countries involved and on your circumstances. Anyone in this position needs a qualified tax adviser and, on the permission question, a qualified immigration adviser.

The immigration question comes first

Before anything financial, there is the plain question of whether your permission to be in the country allows you to work while you are there, including work for an employer outside it. Intuition says that a foreign employer and a foreign payment have nothing to do with the country you happen to be sitting in. Several countries take a different view.

The answer is entirely national, it has been changing in recent years as remote work has become common, and the terminology used to describe such arrangements is not consistent between countries. It is a question for the official immigration source and, if there is any doubt, for professional advice.

Getting this wrong is the most serious of the three failures, because it goes to your right to be in the country at all.

Tax follows presence more often than payment

The instinct that income is taxed where it is paid from is one of the most persistent misconceptions in this area. Tax systems are generally interested in where a person is resident and where work is performed, and the country you are physically living in commonly has a claim regardless of where the employer sits or which bank receives the money.

Where two countries both assert a claim, arrangements between them may determine which one takes priority and provide relief against double taxation. Those arrangements are specific to each pair of countries, they are technical, and applying one is not a do-it-yourself exercise.

None of which means the outcome is bad. It frequently is not. It means the outcome has to be established rather than assumed, and established before the tax year in question ends rather than afterwards, because remedies are far easier in advance.

Social contributions are a separate system entirely

Social security — the contributions that fund pensions, healthcare and benefits — is governed by its own rules, and those rules are not the same as the tax rules even though the money often leaves the same payslip. There are international arrangements in this area too, and they are distinct from tax arrangements and can point in a different direction.

For an individual this matters in two ways. It decides which system you are contributing to, and therefore which system may eventually pay you something. And it can create obligations on your employer that they may not know they have.

Employers are frequently the weak point here. A company with no presence in the country you have moved to may have registration or reporting duties that arise simply because an employee is living there, and many discover this late. Raising it early is in everybody’s interest.

How to handle it without becoming an expert

The practical approach that works is to establish the position once, properly, at the start, and then keep records. Get written advice covering the immigration position, the tax position in both countries and the social security position, and keep it with the evidence that supports it.

Keep a record of where you actually were, month by month. Presence is a question of fact and it is the fact most often disputed, and a contemporaneous record is worth far more than a reconstruction from memory or from photographs.

And revisit the arrangement whenever something changes: a move, a new employer, a change in the contract, a long absence, a change in the rules. This area is being actively reformed in many countries as remote arrangements become common, and an answer that was right two years ago is not automatically right now.