tax mobile employees

How to Discuss Tax Matters with Globally Mobile Employees

A globally mobile employee is a person who is registered in one country, their country of residence, and has worked someplace else for a while. They could travel to a different country and work there for a few weeks or months or be a digital nomad, changing their temporary residence every few months. Needless to say, this makes taxation incredibly difficult; however, you still have to pay it.

With that in mind, and without further ado, let’s see what globally mobile employees have to say about taxes and related matters. 


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Where do all these challenges come from?

Generally speaking, mobility employment is a very popular form of employment in 2024. Many people work from home, and a huge number are employed by companies outside their home country. 

This provides some fantastic opportunities, like finding employment in a position that’s not available locally or getting paid by the standards of a country that’s much more developed than yours.

It also creates a lot of challenges when it comes to tax compliance.

Many countries are still unbanked or underbanked, and governments and finance ministries have yet to regulate receiving money via PayPal, Payoneer, etc. 

Others have a hard time getting to terms with the issues of taxation. Where do you pay taxes? Do you pay taxes in a country that the company you’re working for is from or in your home country? What if you must travel for work even though you’re remotely employed and spend a month, two, or three abroad? 

Moreover, what about people who find it more convenient to travel abroad, work for a few months, and use this income much higher than they would earn at home to live for a few months without worries?

Lastly, you have digital nomads. Remote work has allowed them to work for a few months from one location and then move. 

All of this is causing a conundrum regarding how you pay taxes. Here are a few considerations you must make. 

What is tax residency?

The simplest explanation of the term tax residency is that it refers to your permanent home and, by default, a place where you pay taxes. In the simplest terms possible, unless you stay in a different country for a set number of days, visit it a certain number of times, or have special ties to the country like performing a task that’s specified in some particular law, you’re paying taxes in your own country.

Sometimes, this is a dispute between two countries that are entitled to your tax money, and, as such, it’s a source of dispute that must be resolved through bilateral tax agreements. There are some global guidelines to help facilitate this, but it’s always resolved on a case-to-case basis. This means you can’t rely on what’s intuitive or what you know about the tax relations between the two countries.

One of the most common such arrangements is the 183-day rule. This is a simple rule that states that as long as you spend more than 183 days in a given country within 12 months, the profit earned there is paid there. 

What is double taxation?

Double taxation is an unfavorable scenario that you’re trying to avoid. In this scenario, you get taxed twice for the same income. First, you get taxed in your permanent country of residence, and then you get taxed by the country where you earned the money. 

This is the biggest problem for many mobility workers since the cost of extra taxation may be unnecessary, which means that you’re losing money that you would otherwise be able to spend on something worthwhile. In fact, this goes so far as to make working abroad not worthwhile when this was your intention all along. Think about it: you’re making extra effort to make a living elsewhere, and double taxation kills all your profit.

This is why the issue of double taxation is usually regulated through bilateral agreements.

Sometimes, you can get a refund in the target country to pay for the tax contributions in your country of permanent residence. This is something you should research. 

What activities automatically trigger taxation in a target country?

Lastly, some activities automatically trigger taxation in a target country. Physical presence for longer than 183 days is just one of them. Employment income while physically present in the country sometimes triggers local taxes. 

The same goes for a significant economic presence. Earning a paycheck in a target country is one thing, but winning a lottery or taking over a substantial part of the market, even if you are not physically present, will always result in this.

Owning real estate in a target country will subject you to local property taxes nothing else would make sense from a tax and legislative standpoint. A similar thing may happen with stocks that earn dividends. Owning a stock from another country, means the dividend are taxed by it.

Sometimes, conducting business activities with local customers will trigger taxation even if you don’t have a physical presence there. This is primarily the case with e-commerce businesses that sell their products worldwide. 

Wrap up about tax matters for globally mobile employees

Whose responsibility is it to know about tax and related matters, the employer or mobile employees?

This is the most straightforward question to answer of everything we’ve discussed – the responsibility is of the person getting taxed. Sure, a government agency can and should send you a notification, but just because it’s the right thing to do, not because it’s obliged by any law. They don’t have to do it. 

The resources are always out there, regardless of whether you seek them. There are many tools you can use, accountants you could reach out to, and the materials are often even available on a website. 

You’re legally responsible, so doing your research is in your best interest. Fortunately, in 2024, this is easier than you think.

This is a paid guest post.

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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