Which Countries do not Tax Overseas Income?

When it comes to earning an income, a number of people and businesses these days are more international than national. It’s very common these days to work as a freelancer, for instance, and have income coming in from a variety of countries. Businesses as well tend to work across borders these days. So how does this affect your income taxation? Are there countries that do not tax overseas income at all?

What is Income Tax?

It is crucial to understand what type of income is generally taxed in the UK. According to the HMRC website, taxable income includes:

  • Employment earnings
  • Self-employment earnings
  • Income from pensions (state, company as well as personal pensions)
  • Interest on savings
  • Income from shares
  • Any rental income
  • Income from a trustee position

If your total income doesn’t exceed £10,000 annually, then you aren’t required to pay income tax. On top of this, there are a number of deductible allowances, which won’t fall under income tax. For full details, check the HMRC website.

Income Tax on Foreign Income in the UK

Whether you need to pay income tax in the UK depends a lot on your residency status. If you live in the UK, but have a permanent residency in another country, it is possible to avoid paying tax in the UK. This is referred to as being ‘domiciled abroad’. You fall into this category if:

  • You live most of the time in the UK
  • You were born abroad or your parents were born abroad
  • Your permanent home is abroad
  • Your in the UK with the intention of returning to your home abroad

As a domiciled resident, you are able to choose where you pay income tax and whether you want to be taxed in the UK under the remittance basis. You can read more about this on the Tax Fix website.

Double Taxation Schemes

The UK together with a number of other countries also has schemes to avoid double taxation. Under these schemes, you won’t end up paying income tax twice on your earnings.

In some instances, you might conduct work in another country even when your residency is normally in the UK. According to the law of the country you work in, you might need to pay income tax there. To avoid double taxation, you won’t be required to pay income tax in the UK as long as you notify the authorities with the correct paperwork. You can often get help for this self-assessment from professional accountants. Check out our website for more details.

Are There Countries that do not Tax Overseas Income?

There isn’t a comprehensive list available on countries that don’t tax overseas income. Despite this, there are a handful of countries, which don’t impose a tax on foreign income. These are often countries with relatively underdeveloped tax systems.

These countries are called to have a ‘territorial tax system’, as they only tax income generated within the country’s borders. These include countries like Costa Rica, Hong Kong, Panama, Seychelles, Singapore and Taiwan.

On top of these countries, there are also a handful of countries, which have no income taxation in place. These include countries such as Andorra, Bahamas, Bermuda, Cayman Islands, Monaco and the United Arab Emirates.