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debb199
Joined: 15 Dec 2008
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 Posted: Tue Nov 23, 2010 8:58 am Post subject: |
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[quote="harshlands101"]
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The 2 year 'no tax' agreement will form part of the DT agreement for what ever reason was deemed appropriate during negotiation of the said agreement. |
So can you confirm that this 2 year "no tax" agreement means you are not liable for taxes in either Korea or the UK? If so, seems like a sweet deal for public school teacher.
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| Foreign companies are given tax breaks in the UK as part of economic growth programs, why not individuals. |
They are to some extent, eg some professions are exempt from paying UK taxes if their stay in the UK is less than 2 years and they are taxed on their UK earnings in their home country.
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| People working in the middle east have had the luxury of tax free incomes for years, it's part of the incentive package to get people working there. They don't and have never paid UK tax on that income, unless it is 'Unearned' income made from monies sent back to the UK as I outlined in my previous post. And no, I haven't read the double taxation link you posted, but if not Saudi or Oman why not Korea? |
Well, that's really another issue, isn't it? HMRC cannot charge you tax if you are classified as non-resident which means you are subject to whatever taxation system exists in the country in which you are a resident. Luckily for expats in the Middle East, there is no income tax, so they don't have to pay any tax. Korea does have income tax.
However, the point I'm slowly getting to is that, surely by getting a UK residency certificate from HMRC, then you are still classed as a resident in the UK. Therefore you are not subject to Korean taxation, but you are still subject to UK taxation on your earnings? |
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harshlands101
Joined: 19 Oct 2010
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| Posted: Tue Nov 23, 2010 5:03 pm Post subject: |
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| So can you confirm that this 2 year "no tax" agreement means you are not liable for taxes in either Korea or the UK? If so, seems like a sweet deal for public school teacher. |
I'm going to go out on a limb here, and use this quote as reasoning as to why we get tax relief in Korea, based on the assumption that we provide this to Korea and so visaversa within our joint DTA
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9.1.6 Teachers and researchers
Under some DTAs, if you are a teacher or professor who comes to the UK to
teach in a school, college, university or other educational establishment for a
period of two years or less, you are exempt from UK tax on your earnings
from the teaching post. Temporary absences from the UK during this period
normally count as part of the two years.
Some agreements cover persons who engage in research. Where this is so, the rules are normally the same as for teachers.
If you stay for more than two years you cannot claim exemption and you
will be liable to tax on the whole of your earnings from the date you
arrived. Some agreements only allow exemptions to be given if the earnings are liable to tax in your home country. If you have already received exemption for a visit (or visits) of up to two years, some agreements will not allow you to claim the exemption again if you make a further visit at a later date.
A 'permanent establishment' will include a place of management, a branch
or an office.
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| Luckily for expats in the Middle East, there is no income tax, so they don't have to pay any tax. Korea does have income tax. |
Fair point well made.
So having read some of t he chapter on DTA's (no lessons this morning!) this is what i can summise:
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8.5 Leaving the UK to work abroad as an employee
If you are leaving the UK to work abroad full-time, you will only become
not resident and not ordinarily resident from the day after the day of your
departure, as long as:
� you are leaving to work abroad under a contract of employment for at
least a whole tax year
� you have actually physically left the UK to begin your employment abroad
and not, for example, to have a holiday until you begin your employment
� you will be absent from the UK for at least a whole tax year
� your visits to the UK after you have left to begin your overseas
employment will
- total less than 183 days in any tax year, and
- average less than 91 days a tax year. This average is taken over the
period of absence up to a maximum of four years � see 8.3 which will
show you how to work out this average. Any days you spend in the UK
because of exceptional circumstances beyond your control, for example
an illness which prevents you from travelling, are not normally counted
for this purpose.
If you do not meet all of these conditions, you will remain resident and
ordinarily resident in the UK unless paragraph 8.2 applies to you.
If your employment comes to an end and you do not return to the UK it will
be necessary to consider if you continue to be not resident and not
ordinarily resident in the UK |
I think there are 2 points here;
1: that you have to be absent from the UK for a whole tax year to become 'non-resident' and I would guess that most people do not come here on the 6th April and leave on the 5th April to qualify for this. Obviously if you are here for over 1 year then that is different.
2:Second bold extract, see below.
To become 'non-resident' doesn't seem that easy and due to the nature of the 1 year contracts that we work on here and the turnover of native teachers i would hazard a guess that most people will not be spending much more that 1/2 years here and then would return to their home country to take up residence again, so they would not apply for non residential status or really even consider it. Of course there are always exceptions.
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8.2 Leaving the UK permanently or indefinitely
If you are leaving the UK permanently or indefinitely, you will only become not resident and not ordinarily resident from the day after the day of your departure, as long as you have actually physically left the UK and have left for the purpose you have stated, not for example, to have a holiday until you move into your new home or begin your overseas employment. You can still visit the UK but if your visits here after you have left average 91 days or more in a tax year, you will remain resident and ordinarily resident in the UK.
If you say that you are no longer resident and ordinarily resident in the UK, we might ask you to give some evidence to show that you have left the UK permanently or indefinitely. For example, we would expect you to show that when you left the UK you had acquired accommodation abroad to live in as a permanent home.
The act of leaving the country is not likely to be sufficient evidence that
you have left the UK permanently and have become non-resident and
not ordinarily resident.
If you still have property in the UK which you can use after you leave, we
might want you to explain why you are retaining that property when you
say you have left the UK. |
And the definition of a DTA;
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9 Double Taxation Relief (DTR) & Double Taxation
Agreements (DTAs)
Different countries and states have their own tax rules and laws. When you have income and gains from a source in one country and you are resident in another, you may be liable to pay tax in both countries under their different tax laws. To avoid 'double taxation' in this situation, the UK has negotiated double taxation agreements with a large number of countries. DTAs are designed to protect against the risk of an individual or a corporate entity being taxed twice where the same income is taxable in two countries.
DTAs also provide details of other things which can affect your liability to
UK tax, such as whether or not you are able to claim personal tax
allowances and what types of income and at what rate you will receive relief from UK tax.
To obtain relief from UK tax under the terms of a DTA it will be necessary for you to make a claim under the relevant DTA.
A table showing the countries with which the UK has a DTA in force can be
seen at 9.3. This table is correct as at April 2009 and does not show the
individual content of each DTA, simply the fact than an agreement exists. |
The first bold entry in this quote i think explains your question
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| Therefore you are not subject to Korean taxation, but you are still subject to UK taxation on your earnings |
and i think the second bold entry explains the reason why we need to give a residency certificate - in that it is needed because it forms part of the individual DTA with korea.
I'm taking these quotes in the spirit of them not being definitive but a catch all, because without refering to the individual DTA i can only make assumptions.
Ahh and the link, look at chpt 8 & 9
http://www.hmrc.gov.uk/cnr/hmrc6.pdf
What do you think? |
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harshlands101
Joined: 19 Oct 2010
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| Posted: Tue Nov 23, 2010 5:10 pm Post subject: |
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http://www.hmrc.gov.uk/international/korea-dtc.pdf
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Article 20
Teachers
(1) Subject to paragraph (2) of this Article, an individual who visits one of the Contracting States for a period not exceeding two years for the purpose of teaching or engaging in research at a university, college, school or other similar educational institution which is recognised as non-profit seeking by the Government of that Contracting State, and who immediately before that visit was a resident of the other
Contracting State, shall be taxable only in that other State on any remuneration for such teaching or research for a period not exceeding two years from the date he first visits that State for such purpose.
(2) Where, under the provisions of this Convention taken together with the law in
force in the other State, a teacher or researcher referred to in paragraph (1) of this Article is exempt from tax in that other State on his remuneration, or is entitled to a deduction equal to that remuneration in computing his liability to tax in that other
State, such remuneration shall be taxable only in the first-mentioned State.
(3) The provisions of this Article shall apply to income from research only if such research is undertaken by the individual in the public interest and not primarily for the benefit of some other private person or persons.
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Page 19 article 20 of the DTA between korea and the UK... |
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Andyc24_uk
Joined: 21 May 2007
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| Posted: Tue Nov 23, 2010 9:48 pm Post subject: |
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The legal background is all quite interesting and as far as I can see, spot on. However, I think it's getting more complicated than it needs to be.
The fact is, the UK government has no clue if and/or how much you're earning in Korea, and no way to find this out. Therefore, it can't and doesn't tax you on it.
The Korean government does know how much you're getting paid, and taxes you accordingly (assuming your employer has followed the correct regulations).
You're not taxed on money tranferred home to your bank. The government has no record of that transaction, and even if they did, there is no law that allows them to tax this anyhow.
Therefore, you really don't need any certificates of residency or anything. Simply come to Korea; work here; Pay Korean taxes; and don't tell the British tax people anything. There's no obligation to tell them anything, and they won't ask. This is perfectly legal, and the way 99% of people handle their taxes here. The only exception would be, as pointed out above, if you have unearned income from property/stocks and shares etc back home - then you would need to make separate arrangements for taxation on that. |
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harshlands101
Joined: 19 Oct 2010
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| Posted: Wed Nov 24, 2010 12:42 am Post subject: |
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I think it's getting more complicated than it needs to be.
The fact is, the UK government has no clue if and/or how much you're earning in Korea, and no way to find this out. Therefore, it can't and doesn't tax you on it.
The Korean government does know how much you're getting paid, and taxes you accordingly (assuming your employer has followed the correct regulations).
You're not taxed on money tranferred home to your bank. The government has no record of that transaction, and even if they did, there is no law that allows them to tax this anyhow.
Therefore, you really don't need any certificates of residency or anything. Simply come to Korea; work here; Pay Korean taxes; and don't tell the British tax people anything. There's no obligation to tell them anything, and they won't ask. This is perfectly legal, and the way 99% of people handle their taxes here. The only exception would be, as pointed out above, if you have unearned income from property/stocks and shares etc back home - then you would need to make separate arrangements for taxation on that. |
I agree 100%!!! |
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