How To Pay Taxes For Brazilians Working In The UK
As a Brazilian who is working in the UK, how you pay taxes depends on what is established as your domicile. Since double taxation can hurt your finances, it is important to understand the rules. Although it is highly recommended that you work with a tax expert, getting acquainted with the system can prove beneficial.
The first thing you need to do is to establish your tax residence. You must specify which contracting state is your domicile, so you’ll know how tax payments will be made. Why does this matter?
In the case of Brazilians working in the UK, for example, failure to establish tax residency can result in confusion or double taxation. This is because Brazil and the UK do not have a tax treaty, which could cause a problem. The good news is that the Brazilian tax service will consider any tax you paid in the UK as deductible from your tax liability in Brazil, provided that you meet certain criteria, of course.
Now, to determine your residency, you can use the tax residence indicator that HM Revenue & Customs launched online. You will be asked to answer some situations and, if your situation is not complex, you will know right away your residency.
An easier option to determine your tax residency is to count the number of days that you live in the UK. As a Brazilian, you are considered a resident for tax purposes in the UK if you lived in the country for an average of 91 days per year, which is calculated over a 3-year period. If you did not meet this particular requirement, you will be exempt from paying UK income tax even if you’re working and getting paid by a UK-based company. However, you will have to pay the full amount of your withheld income tax inBrazil.
What happens if your work requires you to be in Brazil and the UK at certain periods of the year, but not long enough to meet tax residency?
Most Brazilians working overseas are under the ‘hypotax’ system. This is where the company you are working with will deduct from your pay packet the theoretical equivalent of your Brazilian tax and then settle your dues. Under the system, your pay is still remitted in the UK, but without any tax liabilities.
Say you are considered a resident for tax purposes in the UK. You will be liable to pay taxes for any of the following:
- Earned income
As a UK resident, you are liable to UK tax on all the income you earned, wherever it arises, except if you are able to use a remittance basis.
- Earnings from employers
Whether the work is carried out in the UK or abroad, you must pay your UK taxes if you are a resident. When using remittance basis, however, your earnings abroad are exempt, except when remitted in the UK.
Other types of income include earnings from a trade, profession or vocation; pensions, and offshore oil and gas work.
Because of the complexity of the tax rules between Brazil and the UK, it is highly recommended to speak to an expert. As a foreigner in UK soil, knowing how the rules work, especially with the absence of a double tax treaty, will spare you from headaches come taxation time.
For Chileans living and working in the UK, the two countries don’t have a double taxation treaty either. The same tax rules in Brazil also apply for Chile nationals.