Published 16th March 2020
Last Updated on
There are not many things that are as unsexy as taxes but sadly it is something we need to consider, even when teaching English abroad. Dealing with finances can be quite tricky even if you did accounting at school but especially if you are living in a foreign country. Knowing if, when and how to pay taxes will give most of us sleepless nights, so let’s try get this sorted out once and for all. Please note that we are not tax specialists and while we trust the sources of this information it is your responsibility to make sure you are aware of the tax implications of your TEFL job. So, do I have to pay tax when teaching English abroad?
For UK citizens, whether or not you will pay tax in the UK while abroad depends on your residence status (in the UK). If you spend less than 16 days in the UK in the tax year, if you weren’t a resident for the previous three tax years and spend less than 46 days in the tax year or have left the UK to work abroad full-time, you are not a resident and do not need to pay tax in the UK. If you are a resident, then you do need to pay tax in the UK. Residency status is affected by complicated things such as property ownership and family ties so make sure you know which status applies to your specific situation.
Either way you will still need to pay local tax of the country you’re in but if the country has a tax treaty with the UK, you may be exempt from paying taxes in both countries.
US citizens earning more than approximately $100 000 a year (or the equivalent in foreign currency) are required to pay tax in the US. If you earn below this amount you are not required to pay tax. However there may be other taxes you will still be liable for, such as capital gains tax. Even if you don’t need to pay any tax you still need to file a return, and you also need to file a Foreign Earned Income Exclusion (FEIE). To qualify for a FEIE you need to have spent at least 330 days in 12 consecutive months outside the US.
You will also be liable to pay any taxes in the country you are living, according to that country’s tax laws, but if the country has a tax treaty with the US, you may be exempt from paying taxes in both countries.
South African citizens
South African tax laws also operate on a residency basis. If you are working overseas and spend at least 183 days (about six months) of a year outside South Africa with 60 of those days being continuous, you do not need to pay tax unless you are earning more than R1 million a year. Even if you don’t need to pay tax you should still file a return with Sars.
General tax laws
Generally speaking, you will pay local tax if you are resident in that country. How much tax and what qualifies you as resident depends on the tax laws of the country you are working in. Luckily, if you are employed by a school it is usual for the school to deduct taxes from your salary.
Here are a few tax laws of the most popular TEFL destinations:
South Korea – Schools in South Korea will deduct the local income tax (3 – 5%) from your salary. Plus if you work in a public school you won’t need to pay tax for the first two years of employment – as long as you submit a Residency Certificate. However, you may need to make contributions to a pension scheme (4.5%) and medical insurance (1%). Only American and Canadian teachers are eligible to claim back their pension contributions on completion of their contracts.
Thailand – If you are resident in Thailand for 180 days or more in a year you need to pay tax, which varies from 5% to 35%. Schools in Thailand will deduct tax from your salary.
China – China has a very complicated tax system but income tax varies from 3% to 45%. Schools in China will deduct tax from your salary.
Spain – If you live in Spain for more than 183 days in a year, you are required to pay tax. You are tax-exempt if you earn less than €5 000 a year but that’s unlikely. After that you’ll pay tax on a sliding scale from19 to 45%. If you work for a school they will deduct this tax from your salary, plus 6% for Social Security benefits. If you are self-employed, as many TEFL teachers in Spain are, you will need to pay your own tax and make monthly Social Security payments of between €50 and €250.
United Arab Emirates, Saudi Arabia and Kuwait – Hello tax-free salaries!
Online – You will pay tax in the country where you are resident.
Remember, we are not tax experts and while we are happy to give advice should you have any more questions, we suggest you speak to a registered tax practitioner if you have any serious queries.