Do You Have To Pay Taxes While Teaching Abroad?

For the most part, English teachers abroad are paid in the local currency of the country they’re teaching in and, as such, will be responsible for paying local taxes. This varies greatly depending on where in the world you find yourself. 

When considering a TEFL job abroad, it’s worth chatting with your employer to understand what taxes you’ll be required to pay during the duration of your contract. Check in with our TEFL guide and job support, as well as speaking to other teachers abroad to get a better gauge of what you will be responsible for. 

For full-time employment, it’s common for schools to deduct taxes from your salary for you. But, again, it’s worth knowing what rates you should be paying so you can spot any red flags. 

One thing to bear in mind is the relationship between your home country and the one you are teaching in. If the two countries share a tax treaty, you may be exempt from paying taxes in both.

US citizens earning more than $100,000 USD per year, or the equivalent in local currency, are required to file a US federal tax return. Failure-to-file penalties start at $135 and can mount up with interest and additional fines if not addressed. 

Those who don’t reach that threshold won’t owe any income tax thanks to the Foreign Earned Income Exclusion (FEIE). Most English teachers abroad don’t make $100,000 so you probably will not be required to pay income tax on the money you make. 

To qualify for a FEIE, teachers will have to have spent at least 330 days in 12 consecutive months outside the US. 

However, there may be other taxation you are required to pay as a US citizen teaching abroad such as:

• Local property taxes: you won’t be exempt from paying applicable property taxes if you own a home.
• Capital gains tax: capital gains when selling stocks, bonds or other financial assets in the US may be subject to taxation.

For UK citizens wondering about taxes for teaching abroad, it all depends on your residency status when you leave. You don’t have to pay tax in the UK if you meet the following criteria:

• You spend less than 16 days in the UK across a tax year.
• You were not a resident during the previous three tax years and spend less than 46 days in the country during the tax year.
• You have left the UK to work abroad full-time.

South Africa is another country whose tax laws operate on a residency basis. If you are working overseas and spend 183 days (roughly six months) outside South Africa, with at least 60 of those being continuous, you are not required to pay tax. The only exception to this is for those who earn more than R1 million a year ($54,766 USD).

Even if you do not pay tax, you should still file a return with The South African Revenue Service (SARS).

Here are some examples of different tax laws and how wildly they vary across some of the world’s most popular destinations for TEFL teachers:

• South Korea: Schools deduct a small amount of income from your salary (3-5%). Provided you supply a Residency Certificate, you’ll be exempt from taxation for the first two years of employment in a public school. However, teachers may need to make contributions to pension schemes (4.5%) and medical insurance (1%). Only Canadian and American teachers are able to claim back their pension contributions following the completion of their contracts. 
• Saudi Arabia, Kuwait, United Arab Emirates: Totally tax-free salaries! No wonder the Middle East is renowned for being one of the best TEFL destinations for making money! 
• Spain: Tax is required from anyone living in Spain for longer than 183 days. Tax is paid on a sliding scale between 19-45%, with schools also taking 6% for Social Security benefits. Social Security payments usually range between €50 and €250.
• Costa Rica: Americans and Canadians teaching English in Costa Rica are required to sign up with a Tributacion, a branch of government that assesses income taxes for their legal ability to work. A 10% tax is paid if yearly earnings exceed the equivalent of $6,000 USD.
• Thailand: Schools in Thailand deduct tax from your salary. Tax is paid by any teacher that is a resident for 180 days or more in a year, and can vary between 5-35%.