There is a common misconception that individuals can undergo temporary work in a different country for up to 6 months without having to declare the income locally or pay tax there. This is unfortunately not the case.

What is the 183-day ruling?

The 183-day ruling is legislation to govern where an individual’s global tax base is for their worldwide income.

The country which is deemed the individuals’ global tax base is where they reside for over 6 months of the year and where they would keep the authorities of that country informed of;

1. The income they earned locally.
2.  All income earned overseas, and taxes paid.

For all income as outlined in point b), the taxes paid in the overseas country is then credited off (as a foreign tax credit) against what would have been paid in their home country – this is how the dual taxation treaty between the two countries works.

If an individual works over 183 days in a different country, this new location would typically become their global tax base for reporting purposes.

As you can see, the 183-day ruling is not related to local taxes on locally sourced income. This is a separate issue.

You will find that most authorities would expect that any income sourced locally is declared and tax/social security paid locally from day 1.

We can see additional proof of this in practice if we look at Sweden for example. The authorities have a special tax scheme called SINK tax. This special tax scheme is specifically for individuals that will be working in Sweden for under 6 months.

We raise this point as the Swedish authorities wouldn’t have a special tax rate in place for the scenario that someone will be working specifically under 6 months, if they didn’t expect individuals working there for under 6 months to be registered and declaring the income in Sweden.

In summary, if you are working in a country, make sure you have a method to declare and pay the local taxes on this income.

Below are some further questions that commonly occur in relation to this.

Does an A1 mean you don’t have to pay tax in the country you will be working?

No, an A1 is only in relation to social security, not tax.

Does the fact I am using my own company registered in my home country mean I can get paid into this and not pay tax in the country of which I’m working?

If you are a 1-man-band company, the administrative activity of that company moves with you. This is one of the defining factors to having a permanent establishment within the country you are working. Therefore, if you are working in a country, the company you are getting paid through should be registered and paying tax in that country.