My wife is working part time earning under £800 a month and paying taxes in Japan on her income. She lives in the UK though, I believe there's a tax agreement with Japan to prevent double taxation. Does she need to do anything over here? She's worked for this company for 6 months now, I'm beginning to get concerned we're missing something here.
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2Why is she paying taxes in Japan? Is she working for a Japanese employer? Is she legally allowed to work in the UK? I ask because remote work is still considered 'work' for purposes of work Visas etc., which is something often missed in cases like this.– Grade 'Eh' BaconCommented Jun 20 at 19:10
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She is working for a Japanese employer. She is on a Spousal visa so is legally allowed to work. Sorry should have clarified– Josh19041996Commented Jun 21 at 20:27
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1 Answer
Does she need to do anything over here
Most likely.
The tax treaties between countries do indeed exist and attempt to address the issue of double taxation, but this is not trivial. If there's a treaty between the UK and Japan, it would define what income should be taxed by whom in what order, and if there are any treaty benefits in either country - the taxpayer would need to actively claim them.
Generally, income earned in a country is sourced to that country, meaning that country has the first right to tax it. So if a treaty says that only one country should tax it - most likely in this case that would be the UK, not Japan.
However, there may be specific provisions that change that depending on the type of income, and the purposes of stay. For example, students may be treated differently than long term foreign employees.
I suggest to speak with a UK based tax advisor who'd be able to analyze the treaty and propose how to apply it in your case.
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Probably income in Japan is automatically deducted from her salary, which makes it hard to make the employer stop deducting it and send it to UK so she can pay her taxes in UK. I'm in a similar situation even though country names are different, it's hard to stop automatic tax payments and do it manually elsewhere.– uylmzCommented Jun 21 at 6:06
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@uylmz I'm assuming the employer is unaware the employee is in a different country? The employer in this situation is also in violation of the UK/wherever-you-are labor and tax laws. Generally, remote work would not allowed as an employee unless you become an employee of the local entity of your employer. Commented Jun 21 at 6:18
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"unless you become an employee of the local entity of your employer." or if she works as a subcontractor which means she gets the gross payment and has to handle taxes herself, both resolves her tax situation?– uylmzCommented Jun 21 at 6:39
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@uylmz right, but for contractors you wouldn't usually have a withholding issue. You might have a VAT issue, instead. Although I don't know how it works in Japan. In some countries there are also laws preventing converting employees into subcontractors (e.g.: the US). Commented Jun 21 at 6:42
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1@Josh19041996 This is not a full answer, I have not researched the specifics of the UK-Japan tax treaty, so take this as a starting point only: probably your wife only owes tax to the UK, and no tax owed to Japan. You would need to file as a UK... 'resident' [not sure if they use that term precisely], but note that tax 'residency' <> immigration 'residency', so even if you are not considered a resident for other purposes, you may be considered a resident for tax purposes. Look up 'how to file taxes in UK as a self-employed person'. Commented Jun 25 at 12:44