If understanding taxes is difficult, understanding taxes simultaneously in two different countries is even worse. There is no supranational authority that effectively coordinates the definition of tax policies internationally and that is somethig we find out when we become an Expat.
Let's start with an example, the tax year is different in many countries:
Another concept that is very linked to the Tax Residency is the Worlwide Income. Worldwide income refers to the income received in any country, as in many cases, Expats are paid during the assignment in both the country of origin and destination. You may presume that each income will be taxable in the country where it is paid, but this is NOT necessarily the case. In many cases, your tax residency in a given country will mean that you will be taxed on your worlwide income, that is, on the salaries país in both the country of origin and destination.
- The company is required to withhold under the applicable tax law.
- You are responsible for filing your personal income tax in accordance with the legislation in force in each country
It is key to have these concepts in mind to avoid confusion
The tax issue gets more complex as companies have diferent policies and approaches (gross, equalization, etc.). I will need a new post to cover these topics.