Tax Residency for Expats during lockdown
If you spend more than 183 days in any country you become tax resident. This could pose problems with tax residency for Expats during lockdown. Some countries still allow flights and shipping.
In extreme cases, a country like Cyprus completely closed all its airports and sea ports, not allowing anyone to travel in or out of the country.
Even as we see some countries relaxing their lockdown regulations, many are maintaining rules regarding border control in order to protect themselves against people bringing second waves of the virus into their countries. This is likely to be an area of lockdown release which governments will be divided on and some will hold off for as long as they can.
For anyone who was in Cyprus on 1st January, by the time overseas travel is allowed again (expected in August) they will have been resident for more than 183 days. Even then, there may be personal fears for health which mean that some individuals could decide that they don’t want to travel overseas at this time.
This creates tax residency issues, which will need to be considered and reviewed by Expats Living and Working Abroad.
If you are an Expat in a position whereby you may be exceeding 183 days outside of your current country of residency, please contact us for advice.
Tax residency and the Brexit transition period
Let’s not forget that there is also the complication of the Brexit transition period (ends December 2020), which has implications for residency and those Living and Working Abroad. Make sure that you’ve downloaded our FREE Checklist for Expat Residency Rights during the Brexit Transition Period which gives you details of everything you need to monitor at this time.
Can my time spent in lockdown in the UK affect my tax residency?
As a UK Expat, your time spent in lockdown in the UK may affect your tax residency status.
For UK Expats normally working abroad and spending a limited amount of time in the UK, the 183 day rule creates a challenge.
Tax residency rules are more flexible for tax residents that have been out of the UK and lived as non-resident Expats for more than 3 years.
Depending upon circumstances, it may be possible to remain in the UK for up to 182 days in the current tax year, starting 6th April.
Because the UK lockdown started on 23rd March, this spans two tax years. Assuming a UK Expat has been in the UK for less than 183 days during the tax year 2019/20, the period of concern becomes the current tax year 20/21.
Potentially, a UK Expat could remain locked down in UK until the start of October.
The UK could release its own lockdown at some point between now and then, but another country could be on a different path. If the overseas country the UK Expat is Living and Working Abroad in is still in lockdown, a different way forward will be needed. It could be that previous work and contracts have been terminated, in which case, in the post WWC period there may be a delay in finding new work to go to.
Tax residency for Expats during lockdown treated as exceptional circumstances
One fallback the UK Expat has at this time is that the UK tax office HMRC have confirmed that the coronavirus economic lockdown will be treated as exceptional circumstances. This allows an Expat an additional 60 days in the UK in 2020/21 as a result of lockdown, closure of international borders, or unable to travel because of government advice.
Note that these exceptional circumstances for issues concerning residency for Expats during lockdown does not include extended stays in the UK because no work is available.
The statutory residency test will still apply at this time and we previously published an article which addresses how many days UK Expats can spend in the UK and retain Non-Resident status, which details this information.
Your ties to the UK will still be counted - family, accommodation, work.
Caution is recommended to protect non-resident status and non-domicile status earned over many years - if that’s what you want.
For a FREE Review of your own personal circumstances, contact us - www.proactpartnership.com/contact-us
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