If I move to Indonesia as a British citizen but continue to work for a British company how will my tax work?

Question

The UK and Indonesia have a "Double Taxation agreement".

I'm also assuming that the digital nomad visa for Indonesia will go ahead.

The visa allows you to stay in the country without paying tax. [emphasis mine]

The plan is now to launch an Indonesia 5 year digital nomad visa that will facilitate long-term stays, and allow the holder to live in the country without paying tax in Indonesia.

As far as I understand it a double taxation treaty means that you don't pay tax in both countries (whether that's not paying tax in one country from the start, or claiming it back afterwards).

• If I'm not paying tax in Indonesia then would the double tax treaty even apply? So would I have to pay tax in the UK or would I pay no tax at all?
• Would my company just keep paying me to my UK bank account as normal?

Answer 1

The usual method is that every country charges you income tax for income that you make while your body is in the country. Big exception is the USA which wants a chunk of every income, and some countries like Germany calculate your tax rate based on world wide income, but charge that tax rate on your income in Germany.

"Double taxation agreements" usually have the purpose that if two countries think you should pay tax on the same money, then somehow you only pay once.

If you were a US citizen, then being tax-free in Indonesia wouldn't help you at all, because the USA would want full US tax minus zero Indonesian tax. In the UK, you need to check what money you have to pay tax on as a UK citizen, especially in the first and last year when you are still in the UK.

For the use of a bank account in which country, ask a lawyer. Especially as making a stupid mistake could be very costly. It may be easier to set up a company in Indonesia and your company pays the company, because it is very unlikely that your UK company wants to learn about Indonesian tax law and risk getting it wrong.

Answer 2

The usual method is that every country charges you income tax for income that you make while your body is in the country. Big exception is the USA which wants a chunk of every income, and some countries like Germany calculate your tax rate based on world wide income, but charge that tax rate on your income in Germany.

"Double taxation agreements" usually have the purpose that if two countries think you should pay tax on the same money, then somehow you only pay once.

If you were a US citizen, then being tax-free in Indonesia wouldn't help you at all, because the USA would want full US tax minus zero Indonesian tax. Germany would look at your world wide income, including Indonesia, tax free or not, to calculate your German tax rate, and apply that to your German income. In the UK, you need to check what money you have to pay tax on as a UK citizen, especially in the first and last year when you are still in the UK.

For the use of a bank account in which country, ask a lawyer. Especially as making a stupid mistake could be very costly. It may be easier to set up a company in Indonesia and your company pays the company, because it is very unlikely that your UK company wants to learn about Indonesian tax law and risk getting it wrong.