As global mobility increases, more professionals are splitting their work between two or more countries. Whether you’re a remote tech worker, a consultant with international clients, or an executive on overseas assignment, filing taxes when earning income in two jurisdictions can quickly become complex — and costly, if not handled correctly.
This guide simplifies the process for expats, remote workers, and digital nomads who need to navigate the tricky terrain of dual tax obligations — including those filing income tax for a foreign entity or through foreign-based employers.
- Know Your Tax Residency Status in Each Country
The first step is understanding where you are considered a tax resident — because tax obligations are typically tied to residency, not just citizenship.
Key residency tests often include:
- Physical presence: Did you stay more than 183 days in the country?
- Center of vital interests: Where is your family, property, or business based?
- Permanent home: Do you have long-term accommodation in the country?
You can be a resident in both countries under local laws — that’s when tax treaties become critical.
- Check for a Double Taxation Agreement (DTA)
Double taxation occurs when both countries claim tax on the same income. Many countries have signed Double Taxation Agreements (DTAs) to resolve this.
A DTA can determine:
- Which country has the primary taxing right over your income
- Whether the other country must exempt or give credit for taxes paid abroad
- The definition of tax residency if both claim you as a resident
If you’re filing income tax for a foreign entity — such as a company or employer based outside your country of residence — understanding the tax treaty rules is crucial to avoid double taxation.
- Determine What Income is Taxable Where
Different countries tax income based on:
- Worldwide income (e.g., USA, Canada, UK residents)
- Source-based income (e.g., UAE, Saudi Arabia for non-residents)
Understand how each country treats:
- Salary or freelance earnings
- Dividends, interest, and capital gains
- Rental income
- Business profits
If you’re being paid by a foreign entity, or operating your own entity abroad, some countries may still expect you to report and pay income tax locally — depending on how they classify the source of income.
- Track All Income Streams Accurately
Keep a record of:
- Payslips from both countries
- Freelance contracts or client invoices
- Foreign bank account statements
- Tax withholding certificates
- Expenses if deductions are allowed
Use multi-currency accounting tools and convert to the filing country’s currency using the official exchange rate.
- Use Foreign Tax Credits or Exemptions
If you pay tax in one country, you may be eligible to:
- Claim a foreign tax credit in the other
- Exempt the foreign income if allowed by treaty
- Use territorial taxation rules to exclude non-local income
This is particularly useful if you’re filing income tax for a foreign entity and already paying tax abroad.
- Don’t Overlook Social Security Contributions
If you’re employed in both countries, you may be:
- Double paying into two social systems
- Or exempt under totalization agreements
This affects your:
- Retirement eligibility
- Employer tax responsibilities
- Health insurance entitlements
- Beware of Exit Taxes and Reporting Obligations
Some countries impose:
- Exit taxes if you stop being a tax resident
- Foreign account reporting (e.g., FATCA, CRS)
- Worldwide asset declarations
Filing income tax for a foreign entity may also trigger disclosure rules — even if you’re not a direct shareholder — especially under anti-avoidance laws or beneficial ownership reporting.
- Get Help: Hire a Cross-Border Tax Advisor
If your situation involves:
- Business income
- Dual tax residency
- Property or investments abroad
- Filing income tax for a foreign entity
… then consulting a cross-border tax advisor is essential. They can interpret treaties, optimize tax credits, and help you remain compliant while saving money.
Final Thoughts
Filing taxes while working in two countries isn’t impossible — but it does require careful planning, accurate recordkeeping, and ideally, professional guidance.
In a globalized world, smart tax strategy isn’t just about compliance — it’s about protecting your income and staying legally mobile.