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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4942
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I work company who has offices in Japan, Singapore, Houston

Customer Question

I work for a company who has offices in Japan, Singapore, Houston and Rio de Janeiro.
I’m a UK citizen working for this company in Rio.
This company are applying Hypo Tax to myself and other ExPats not only here but other locations Worldwide who are not nationals of any of the countries where this company have offices located
Brazil does not have a reciprocal tax arrangement with the UK.
The company claims that they will offset this money on any tax I/we have to pay in our own countries but all of us work out of our own countries so as to not to pay income tax(legally) which this company knows.
Question: Can this be deemed a legal tax or one that is a tax to the benefit of the company as they will keep these monies?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Brazil has Double Taxation Treaties with the UK and has had for some years, well over a decade. These preclude the same income streams being taxed in both jurisdictions. ExpatNetwork advises that the purpose of Hypo Tax is: 'So an individual seconded from (say) the UK to the United States would have an amount of ‘hypothetical tax’ withheld from their earnings each month in line with what they would have paid on the non-expatriate parts of their salary package if they had remained in the UK. It follows that the individual therefore suffers no personal tax burden as a result of the expatriate aspects of the assignment such as cost of living allowance, disturbance allowance and accommodation in the host country. The only ‘tax’ that the individual pays is the ‘hypothetical tax’ withheld at source to reflect home country tax and social security liabilities.' It follows that this Hypo Tax can, under the Treaty, be claimed as a tax credit against any Brazilian lax liabilities. The operation of Hypo Tax is perfectly legal and a very frequent occurrence for expat workers. I am so sorry to have to rain on your parade.