Term
183-day rule
A double tax treaty rule under which pay for work abroad is taxed at home if the person spends fewer than 183 days there and the cost is not borne by a local employer or permanent establishment.
Updated
What it means
The 183-day rule is a provision of double taxation treaties that determines where the pay of an employee working temporarily in another country is taxed. If its conditions are met, employment income is taxed only in the country where the employee is tax resident.
There are three conditions, all of which must be met: the employee is present in the other country for no more than 183 days in the relevant period, the pay is not paid by an employer resident in the other country, and the pay is not borne by a permanent establishment of the employer there. If even one condition fails, the country where the work is done may also tax the pay.
How days are counted differs between treaties. Some count the calendar year, others any twelve-month period. As a rule every day of physical presence counts, including weekends and days of arrival and departure.
How it works in practice
When posting employees abroad we keep a record of days spent in each country. At the planning stage we already check whether the 183-day threshold might be crossed, because that decides whether the pay will also have to be taxed abroad.
The 183-day rule concerns only income tax. Social and health insurance follow the EU coordination rules and, for postings, are dealt with through the A1 form. An employee may therefore pay contributions in Slovakia and tax in another country, or the other way round.
Where staff are hired out to a foreign client, we examine who the economic employer is. Many countries then treat the local company using the worker as the employer, and the 183-day rule does not apply.
What to watch out for
The rule does not mean nothing needs doing abroad for stays under 183 days. Even when the conditions are met, the employer may have notification duties in the other country, for example for postings, and the employee may need a certificate of tax residence.
Long-term work in another country may, besides the employee’s tax, create a permanent establishment of the company and thus a tax liability for the company itself abroad. On larger projects we therefore assess both levels together.
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