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The 183 Day Rule

This is an issue frequently brought up by contractors who think that moving from one country to another is a great opportunity to evade tax. In effect it means that if a contractor spends less than 183 days in the country in which he performs his duties, he is not liable to pay tax there. Most initial contracts are for 2, 3 or 6 months and therefore if we take them in isolation, the argument for the 183 day rule may be valid.

However, we do not have total control over the contractor. The possibility exists that the contract gets extended (whatever the intentions of both parties are at the beginning); the contractor may also move to another agency or another client within the same country. In this scenario, the tax liability is dated back to day 1, not day 183. For this reason alone, it is not possible to take account of the 183 day rule for the purposes of the contract market. There are also other complexities associated with the 183 day rule which should mean that for any agency that signs off client contracts, it should be standard policy to avoid using the 183 day rule in any circumstances.