Taxes for Foreign Workers: What New Immigrants Need to Know

Starting a job in another country often means learning an entirely new tax system at the same time. Your employment contract may show an attractive annual salary, but the amount reaching your bank account can be significantly lower after income tax, social insurance, pension contributions and other required payroll deductions.

For new immigrants, taxes can also become more complicated because immigration status and tax residency are not always the same thing. A temporary visa holder may become a tax resident of the country where they work, while another worker with similar immigration status may remain a non-resident for tax purposes because of different circumstances.

Tax residency can determine whether you pay tax only on income earned in your new country or potentially have to report income from around the world.

The rules differ considerably between major destinations. The United States distinguishes between resident and nonresident aliens for federal tax purposes. Canada determines tax obligations primarily through tax residency and residential ties. The United Kingdom uses its statutory residence rules, while Australia applies separate tax-residency tests that do not simply follow visa status.

This guide explains the most important tax rules foreign workers and new immigrants need to know, including payroll deductions, worldwide income, tax returns, double taxation and common mistakes to avoid.

Immigration Status and Tax Residency Are Not the Same Thing

One of the first concepts foreign workers should understand is the difference between immigration residency and tax residency.

Immigration authorities decide whether you are legally permitted to enter, live and work in a country.

Tax authorities determine how your income should be taxed.

The two systems can use different definitions.

Someone might hold a temporary work visa but still become resident for tax purposes after establishing sufficient physical presence or residential ties.

This matters because tax residents are often subject to broader reporting obligations than non-residents.

For example, Canada states that an individual’s Canadian income-tax obligations are based on residency status. Australian tax authorities similarly make clear that tax residency can differ from citizenship and immigration status.

Do not simply look at the word “temporary” on your visa and assume you are automatically a temporary or non-resident taxpayer.

Understand Gross Salary Versus Take-Home Pay

Your gross salary is your income before deductions.

Your take-home pay, also called net salary, is the amount remaining after required deductions.

Depending on the country, your payslip may include deductions for:

• Income tax
• Social Security contributions
• Medicare contributions
• National Insurance
• Canada Pension Plan contributions
• Employment Insurance
• Pension or retirement contributions
• Other authorised workplace deductions

These deductions can make a major difference to your monthly budget.

A worker earning $60,000 annually does not normally receive $5,000 in spendable cash every month.

When comparing international job offers, estimate your after-tax salary using the tax system of the actual country—and sometimes state, province or region—where you will work.

Most Employees Have Taxes Withheld Automatically From Their Salary

Foreign workers employed by established companies generally do not calculate and send every payroll tax payment themselves.

Employers normally withhold relevant taxes from each salary payment.

Different countries have different names for these systems.

In the United Kingdom, employers generally operate PAYE, or Pay As You Earn, and deduct Income Tax and applicable National Insurance from employees arriving to work from overseas. HMRC states that PAYE and National Insurance generally apply whether the employee comes to the UK temporarily or permanently.

Canada’s payroll system can include federal and provincial or territorial income taxes, Canada Pension Plan contributions and Employment Insurance premiums.

Australia uses Pay As You Go withholding, commonly called PAYG, through which employers withhold applicable amounts from wages.

Payroll withholding makes tax collection easier, but it does not always mean that your final tax obligation has been settled perfectly.

You may still need to file an annual tax return.

Taxes for Foreign Workers in the United States

The U.S. tax treatment of foreign nationals depends heavily on whether the person is considered a resident alien or nonresident alien for tax purposes.

A foreign national generally becomes a U.S. resident alien for federal tax purposes by meeting either the Green Card test or the Substantial Presence Test.

The U.S. Substantial Presence Test

The Substantial Presence Test looks at how many days someone has physically spent in the United States.

The basic calculation generally requires:

• At least 31 days in the current year, and
• 183 weighted days over the current year and previous two years.

The calculation counts all qualifying days in the current year, one-third of relevant days during the previous year and one-sixth of relevant days during the second previous year. Various exceptions can apply.

This means someone can become a U.S. tax resident without obtaining permanent residence.

U.S. Resident Aliens and Worldwide Income

Once classified as a resident alien, an individual generally follows the same federal income-tax rules as a U.S. citizen and reports worldwide income on Form 1040.

Worldwide income can include qualifying:

• U.S. salary
• Foreign salary
• Bank interest
• Investment income
• Rental income
• Other taxable foreign income

Having money outside the United States does not automatically make it exempt from U.S. reporting.

U.S. Nonresident Alien Tax Rules

A nonresident alien generally has a more limited U.S. tax obligation.

The IRS generally taxes nonresident aliens on income effectively connected with a U.S. trade or business and certain U.S.-source income. Nonresidents who are required to file generally use Form 1040-NR rather than the normal Form 1040.

Tax treaties can reduce or eliminate U.S. tax on particular types of income for qualifying residents of treaty countries.

Social Security and Medicare Taxes for Foreign Workers in the USA

Income tax is not the only deduction foreign employees may see in America.

Most employees working in the United States also face Social Security and Medicare taxes, commonly referred to together as FICA taxes.

The IRS states that foreign employees performing services in the U.S. are generally liable for Social Security and Medicare taxes, although certain visa categories and other exceptions can apply.

International Social Security agreements can also change the result.

The United States currently has Totalization Agreements with 25 foreign countries. These agreements are designed to prevent workers from paying compulsory Social Security contributions to two countries on the same employment when the agreement’s requirements are satisfied.

A worker temporarily transferred from an overseas office to the United States should therefore determine whether a Social Security agreement affects their payroll deductions.

Taxes for Foreign Workers and New Immigrants in the UK

The UK also makes tax residency extremely important.

A person who is not UK resident generally pays UK tax on relevant UK income rather than foreign income.

UK residents, by contrast, normally pay UK tax on income from both the UK and abroad, subject to available reliefs and special rules.

PAYE and National Insurance for Foreign Employees

A foreign worker employed normally by a UK company will commonly have Income Tax and National Insurance deducted through payroll.

This means the salary shown in an employment contract is usually higher than the amount deposited into the employee’s bank account.

Your first UK payslip can also look unusual if your employer does not yet have all of the information needed to apply the most appropriate tax code.

Keep your payslips and review the tax code shown on them.

New UK Foreign Income and Gains Rules

The UK significantly changed the taxation of certain internationally mobile individuals beginning in April 2025.

The former remittance-basis system was replaced by a residence-based Foreign Income and Gains regime.

Qualifying new UK residents who were non-UK resident for the previous 10 consecutive tax years may be able to claim relief on eligible foreign income and gains during their first four tax years of UK residence.

This is a specialist area.

A newly arrived worker with investments, rental property, business income or substantial savings outside Britain should not assume all foreign income is automatically exempt simply because they recently moved to the UK.

Taxes for New Immigrants and Foreign Workers in Canada

Canada’s tax system also focuses heavily on residency rather than immigration labels alone.

The Canada Revenue Agency states that income-tax obligations depend on whether an individual is resident, non-resident or falls into another recognised residency category for tax purposes.

Residential ties can be important when determining status.

These can include a home in Canada and significant personal or economic connections.

Canadian Tax Residents and Worldwide Income

Once a newcomer becomes resident in Canada for tax purposes, they generally have to report worldwide income for the applicable period of Canadian tax residence.

The CRA defines world income as income from sources both inside and outside Canada.

This can surprise immigrants who still receive:

• Foreign bank interest
• Rental income from property abroad
• Investment income
• Pension income
• Income from overseas businesses

Keeping the money in an overseas account does not necessarily remove the reporting obligation.

Canadian Payroll Deductions

Employees commonly see several deductions on their Canadian paycheques.

These can include:

• Federal income tax
• Provincial or territorial income tax
• Canada Pension Plan contributions
• Employment Insurance premiums

Quebec uses a separate pension system and has additional payroll differences.

CRA payroll guidance confirms that employers calculate CPP contributions, EI premiums and applicable federal and provincial or territorial income-tax deductions from employees’ remuneration.

Filing Your First Canadian Tax Return

New immigrants usually file a Canadian tax return for the year in which they become resident for tax purposes.

For example, the CRA states that someone who becomes a Canadian tax resident during 2026 will generally file the 2026 return by April 30, 2027.

Filing can also be important for accessing qualifying Canadian benefits and credits.

Taxes for Foreign Workers in Australia

Australia provides another strong example of why visa status should not be used as a shortcut for determining taxes.

The Australian Taxation Office applies specific tax-residency tests.

An Australian tax resident generally has broader Australian tax obligations, while a foreign resident normally reports Australian-source income such as employment income earned in Australia.

Australian Tax Residents and Foreign Income

Australian tax residents generally need to report worldwide income, subject to available exemptions, offsets and special rules.

Foreign residents generally do not report ordinary foreign-source income to Australia simply because they are working there, although they remain taxable on relevant Australian-source income.

Temporary residents can have additional special rules, making it important to determine the exact tax category that applies.

Tax File Numbers and PAYG Withholding

Workers in Australia normally obtain a Tax File Number, commonly called a TFN.

Employers use payroll information to apply PAYG withholding to wages.

New arrivals should provide accurate tax-residency information when completing employment paperwork because resident and foreign-resident tax treatments can differ.

For example, Australia’s full-year resident tax-free threshold is currently $18,200, while foreign residents are subject to a different tax-rate structure and generally do not receive that ordinary resident threshold.

Foreign Income Can Create Unexpected Tax Obligations

New immigrants often continue having financial connections to their previous country.

You may still own:

• A rental property
• Savings accounts
• Investments
• Shares
• A business
• Retirement accounts
• Other income-producing assets

Do not assume that because the income is earned abroad, your new country does not need to know about it.

Whether foreign income must be reported depends heavily on tax residency.

A Canadian tax resident may need to report worldwide income. A U.S. resident alien generally has a worldwide income obligation. UK residents normally face tax on worldwide income unless a specific relief applies. Australian residents generally have similar worldwide reporting principles.

Keeping good records from both countries can make your first tax return much easier.

Can Foreign Workers Be Taxed Twice on the Same Income?

Cross-border workers sometimes discover that two countries appear to have a right to tax the same income.

Fortunately, tax systems often provide mechanisms designed to reduce genuine double taxation.

Countries enter into Double Taxation Agreements or tax treaties that allocate taxing rights and provide relief in qualifying situations.

The UK, for example, allows Foreign Tax Credit Relief in many cases where foreign income has already been taxed abroad.

Canada similarly provides a federal foreign tax credit where qualifying foreign income or profit tax has been paid on foreign income reported in Canada.

Australia provides a Foreign Income Tax Offset for qualifying foreign taxes, while U.S. taxpayers can potentially use foreign tax credits where the required conditions are met.

Double taxation relief does not necessarily mean you simply choose the country with the lowest tax rate.

The treaty and domestic laws determine how relief works.

Working Remotely Across Borders Can Create Tax Complications

Remote work has made cross-border taxation more important.

Suppose you are employed by a company in one country but spend several months working from another.

Questions can arise about:

• Your tax residency
• Where the employment income was earned
• Employer payroll obligations
• Social insurance
• Tax treaties
• Whether the employer creates additional local obligations

Working online does not mean the income exists outside normal tax systems.

Before moving abroad while keeping the same remote job, check both immigration permission and tax consequences.

Your employer should also know where you are physically performing your work.

Employer Relocation Benefits May Have Tax Consequences

Foreign workers sometimes receive relocation packages containing benefits such as:

• Flights
• Temporary housing
• Relocation allowances
• Cash bonuses
• Moving expenses
• Employer-paid insurance

Do not automatically assume every employer-paid benefit is tax-free.

Different countries classify employment benefits differently, and some employer payments can become taxable compensation.

Ask payroll whether a relocation payment will appear as taxable income and what amount is likely to reach your bank account after deductions.

This is particularly important when an employer provides a large cash relocation bonus that you plan to use for rent or deposits.

Keep Important Tax Documents After Moving Abroad

Good record keeping is one of the simplest ways to avoid unnecessary tax problems.

Keep documents such as:

• Employment contracts
• Payslips
• Annual earnings statements
• Tax identification documents
• Foreign income records
• Overseas bank statements
• Investment statements
• Rental property records
• Tax paid in your previous country
• Immigration entry dates
• Evidence of major relocation dates

Cross-border tax questions often depend on exact dates.

Knowing when you arrived, when employment began and when you established a home can become important when determining tax residency.

Common Tax Mistakes New Immigrants Should Avoid

One common mistake is assuming your employer handles all of your tax responsibilities simply because tax is deducted from your salary.

Payroll deductions may cover employment income while leaving foreign investments, rental income or other income requiring separate reporting.

Another mistake is assuming that temporary immigration status automatically means non-resident tax status.

A third is failing to report overseas income because the money remains in a foreign bank account.

Also avoid ignoring letters from tax authorities because you do not understand them.

Tax issues are usually easier to resolve when addressed early.

Finally, do not rely solely on advice from friends whose immigration, residency and financial circumstances differ from yours.

FAQs

Do Foreign Workers Have to Pay Income Tax?

Generally, yes, when they earn taxable employment income in the country where they work. The exact liability depends on local law, residency status and applicable tax treaties.

Do Temporary Workers Pay Tax?

A temporary work visa does not automatically exempt someone from tax. Temporary workers can still owe income tax and social-insurance contributions.

Do Foreign Workers Pay More Tax Than Citizens?

Not necessarily.

In many countries, tax residents can fall under substantially the same income-tax system as citizens, although non-resident rules, available allowances and special visa-related rules can produce different results.

Do New Immigrants Have to Declare Foreign Income?

Potentially.

U.S. resident aliens, Canadian tax residents, UK residents and Australian tax residents can all face worldwide income-reporting obligations, subject to each country’s exemptions and reliefs.

Can I Get Credit for Tax Paid in Another Country?

Potentially. Tax treaties and foreign tax credits can provide relief from double taxation when the required conditions are satisfied.

Should Foreign Workers File a Tax Return Even When Their Employer Deducts Tax?

Sometimes yes. The requirement depends on the country and your circumstances. Foreign income, multiple jobs, investment income or other factors can create a filing obligation even when employment tax has already been withheld.

Conclusion

Taxes are an unavoidable part of working abroad, but they become much easier to manage once you understand the basic structure.

Start by determining your tax residency rather than relying solely on your visa type.

Then understand your payslip.

Know which amounts are being deducted for income tax, Social Security, National Insurance, CPP, EI, Medicare, pensions or other compulsory programs.

If you become a tax resident of your new country, investigate whether income you still receive overseas must be reported. The United States, Canada, the UK and Australia all have circumstances in which tax residents are subject to worldwide income rules.

Keep records of taxes already paid overseas because tax treaties and foreign tax credits may reduce double taxation.

Most importantly, treat your first year after immigration carefully. Moving during a tax year, maintaining assets overseas or working in more than one country can make your return more complicated than that of someone who has lived and worked in one country all year.

Understanding these rules early helps you estimate your real take-home salary, budget more accurately and avoid discovering months later that foreign income, payroll deductions or filing requirements were handled incorrectly.