According to an analysis by contractor accountancy firm, Access Financial, foreign contractors in Mumbai, India, have the highest take home pay when taxes, social security and cost of living are factored in. Shanghai in China comes in second place, while Switzerland, the only European country to feature in the Top 10, is ranked third.
Access Financial explained that many of the most popular destinations for contractors, such as New York, are not particularly lucrative when the high cost of living is accounted for. Cities like Mumbai and Shanghai have to compensate for being less relatively desirable places to live by paying a premium for contractors with internationally sought-after skills.
According to the analysis, the average disposable income for a skilled contractor in Mumbai, India, is €115,585 compared to €69,554 in New York and €51,735 in Paris.
The research points out that British contractors need to ensure they are non-UK tax resident to benefit from lower rates of tax in some destinations. UK tax residency is governed by a complex set of rules, which means that some British contractors working overseas still pay UK taxes. As a general rule, if a contractor has family in the UK and maintains a home in the country, in order to be non-resident for tax purposes they should spend no more than 90 days in the UK in a single year.
Kevin Austin, Chief Executive of Access Financial, said: “The Indian financial centre of Mumbai emerges as the most attractive destination for contractors. Foreign workers in Mumbai are more likely to have been sent there by the companies they work for and they usually offer highly competitive rates. This means that contractors can enjoy an equivalent standard of living to their home country at a fraction of the cost.
“The East and South East Asian destinations of Singapore, Malaysia, Hong Kong and China offer that attractive combination of low taxes and cost of living. Pay in mainland China is not the highest but it is one of the most candidate-short markets in Asia, characterised by high pay inflation and staff turnover. Most foreign workers in China are highly qualified and tend to work for foreign-owned multinationals, which pay significantly more than the local market rate.
“When you factor in pay and the cost of living, many of the more obvious destinations for expats, such as New York, are much less attractive. Income for contractors in New York is usually very high but the cost of living, particularly housing, push the city down our league table.”
The research shows that, contrary to popular belief, contractors should not place undue emphasis on tax rates when comparing foreign destinations. For example, despite income in Dubai being tax-free, it is not a high-paying destination. British expats can earn considerably more in East and South East Asia, even when taxes and social security are factored in.
European countries remain highly popular with contractors despite their generally higher tax rates and cost of living.
Kevin Austin said: “Aside from Switzerland, European countries fare badly in this analysis. The growth of East and South East Asian economies has seen European countries pushed into second place on pay. Together with high taxes and cost of living they make poor choices for contractors primarily looking to save money. Their enduring popularity is a combination of lifestyle and proximity to the UK.
“The majority of contractors who work abroad are doing so to save money or broaden their experience. It is increasingly common for contractors to save for a deposit on a house in the UK while working abroad.”
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Susie Hughes © Shout99 2018