Tax Free Income
The allure of the tax free income offered by cruise line employment is almost too much for job seekers to resist. But before you get too excited, it might 'pay' to conduct a little research into your country of residence and any maritime laws that may apply in regards to income.
In most cases, it's the responsibility of the individual worker to report any monies earned as income to their respective governments as declared by law. But in many cases, when a cruise ship employee works outside of his or her own country onboard a vessel where the employment contract is six months or more in duration, any income earned by that employee is not taxable by their country of origin.
Here are some examples of tax free income laws:
Australia
If you are an Australian citizen, you are required by law to pay tax on any foreign income earned. The Australian Government does provide an Exempt Foreign Employment Income policy (23AG), however, strict conditions apply regarding the type of employment and the policy does not generally apply to cruise line employment.
Canada
Canadian citizens are required to report all of their income regardless of the country of origin of that income and are expected to pay income tax accordingly. Technically, there is an Overseas Employment Tax Credit (IT-497R4) available, however, this tax credit only applies if the employee is working for a Canadian company overseas and within certain industries specified.
United Kingdom
Any potential income tax required to be paid is determined by your ‘status' (resident, ordinarily resident, or domiciled) within the United Kingdom (UK) and the location of where your overseas employer is based.
- Resident – if you're in the UK for 91 days or more during the calendar year; or if you've arrived in the UK to live permanently or for 3 years or more
- Ordinarily Resident – if you normally live in the UK year after year or plan to stay more than 3 years
- Domiciled – you were born in the UK or have lived the majority of your life in the UK
For example, if you're deemed a resident and were born in the UK, and are working solely outside the UK for an overseas employer, you'll be required to pay tax if you're ordinarily resident or only on the portion of income brought into the UK if you're not ordinarily resident.
United States of America
All U.S. citizens working for a U.S. based cruise line such as Norwegian Cruise Lines or Carnival Cruise Lines, will automatically have income tax deducted from their paychecks as per federal and state laws. Depending on individual circumstances, regulations within the Internal Revenue Service (IRS) Foreign Earned Income and Housing Exclusions/Deductions (Publication 54) may apply.
If you're concerned about whether or not you'll be able to earn tax free income while working onboard a cruise ship and since laws can be confusing, it's best to consult a professional certified accountant who will provide you with tax advice and an interpretation of the law in regards to your own specific overseas employment situation.
