Posted by: scottishboomerang | August 27, 2007

Financial Management for Fellow Boomerangs

I came from the generation which was never taught financial management in school, and, sadly, I wish my mum and dad had taught me how to book keep before I left home. Bookkeeping, budgeting, and investing are essential skills which shouldn’t get left of anyone’s list. So, we learn the hard way about money, sooner or later, if we are not taught the easy way.

For ESL Teachers, long term financial management and planning is absolutely essential, and, unlike other professions, fraught with difficulty. To start with, you are nearly always working for “local” wages and dealing with local tax systems, which can be very different from back home. Employers – your average English Academy is a “Mom-And-Pop” affair, even if it’s a franchise, can be dicey at the best of times regarding taxes: for many of us, we simply do not know whether our employers have fulfiled their obligations to the State and deducted your tax at source, or, in the event that they have, whether the deductions are right.

The following is my check list for making sure you are not stung for tax when you return to your country.

  • Will you pay tax in your home country or the country that you work in? If so, check that there is a double-taxation agreement between your home country and your working country. You might have to pay taxes in both jurisdictions.
  • If no double-taxation agreement exists, do your earnings meet the threshold for taxation in your own country? If you are earning below the taxable threshold in your own country, you might not have to pay tax in your own country.
  • Some countries, like the UK, do not require you to pay tax on your return if you are living and working outside the country for a certain period of time. In the case of the UK, this is 2 fiscal years.
  • If you have deductions for national/social insurance or state pension in your host country, can you reclaim this when you leave. Some countries have a mutual cooperation treaty – for example, Americans and Canadians can claim this money back when they leave Korea. The poor old British teacher, though, never gets that money back because Ol’ Blighty won’t grant Koreans the same privilage in Britain.
  • If you have no pension provision in your home country, get a flexible one and start saving for your retirement, even if you don’t plan on staying in teaching. You never know (as in my case) when you end up back on the ESL circuit.
  • Get your employer to give you a payslip which is signed and stamped and looks as near to your home countries record of earnings slip as possible. Payslips are not customary in all countries (certainly they are a rarity in South Korea), but they are very necessary in the West if you need to prove your earnings. There are a number of reasons to do this. (1) making one every month helps you keep track of what you are being paid and will highlight any anomalies; and (2) signed and stamped by your employer, it constitutes a legal document which, if you ever need to prove to the tax man what you’ve been earning and what taxes you have paid in your host country you can present.
  • In conjunction with your payslip, get some record from your bank to show that the amount shown as the net pay has gone into your account. Keep this record with your payslip. Get your employer to sign or seal the payslip, which you also countersign (I also add my fingerprint to it).

Below you can download my “British Style” payslip which I’m currently using with my employer in South Korea. Of course, it’s not really a British payslip (normally these are not stamped and sealed with signatures and fingerprints) but its in a format the British Inland Revenue is acustomed to dealing with and is a darn site easier to read than the hotch-potch table of payments and deductions my employer gave me. Asian logic (not to mention the quality of their official English) can be rather dicey at times. I will add an American and Canadian Style one here when I get my paws on one.

I designed these documents in Open Office Writer – the Open Source word processor – which I highly recommend since you can download an English version of it onto a computer which has its MS products and its OS in Asian languages. I have saved them in MS Word format and uploaded them but I have no idea how they will turn out: you might need to tweek the contents a little to get it all back on one page. To download Open Office, click here.

  • British-Style Monthly Record of Earnings – OOo Writer (Recommended)
  • British-Style Monthly Record of Earnings – MS Word Format
  • Canadian-Style Monthly Record of Earnings – OOo Writer Format (Recommended)
  • Canadian-Style Monthly Record of Earnings – MS Word Format
  • US-Style Monthly Record of Earnings – OOo Writer Format (Recommended)
  • US-Style Monthly Record of Earnings -MS Word Format.

Legal Note:

The information contained in this post is based on my understanding of current tax law in the UK and elsewhere, but should not be used as a substitute for doing your own research into the current situation in your home and host countries regarding taxation and your legal responsibilities. Nothing in this post shall be interpreted as legal advice.

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