just secured a job to work in asia for an american company on expat terms. for anyone that has worked abroad:
is it common to be paid in local currency? how difficult is it to repatriate earnings back to the u.s. or would a global banking account solve that? what's the impact of taxes? lastly, is there anything else additional i should negotiate for vs. a normal offer in the u.s.
thanks...
Assuming you are US citizen or resident you need to file (and pay) US taxes. Generally this is not as much of a burden as it might seem to be because 1) the first 90k are exempt and 2) you can offset foreign taxes that you pay against your US tax base (for the most part).
If the company is sending you on expat terms, you might be receiving additional benefits such as housing etc - this might complicate your tax returns so I would see if the company will be paying for professional tax preparation for you. You will likely need it.
Being paid in local currency vs USD only really matters if you're in say China where getting money out of the country is a bit if a pain (but not impossible as an expat) - if you are in HKG/SIN etc wiring your money back home isn't a big deal. As for global accounts, if you mean something like HSBC Premier, I have heard very mixed reviews from people who actually wanted to use it for its intended purpose (think it's more of a marketing ploy) and all you want is a local bank with easy/cheap international bank wires. On that note, you will see that being a US citizen will make it a lot harder to open investment accounts overseas (most companies won't want to do it for you due to the additional regulatory headache for them) so you may want to keep your brokerage account in the US (also makes filling out your taxes easier).
PM me if you have any other questions.
Keep in mind that your state may charge you taxes on the foreign source income, and not all states offer a credit against taxes paid.
thanks kingb and wso1234 for this. yeah, i was looking at hsbc premier and i will be headed to china. so i'll need to do more research but this is a good start. i did read about the first 90k or so being exempt and hopefully the local tax environment in china is more favorable. will get my state residency switched out of new york. i usually do my taxes under the guidance of my mom who is an accountant but i think i'll need to outsource this one as you highlighted there are the complications of a housing allowance and other stuff. will take your advice and keep the brokerage accounts in the u.s. also. thanks again for all your advice.
tax questionf for Americans working in abroad (Hong Kong) (Originally Posted: 10/04/2007)
How does it work exactly? I know that there's an $83,000 exclusion and for Hong Kong the housing exclusion is like $110,000 but am i still subject to withholdings for my monthly paycheck, or do i pay everything at once when i file?
For example, I'll make $60K, $23K housing, plus bonus, say, $70K, so the U.S. tax I owe will be: (60K+70K-83K)* (applicable U.S. tax rate). I know that there's a dollar to dollar credit to the foreign tax paid, so it works out to be I don't own any U.S. tax because the amount of H.K. tax i will pay will exceed the amount i owe to the U.S.
Does it work this way? Can someone with relevant knowledge pls. help me? I'm trying to decide whether to work in HK or the U.S. If the pay would be significantly higher in HK due to lower tax bills, then I will choose it over NYC.
Thank you!
I don't know how it is in HK, but I lived in Japan for a bit and apparently you still had to file your taxes with the US. It depended on things like what visa you were on and what country you were from. You may even be exempt from paying taxes. I don't know under what would qualify one for being tax exempt (I'm no tax major). Other than that you would have to file taxes under form 1040-7 I believe. You can request that to be sent to you. I'm checking over the book that they gave us and it says in bold letters that "you must file a tax return in order to claim income exclusion. It is not automatic! (lol). Failure to file a return could result in a loss of the exclusion and an individual may be subject to taxes , interest and penalties on the entire amount of their income.". Plus living abroad you get an automatic two-month extension. Phew, there is a whole bunch more stuff that they write about taxes that I'm not going to type it all. My suggestion is to go speak with someone who is familiar with tax laws, you won't find a good answer on here. Can anyone figure out the tax laws today anyway? lol.
********"Babies don't cost money, they MAKE money." - Jerri Blank********
ahhh...the joys of working for the American Empire.
Looks like you'll be better off financially in HK for the first year at least. Why don't you talk it through with an international tax specialist? $300 for peace of mind is a small price to pay.
One more reason I believe the IRS deliberately wrote the tax code to be so complicated that even the best CPAs would screw up and so they can "audit" you and "adjust" your tax refund (99.9999% of cases, NOT in your favor). How the hell does the US explain taxing foreign income of someone who earned that income abroad, just because they hold American passports? I have no problem with the IRS taxing people who earn money within the US, but to think that they are entitled tax on income earned abroad by someone who lives abroad is not only patently ridiculous, but it's straight up fraud. Last I looked, a 4 by 6 book with your picture and other stuff doesn't cost $10,000. By the way, you PAY for your passport, too.
you pay taxes when you work abroad so that if war breaks out between china and russia (farfetched but you get my drift) The U.S. gov't will be out there with a fleet picking up all the U.S. citizens out of HK. You still have the benefits of being a U.S. citizen, even though you don't live in the U.S. Why do people who send their kids to private school still have to pay for the pubic school system?
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