Before taking a position working overseas, its a good idea to understand the potential tax implications and make sure youre clear on what is necessary to file these taxes in the proper way. Otherwise, it could lead to fines or paying more taxes than necessary. In many cases, people need to file paperwork both in the U.S. and in the country where the income is earned. A company specializing in international taxation, such as tax advice, can help figure out just what is necessary to minimize the overall tax burden.
U.S. Tax Law
According to U.S. law, Americans need to pay taxes in the U.S. on any income they earn, regardless of where they earn it. However, there are a couple exceptions. For example, those who are actually living in another country when they earn the income may be exempt from paying taxes on the income they earn from working, though not that from investments, up to a certain amount. Above that amount and theyll probably have some taxes due. Should the other country require a person to pay taxes on the income, this amount is sometimes able to be applied as a tax credit so people dont get taxed twice on the same income. Someone familiar with international tax law can advise individuals on what forms to use and whether these exemptions and credits apply in a particular situation.
Tax Laws in the Other Country
Many countries have laws similar to those in the U.S. that state that people who earn money in the country need to pay taxes in that country. Do a little research to see what the potential tax liability might be based on the countrys laws. If the company you work for has offices there and has previously sent in expatriates, the personnel office may be able to give you an idea of what is involved. It may mean filing taxes in both countries even if its just to show that you may be exempt in one of the two countries, as its often necessary to report the income in question regardless of whether any tax is actually due in the end.
International Agreements Between the Two Countries
There are many agreements in place between various countries to try to deal fairly with the potential for people being taxed twice on the same income, so looking into international taxation laws and agreements can help a person figure out whether they may wind up having to pay twice on their overseas income. This will help you make sure you understand the true amount of money a potential overseas position will net you.