Thursday, September 17, 2009

Taxes: Everyone Wants Their Piece

Living in a foreign country brings with it a whole host of challenges, not the least of which is figuring out how to pay what to whom. If taxes in the United States aren't complicated enough, now there are two countries to worry about. I'm not an expert at this, and I don't do it all myself, but here is some of what I have learned so far:

Income tax: If you earn U.S. dollars but live abroad, there are some pros and cons:
  • The foreign-earned income exemption: You don't need to pay U.S, taxes on the first 85k you earn in a foreign country. Yes, even if you work for a U.S. company. The hitch is, you have to have been in that country for all but 30 days of the calendar year (which we have not been-- doh!)
  • State Taxes: If you haven't been in the U.S. and don't have a house there, you are not a resident of any state. So you don't pay any state tax, right? Well, each state has different rules about what qualifies as a resident, and CA is VERY tough on this one. You have to be careful how you prove you are not a resident. AND if you are NOT a resident of any state, complications arise with all kinds of other bureaucratic tasks, such as banking.
  • What do I withhold? When I got a job working virtually, my status as an overseas resident stumped the accounting department. What taxes are they supposed to withhold? The solution was to create my own business, and just send the company an invoice. So technically, my boss is my client. Now I have to include the business income on my tax returns.
  • Argentina: Don't know much about Argentine income taxes yet, as we are not residents, But there is no treaty between the countries, and Argentina requires you to pay taxes on worldwide income. No exemptions for what you already paid in the U.S. I'm procrastinating on this one. Needless to say, I will try my hardest to stay within the letter of the law in both countries while not getting f**ked. (I know what you are going to say- it doesn't matter whether you are a resident- only the length of time you have been there.... *has hands over ears* BLAH BLAH BLAH- I CAN'T HEAR YOU....)
Property Taxes:
  • If you own property in Argentina, you have to pay annual property taxes on that property (usually about 1.5% of the purchase price.) NO ONE WILL TELL YOU THIS UNLESS YOU ASK ABOUT IT, AND THERE IS NO BILL. If you don't pay these taxes, you won't be able to sell the property in the future without a lot of complications. An Argentine accountant needs to register the payment with the government, so don't do this by yourself. This is different than the tax bills you get to cover the cost of city services (below:)
  • City taxes: I don't know about other cities, but in Buenos Aires, you get a quarterly bill for a tax that covers the cost of trash pickup, etc. Not very expensive, but don't pay the bill late, or you will have to take 1/2 a day to go do it at the city office.
Sales Taxes:
  • Taxes on imported goods in Argentina are insane. You can end up paying twice or three times the cost of electronic equipment you would pay in the U.S. All I can see this doing is keeping laptops from teenagers who could use them to learn highly valuable skills. There is wifi on every corner, but only the elite use it. What a shame.
That's all the taxes I can think of. I didn't get into a lot of details, since I am not an accountant, but it gives you an idea of the issues you have to deal with between two countries. It takes a little bit of the romance out of traveling abroad. It requires organization, patience, and tenacity.

This post was written, in part, for where Julia writes about her expat adventures, as well as on this blog. You can follow her in both places.

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