The Old Joel on Software Forum: Part 5 (of 5)

Taxes in Taiwan

My friend is moving to Taiwan. He will be working for a US company, but their branch is located in Taiwan.

Does he still pay full US taxes, or are there any tax breaks?
Thanks.

Thanks
Thursday, July 15, 2004

How can anyone answer that if you don't say what country he is a citizen of?

Bob
Friday, July 16, 2004

If he's earning less than $76,000 a year, and he's out of the country long enough, then he should be exempt from US tax. Check it out on the IRS site.

Stephen Jones
Friday, July 16, 2004

I'm sorry, he's a US citizen. This will be his first time living outside the country.

Thanks
Friday, July 16, 2004

The current amount for last year's tax year (2003) was 78,000$ USD. Next year (2004) it will be 80,000 I think.

For 2003, The first $78,000 you earn abroad (adjusted into American dollars) or even paid in American dollars (as long as you are working outside of the US) is not taxable. However, you cannot take this deduction until you have lived in that country for 1 year.

Also, you get a 2 month extension each year to file when you are employed abroad.

Friday, July 16, 2004

But keep in mind that an extension to file is not the same as an extension to pay anything that might be owed.

As well as the exclusion, there's a foreign tax credit which essentially lets you pay no U.S. taxes if the foreign tax rate is (as it usually is) higher, and lets you pay only the difference if the foreign rate is lower.

Send your friend here for some reading:

http://www.irs.gov/faqs/faq13-7.html

Kyralessa
Friday, July 16, 2004

I have a friend who's a German national who worked in the US for five years or so. The German govt thought he was paying US taxes and the US thought he was paying German tax so, he basically got off without paying.

I'm *not* advocating doing this as I would be afraid of ending up in prision. But, it can be done.

MilesArcher
Friday, July 16, 2004

It is likely that his company will do tax equalization. They pay his taxes for him in Taiwan and get the tax break in the US. He earns and pays taxes like he stayed in the US. This often happens even if he transfers to the Taiwan payroll. I lived in Germany for several years working for a German subsidiary and that is how mine were done. My tax returns were scary: prepared by PWC and 100+ pages long.

Ted Graham
Monday, July 19, 2004