0

Can a citizen of one country be charged income-tax by another country even if he/she has never resided in that other country based on income sourced through customers of that country?

5
  • You mean, for example, can Amazon be charged sales tax in Australia even though they aren't an Australian company? (idk if Amazon does have an Australian subsidiary; it's just an example) – user253751 Dec 5 '19 at 10:14
  • No actualy what I mean is can Austraila charge income tax if I sell services to Austrailia from another country being another country's citizen. – compenthusiast Dec 5 '19 at 11:05
  • You are only asking about income tax, not sales tax or any other tax? The question should say so. – user253751 Dec 5 '19 at 11:06
  • Income tax .It might sound strange but I just want to confirm – compenthusiast Dec 5 '19 at 11:09
  • Note that "income tax" might mean something different from one country to the next. – Relaxed Dec 5 '19 at 13:21
2

Generally speaking - it least from the US point of view - the answer is absolutely yes.

For example:

A foreign investor in US real estate is subject to US Federal (and possibly state and local) income tax on capital gains from the sale of the property and on any rental income received with respect to it.

A foreign investor receiving dividends from a US corporation is subject to income tax on the dividends.

The above applies even if the foreigner never set foot in the US.

On the other hand:

A foreign investor receiving interest income from a US debtor is (generally) not subject to US income tax on.

A foreign service provider who provides services to a US customer is not generally to subject to US income tax if the services were performed entirely outside the US.

Finally, if there is a tax treaty between the US and the other country, these results may be modified by the treaty.

2

Generally speaking yes. Actual physical residence is not the only test countries use to determine tax residence. Contrary to what many people seem to believe, there is no overarching internationally agreed principle that tax residence only exists if you spend X days in a country or anything like that (in fact, the tax year is not the same in all countries in the world).

Just as an example, here is a short summary of the rules in France:

Unless international tax treaties state otherwise, you are considered to be a resident of France for tax purposes if you fulfil at least one of the following criteria :

[…]

  • You have a professional activity in France, as an employee or otherwise, unless this activity is secondary.

  • The centre of your economic interests is in France. In other words, France is the location of your main investments, your place of business, the location of your professional activities, or the source of the majority of your income.

[…]

If your "tax domicile" is in France, you are liable for French taxes on all of your income, including compensation for activity carried out abroad. You must file an income tax return with the tax office with jurisdiction over your tax domicile.

As another example of taxation without physical residence, US law is notorious for covering US citizens' income no matter where they live in the world (but that's a slightly different scenario and not based on drawing any sort of income from the US). In both cases, the country in question would deem you a tax resident and tax the entirety of your worldwide income (possibly subject to some exemptions like the foreign tax credit).

If you do not reach the threshold for tax residence (e.g. the income you get from these customers is a small part of your overall income), another set of rules would apply but you might still be liable for various taxes (in European countries that would typically include VAT, payroll or corporate taxes, but not necessarily personal income taxes).

4
  • If I sell services to lets say austrailian customers through google In App Purchasese.Is it US scorced sale or Austraila Scourced saled?Do I have to pay income tax on it to USA or Austrailia ? – compenthusiast Dec 6 '19 at 9:20
  • I have read Jack's answer but I want to confirm from all. – compenthusiast Dec 6 '19 at 9:21
  • @compenthusiast The scenario I have in mind was more something like selling your services as a designer or software developer for some kind of custom job. In the app example, my guess (but I am not a lawyer) is that this is more like a business transaction. You would be liable for VAT or sales tax, possibly customs duty and other obligations businesses have. That's especially clear if your business is incorporated and the sale to Australia is incidental, possibly a bit murkier otherwise. – Relaxed Dec 6 '19 at 14:10
  • But this is all speculation on my part, if you need advice on a specific scenario, you will need to provide more details and consult with a lawyer or adviser with a practice in the relevant jurisdictions. The key point I was trying to make is that it is indeed possible to be liable for income tax without having been a resident. – Relaxed Dec 6 '19 at 14:12
0

Yes, there are situations where that happens. It's actually not uncommon.

  • Sales tax/VAT is typically due in the country of sale
  • Income from such sales may be taxable in the country of sale as well. See nonresident taxpayer or person with limited tax liability.
    This may be changed (everyone declaring their income in their home country) by tax treaties.

    E.g. if Software developer S somewhere outside Germany sells licenses in Germany to some customer C there, the profits from these sales are taxable in Germany and moreover, C has to send an appropriate fraction of the sales price to the German tax office. If S's country of residence has a tax treaty with Germany, S (or sometimes also C) can either file an exemption beforehand, or claim back taxes that C withheld on behalf of S.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.