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I'm an American living and working in the UK on a Tier 2 visa. I am considering making an Android app. Lets say I make money from an Android app in the US and the resulting money goes into my US bank account. I assume Google will report this money to the US government and I will need to mention it in my US taxes somewhere.

Do I also need to report foreign income in the UK?

  • Could you set up an LLC in, say, Nevada to run the android app business through? And then leave the money in the LLC until you come back to the States? For that matter, could you set up one in the Isle of Jersey and not pay any income taxes at all? Dunno how any of that would play out, which is why I'm asking in the comments. – Patches Jan 6 '12 at 1:53
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Short answer: it's complicated.

The UK govt pages on foreign income are probably your best starting point: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/LeavingOrComingIntoTheUK/DG_10027480

As you can see, it depends on your precise residence status here.

(There is a tax treaty between the UK and the US so you wouldn't be double taxed on the income either way. But there might still be reporting obligations).

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A) a tax treaty probably covers this for the avoidance of double taxation. Tax treaties can be very cryptic and have little precedence clarifying them

http://www.irs.gov/businesses/international/article/0,,id=169552,00.html

B) I'm going to say NO since the source of your income is going to be US based. But the UK tax laws might also have specific verbage for resident source income.

sorry it is an inconclusive answer, but should be some factors to consider and point you in the right direction.

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Yes. You do have to pay taxes in the UK as well but it depends on how much you have already been taxed in the US.

http://taxaid.org.uk/situations/migrant-workernew-to-the-uk/income-from-abroad-arising-basis-vs-remittance-basis

Say, you have to pay 20% tax in the UK for your earnings here. You ARE required to pay the same percentage on your foreign income as well. Now, if your "home" country already taxed you at 10% (for the sake of example), then you only need to pay the "remaining" 10% in the UK.

However, the tax law in the UK does allow you to choose between "arising" basis and "remittance" basis on your income from the country you are domiciled in. What I have explained above is based on when income "arises." But the laws are complicated, and you are almost always better off by paying it on "arising" basis.

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