I am an American Citizen.
I work remotely for a company based in the US.
Working remotely means that I can live wherever I want.
If I move to a foreign country and live full-time there and establish residency, do I qualify for the ~100k tax exclusion?
Note that the company that I work for is a US company, not foreign. That's the main area of confusion.
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This site greenbacktaxservices.com (which I have no affiliation with) seems to have good information on the topic.– RonJohnCommented Jan 2, 2021 at 22:04
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1Working for a US company does not disqualify you for FEIE/FHE (although working for the US government does), but it does mean the company will by default apply normal withholding on your pay, which will probably be excessive. To avoid this see ch 2 in pub 54 (also downloadable in PDF, see nav links at top of page). You should read most of the rest of pub 54 too.– dave_thompson_085Commented Jan 3, 2021 at 5:46
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Also dupe money.stackexchange.com/questions/57256/… and money.stackexchange.com/questions/99686/… and similar money.stackexchange.com/questions/101749/…– dave_thompson_085Commented Jan 3, 2021 at 5:56
1 Answer
Where your employer is is of no consequence. Income is earned where you earn it.
So yes, you'll be able to use the FEIE in this scenario, but you will also be on the hook for the local taxes for the same income and your employer may be on the hook for the payroll taxes on your behalf. Depending on the jurisdiction this may be a significant deterrent for your employer and they may choose to not allow this arrangement.
If you're a 1099 contractor, then the employer wouldn't care, but you would be on the hook for the local taxes as a self-employed person (i.e.: like in the US, you'll be responsible for both yours and the employer's share of the payroll tax load).
There's also the immigration question - you have to have the right to work in the new country, which is not a trivial thing to get (some places make it easier than others, the US is for example notoriously difficult in this regard).
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"Where your employer is is of no consequence. Income is earned where you earn it." Well, at least for IRS purposes. There's no guarantee that a foreign government won't demand taxes for work done for a company in their country. "Depending on the jurisdiction this may be a significant deterrent for your employer and they may choose to not allow this arrangement." If push comes to shove, firing someone because they changed country of residence would be rather drastic. Commented Dec 13, 2021 at 5:48
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@Accumulation in my experience it's entirely to be expected unless the employer is a small company that doesn't appreciate the legal liability to which they would be exposing themselves. My previous employer prohibited me from working remotely for three months from a country where they had no offices, and my current employer allowed me to move to another country as a remote employee only because they have an office in that country.– phoogCommented Dec 13, 2021 at 12:03
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@Acccumulation not at all drastic, on the contrary - the prudent thing to do for any law abiding employer. For a global company to be barred from a market just because one person wants to work from a home office is an enormous risk. Commented Dec 15, 2021 at 6:42