I competed in topcoder and got some money around ~500 $ and may get more If I'm really lucky in not yet reviewed submissions.
But I found out that
30% of that money will be withheld as tax.
I didn't mean to be a millionaire to compete in top coder. In my country (South Korea), tax rate on income around ~500 $ in KRW equivalent is around 3~4%.
I've glimpsed over Korean-American tax treaty, and it seems Article 18 is related to my situation:
ARTICLE 18 Independent Personal Services (1) Income derived by an individual who is a resident of one of the Contracting States from the performance of personal services in an independent capacity, may be taxed by that Contracting State. Except as provided in paragraph (2), such income shall be exempt from tax by the other Contracting State. (2) Income derived by an individual who is a resident of one of the Contracting States from the performance of personal services in an independent capacity in the other Contracting State may be taxed by that other Contracting State, if: (a) The individual is present in that other Contracting State for a period or periods aggregating 183 days or more in the taxable year; (b) Such income exceeds 3,000 United States dollars or its equivalent in Korean won in a taxable year; or (c) The individual maintains a fixed base in that other Contracting State for a period or periods aggregating 183 days or more in the taxable year, but only so much of his income as is attributable to such fixed base.
may I interpret above document like below?:
- I'm a Korean who offered services for TopCoder (and their clients) and made income less than 3,000$
- TopCoder is an American company, and since I'm Korean, so in this case
Americaare contracting states
- My income is less than 3,000$, and I'd like to be taxed in South Korea.
even the technical explanation says:
(1), income derived by an individual resident of one Contracting State from the performance of personal services in an independent capacity may be taxed by that Contracting State.
(with exceptions in (2), which doesn't apply since I've never spent a minute in the United States, and my prize is less than 3000$)