At the moment I effectively work for myself, contracting full-time to a single company. I invoice this company $x every month.

In the near future, I would like to either hire or sub-contract other people, probably South Africans living in South Africa. Ideally I would then want to invoice the company a value of $x + $y. It is likely that $x will increase somewhat, so that will come with additional tax obviously. The entire value of $y will be paid to subcontractors/employees.

Is the entire amount of $y tax deductible? I would like to avoid finding myself in the position of paying increased taxes on money that "passes through me" so to speak.

  • Thanks for the downvote! I am new to this site, and would like engage more appropriately in the future. please be constructive. – Zach Smith Aug 2 '17 at 10:13
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    What country are you living/paying taxes in? – Ogre Psalm33 Aug 2 '17 at 12:06
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    i am a US citizen currently living abroad - so i pay taxes in the US, then file in South Africa – Zach Smith Aug 2 '17 at 12:08
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    @ZachSmith OK fair enough. in general your subcontracting costs would be an expense that reduces your net income (is "deductible"). – D Stanley Aug 2 '17 at 14:38
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    @ZachSmith The specifics of your situation may change the end result, but being paid into a US bank account does not necessarily mean the income was earned in the US. If you are physically present in country x, but doing work for a US company, it is possible that you are considered to have earned that money in country x, regardless of how your payment is routed. Be careful that you are not accidentally committing tax fraud. – Grade 'Eh' Bacon Aug 2 '17 at 14:43

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