US $106k Foreign Earned Income Exclusion

[Dockhead]

Originally Posted by denverd0n

You do have to establish "bona fide residence" in the foreign country. That is not as easy as just going there and staying. Pretty much all countries will require you to jump through some sort of hoops to become a resident.


You mentioned the Bahamas. You can only stay for 90 days unless you qualify for some sort of long-stay visa. Without a long-stay visa the IRS is highly unlikely to consider you a "bona fide resident." So, the first thing you need to do is determine if you can qualify for residency in some other (presumably, lower-tax) nation.


Good luck.

More wrong information, on top of the mountain of wrong information in this thread.


Bona fide residence is only one way to qualify for the FEIE.

[letsgetsailing3]

You and your company also need the right kind of work permits, visas, liability insurance, and health insurance. You can't work in another country without a visa and without filling out tax forms.

Your company is nuts if they don't follow the actual laws. Could be a big liability for them (and you) at some point.

[NPCampbell]

Originally Posted by letsgetsailing3

You and your company also need the right kind of work permits, visas, liability insurance, and health insurance. You can't work in another country without a visa and without filling out tax forms.

Your company is nuts if they don't follow the actual laws. Could be a big liability for them (and you) at some point.

I work for a multinational company that has offices in over 30 countries. No one is suggesting that my company or I don't follow the laws. I am trying to find out more about this legal exclusion and what the best circumstances are for its application.

It looks like the biggest issue so far is establishing residency in a country that has a lower tax rate than the US. USVI looks like it mirrors the US income tax rate even for residence which would make it pointless.

[valhalla360]

Originally Posted by dwedeking2

Even without the tax breaks I'd rather work remotely from out of the US than in some cubicle. (did it for a few years)

We've been doing this the last 5-6 yrs (7-9months per year). This is a bit of a gray area but assuming you are officially a US resident and you are working for a US company on US based projects...they are highly unlikely to make an issue of it...Really, they are unlikely to even realize you are doing it unless you flaunt it.

Most of the visa work rules are about you not taking jobs from locals or dodging local taxes. As long as you are otherwise compliant with your visa, they generally are happy to have you spend your US earned income in their country (YMMV).

Of course, we bounce around every month or so to a different country, so we don't have to mess around with long stay visas. With long stay visas, they usually want info on where the money is coming from and that could trigger the local tax many to ask for his cut.

PS: The physical presence test is 330 days outside the US in a year. (not 250)

[valhalla360]

Originally Posted by NPCampbell

I work for a multinational company that has offices in over 30 countries. No one is suggesting that my company or I don't follow the laws. I am trying to find out more about this legal exclusion and what the best circumstances are for its application.

It looks like the biggest issue so far is establishing residency in a country that has a lower tax rate than the US. USVI looks like it mirrors the US income tax rate even for residence which would make it pointless.

Large multinational company makes it harder if they don't actually have a legitimate overseas position for you.

Big companies generally have less flexibility to restructure something like this as they don't want to get caught up in things if you aren't 100% legitimate. It's just easier to say "no" than to play along.

Without a local job, how do you plan to get a long term visa to establish residency? Most long term visas ask about income sources.

[slug]

Originally Posted by NPCampbell

I work for a multinational company that has offices in over 30 countries. No one is suggesting that my company or I don't follow the laws. I am trying to find out more about this legal exclusion and what the best circumstances are for its application.

It looks like the biggest issue so far is establishing residency in a country that has a lower tax rate than the US. USVI looks like it mirrors the US income tax rate even for residence which would make it pointless.

Plenty of countries don’t tax foreign earned income

Malta for instance

If you’re financially solvent with a clean police record it’s not difficult to gain residency

Again. Best if you contact a specialist, in the country you wish to reside in, for advice

[slug]

Originally Posted by valhalla360

Large multinational company makes it harder if they don't actually have a legitimate overseas position for you.

Big companies generally have less flexibility to restructure something like this as they don't want to get caught up in things if you aren't 100% legitimate. It's just easier to say "no" than to play along.

Without a local job, how do you plan to get a long term visa to establish residency? Most long term visas ask about income sources.

A residency visa is generally easy to secure

A work visa is more complex

[Matt Johnson]

Keep in mind that the US Physical Presence Test (330 day outside the country) counts days at sea in international waters against the 35 days you're allowed to be in the US.

https://www.irs.gov/individuals/inte...-presence-test

"When you leave the United States to go to a foreign country or when you return to the United States from a foreign country, the time you spend on or over international waters does not count as time in a foreign country."

-Matt

[Mook1e]

Originally Posted by Dockhead

A lot of wrong information here. For God's sake, get professional advice.


FEIE (I've been taking it for the last 30 years) is NOT a tax break, unless you are tax resident in a country with lower income taxes than the U.S. If you live in Russia, Estonia, Latvia, Ukraine, or several other countries with low flat taxes, then it can work out fairly nicely. But if you live in Germany, France, Italy, or Scandinavia with higher taxes, the FEIE is worthless -- you rather take the foreign tax credit. It can be good if you are a nomad without any other tax home -- it is NOT a requirement that you pay taxes somewhere else. But this is extremely complicated to do right -- professional help.



There are many conditions. You don't necessarily have to be out of the U.S. for a certain period of time (physical presence test) if you have attributes of bona residency in a foreign country (bona fide residence test). Where the bank account is where you receive your salary is irrelevant. If you are paid as an independent contractor, you are not relieved of social security taxes. It's a complex enough minefield that you MUST have professional help.

This is mostly true, but in Germany (at least, possibly France and Italy as well) the SOFA and TESA process can be used to exempt you from local taxes, provide a visa for residence, and qualify you for the $106k tax exemption. As you state, however, your company needs to have a position for you in your foreign country of residence and provide the documentation and sponsorship.

[NPCampbell]

Originally Posted by valhalla360

Large multinational company makes it harder if they don't actually have a legitimate overseas position for you.

What is your definition of a legitimate overseas position? Even before the pandemic a good portion of the people on my team worked in other countries. With the pandemic, nearly 100% of our work force is remote. I just want to be one of those "overseas" employees.

Originally Posted by valhalla360

Big companies generally have less flexibility to restructure something like this as they don't want to get caught up in things if you aren't 100% legitimate. It's just easier to say "no" than to play along.

What isn't legitimate? The law isn't a loophole. Why do you think it's called the "Foreign Earned Income Exclusion"?

[valhalla360]

Originally Posted by slug

A residency visa is generally easy to secure

A work visa is more complex

Never said it was hard to get a residency visa...but most countries want to see your source of income to support yourself during your residency in order to get said visa. So if you are still relying on a job you are going to have to explain the situation to them and now you have to convince an official that they shouldn't check the box that says you need a work visa.

[Chotu]

Digital Nomad Visas

[valhalla360]

Originally Posted by NPCampbell

What is your definition of a legitimate overseas position? Even before the pandemic a good portion of the people on my team worked in other countries. With the pandemic, nearly 100% of our work force is remote. I just want to be one of those "overseas" employees.

What isn't legitimate? The law isn't a loophole. Why do you think it's called the "Foreign Earned Income Exclusion"?

I was referring to it in more the lay definition and how management at a big multinational is likely to consider it.
- Your company needs a salesman in their Barcelona office selling product to Spanish customers...your company likely won't bat an eye at listing you as working in Spain as everything appears completely legitimate.
- On the other hand, if you are currently in the Peoria office doing IT for the Peoria office, they will likely struggle with doing the paperwork to justify a claim that you are working in the Barcelona office and then the HR people are likely not to know the details of if this is legitimate, so they won't want to take the chance that it's illegal.

I work for a large multinational and want them to change my official work station as they have two offices in the state (I do a big part of my work on projects in the state but not tied to the office or city) and the one I'm officially assigned to has City income tax. Since I only go into the office 3-5 times per year, I wanted them to change me to the no-tax city since I get a refund on 98% anyway as you can discount for days not worked in the city (It's just a pain to document it each year and fill out extra forms)...After a couple weeks back and forth with my supervisor's support, I just gave up as it didn't fit into their normal process. I would expect getting them to list me as out of the country would be many times harder if I wasn't actually tied to a foreign office or project. Also, even though a multinational company, the foreign offices are technically independent foreign corporations.

Not impossible but I would expect it to be a much harder sell with a large corporation vs a small company.

PS: Loopholes by definition are legal just outside what normal people would consider fair or logical.

[letsgetsailing3]

Originally Posted by NPCampbell

I work for a multinational company that has offices in over 30 countries. No one is suggesting that my company or I don't follow the laws. I am trying to find out more about this legal exclusion and what the best circumstances are for its application.

It looks like the biggest issue so far is establishing residency in a country that has a lower tax rate than the US. USVI looks like it mirrors the US income tax rate even for residence which would make it pointless.

Then they'll know what I'm talking about. It costs money to sponsor an employee in a foreign country. It's a hassle for the company.

It's not like letting you work from home.

But I certainly don't blame you for trying.

[letsgetsailing3]

Originally Posted by Chotu

Digital Nomad Visas

Great idea.

If it were easy, everyone would do it.

Governments: "But how will we collect the taxes?"