Work Abroad but earn in USD

Friday, October 07, 2005

Argentina & USA Tax Issues (Double Taxation)

Throughout the world, the U.S. has established "double taxation" treaties with a number of countries. These treaties ensure that when nationals from one country are working in another, they are not subjected to taxation in both countries.

The reason for these treaties is simple -- to promote trade and ease the ability for companies to send their workers abroad. After all, who would accept a foreign assignment if you had to pay taxes twice on your income? Not many, I suspect.

Today's question comes from a reader who is concerned about that exact issue.

Reader's Question

I'm interested in visiting or perhaps getting one of those dual citizenship things, if there is little or no double taxation?

Argentine & U.S. Taxes

First, you should realize that the U.S. taxes its citizens on all income generated worldwide, regardless of whether a citizen is living in the U.S. or in a foreign country. Most other countries, including Argentina, only tax citizens while they are living in that specific country. This is a key difference. As a result, the U.S. has double income tax treaties with a number of countries. It does not, however, have one with Argentina.

The system of taxation is much different in Argentina. You don't submit yearly income tax returns to the government and then pay your share. Apparently the government doesn't put the burden on people to calculate their own income taxes. Instead, your employer prepares your taxes for you and pays them on your behalf. You only sign a statement and away your taxes go, deducted directly from your salary.

In addition, you won't bother with refunds, claim deductions, or deal with any of that. Your employer just calculates what you owe, depending on a schedule put out by the economy ministry, and pays your taxes. So, if you don't work for an Argentine company, you won't be paying income taxes here. The main tax is the IVA (value added tax) which is 21% on all the goods you buy.

This means that as a foreigner living here, you can just continue to generate your income from abroad from investments or whatever and introduce the money via wire transfer to Argentina. You'll pay no income tax on these funds. You'll just pay 21% IVA when you spend the money here. This is the same tax that nationals pay when they buy everything. So, it's not a special tax for foreigners.

There's even a visa called "visa de rentista" for this exact purpose. You generate $1000 USD or more of monthly income from outside the country and transfer the funds into the country via wire transfer. This qualifies you to live here and have a visa. You can get more info about this visa from ARCA.

Tax Relief From the U.S.

If you're employed abroad and you plan to spend less than 30 days per year in the United States, you can get an $80,000 exception from your U.S. income taxes by filing as an expatriate. This is only available on income derived from work abroad and won't apply towards taxes on dividends or capital gains.

If you're living abroad and working, yet not taking advantage of this provision of the tax code, you're missing out on thousands of dollars of tax savings. Make sure you talk to your accountant right away. If you'd like the name of my accountant, who prepares my expatriate returns (which have to be prepared differently than a normal return and sent to a special IRS processing center), contact me and I'll be more than willing to refer you.

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9 Comments:

Blogger Chris said...

You mention the rentista visa. Which state did you incorporate? Nevada? Do you then have the corporation wire the $1k per month to your account in an Argentine bank? Was that the basis of your obtaining a Rentista Visa? Also, am I correct in assuming the income has to be passive (like rental income, investments or simply money your US corp makes that doesn't require your actual labor)? Thanks

10/08/2005 01:04:00 PM  
Blogger Marie said...

My previous employer with headquarters in NY and offices in Buenos Aires, did not make any payments on my behalf to the Social Security neither made deductions on my payroll. Is is mandatory to pay double taxes?

12/22/2005 04:35:00 PM  
Anonymous Denise said...

Hi, I would really appreciate a referral for your tax accountant in the US. I'm not feeling our current CPA is experienced in preparing expat taxes. My email is deniseinba@yahoo.com

Thanks!

6/27/2007 09:48:00 PM  
Anonymous Anonymous said...

Hi, My name is Daniel and have dual citizenship USA-Arg. I am currently leaving in the USA and my company is trying to convince me to move back to Arg. I would really appreciate the contact of your Tax Accountant to see if I will be taxed twice or how can I live there having no problems with both goverments.
My email is yeso20@yahoo.com

Thanks, Daniel

1/19/2008 07:03:00 PM  
Blogger rock hound said...

One important thing to keep in mind is from my own experiences. When you work outside the U.S. for a period of at least 11 months(I think this is correct) you receive from the IRS an exemption of the first $80K dollars free from U.S. taxation. HOWEVER, the bad part is that you are not required to pay any Social Security tax, not even if you volunteer to do so you cannot. What this does is hurt your S.S. wages earned over a number of years thus REDUCING the ultimate amount of retirement funds you will receive at age 65. Just keep this in mind because every year you contribute improves your ultimate bottom line as well as vice versa.

1/24/2008 03:42:00 PM  
Anonymous Anonymous said...

Please provide me with you accountant info, since I did not file income taxes for the last 3 years since I lived in Arg and now I am back in the US. javier_sanchez_us@yahoo.com

5/20/2011 05:13:00 PM  
Anonymous Anonymous said...

Question: brought 10,000 cash from rental income on which I, resident of Argentina, US citizen, have already paid IRS taxes. Isthat subject to taxation here? Thank you

5/22/2011 04:51:00 PM  
Anonymous Rock Knocker said...

I lived and worked in Argentina for the majority of the decade of the 90's and paid heavy taxes based upon my salary schedule. My salary was on the top of the list and therefore, my employer was obliged to extract the maximum per month. In addition, I was also required to pay their social security tax which was also several percent and the only route you will ever profit from this is waiting until you reach 65 years of age (I did) and filing for monthly S.S. payments. It is meager at best and you must have a valid Argentine bank account to which your monthly amount can be deposited. To do this you must have a valid permanent visa. I challenge the statement made by "El Expatriado" regarding "you can transfer money into Argentina without paying any taxes" as being inaccurate. My wife (an Argentina citizen) and I visited with officials of a major Argentine bank in Buenos Aires 2 years ago regarding this issue and tax due on transferred money. We were unable to obtain a direct and straight answer from any one. The general opinion was it depends on the amount and the government can and does hold transferred money for up to 6 months before releasing it to the owner. Is this an obligatory rule? I don'tnow. Regarding taxes due on transferred money, here again it depends on how and where the money will be used or spent. There are no easy answers to the question of transferring money into Argentina so whatever you do, better get the opinion of at least 3 different tax experts and go with the majority opinion. Rock Knocker

5/23/2011 05:51:00 PM  
Anonymous R said...

Hi Rock Knocker. I live in Argentina right now(Sept. 13, 2011). I'm on the retirement Visa program. I have my DNI and meet more than the minimum $700 /month income to live here. I don't use a bank here. I'm retired with a pension plan. 17% of the private companies in the U.S. have pensions. And of course almost all of Government jobs have pensions. But I have my pension automatically deposited in a U.S. bank. I can withdrawel up to $1000 pesos($250 US) a day. Only charge is $4.00 from the banks down here. Maybe using a U.S. bank and withdrawing it in Argentina might be a better route for you. R

9/13/2011 12:15:00 AM  

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