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.