Income Tax on foreign earnings?

InsanelyOne · #1 05-15-2009, 12:21 PM

I've searched and searched but can't find anything. I'm sure I researched this before and had found an answer but can't seem to find it again. I work for a US company and spend about 1 week a month in the US. The rest of the time I work remote. I will be relocating to the DR very soon. My employer is unsure if they need to withhold taxes for the DR. I don't think they do. I was under the impression that as long as I wasn't earning the money IN the DR I wouldn't have to pay taxes.

Can anyone point me in the right direction?

Abuela · #2 05-15-2009, 03:56 PM

Here's the best source for you:
Five Facts about the Foreign Earned Income Exclusion

las2137 · #3 05-15-2009, 04:54 PM

If I understand your situation correctly, your salary will still be paid in the US? Abuela is correct and the site she referred you to is the best source. Be sure to keep track of the amount of time spent in the US each year and file the proper forms.

However, your employer will still withhold social security from your paycheck.

Your employer, based in the US, will not need to withhold DR taxes because you will technically still be paid in the US. Your income will not be generated in the DR and is therefore not subject to Dominican tax law.

InsanelyOne · #4 05-15-2009, 05:53 PM

I was aware of the US tax law implications. i.e. it doesn't matter when where or how I earn money, as a US citizen I have to pay tax to the US government on every penny I earn (except what's taxed by other jurisdictions).

My concern is with the DR. My company is concerned that they aren't doing something wrong (by not withholding taxes for the DR if they are supposed to) so I'm trying to find something online (like something official on a DR governmental website) that covers the issue of foreign nationals in the DR and income earned outside the DR. And yes I realize this is really only relevant if I have my residency in the DR.

InsanelyOne · #5 05-15-2009, 05:57 PM

Quote:

Originally Posted by las2137

If I understand your situation correctly, your salary will still be paid in the US? Abuela is correct and the site she referred you to is the best source. Be sure to keep track of the amount of time spent in the US each year and file the proper forms.

However, your employer will still withhold social security from your paycheck.

Your employer, based in the US, will not need to withhold DR taxes because you will technically still be paid in the US. Your income will not be generated in the DR and is therefore not subject to Dominican tax law.

Actually, I don't think it matters how much time I spend in or out of the US from a tax perspective. I'm liable for all Federal taxes on every penny I earn. The IRS doesn't care that I happen to be residing in a different country.

Lambada · #6 05-15-2009, 06:32 PM

Have a look at Ley 11-92 of May 31, 1992, commonly known as
the Tax Code (Código Tributario)

All income derived from work or business activities in the DR is taxable, no matter if the person is a Dominican, a resident foreigner, or a non-resident foreigner. Income derived from work done outside of the DR by Dominicans or resident foreigners, is not taxable in the DR. Income from financial sources abroad such as stocks and bonds or certificates of deposit is technically taxable in the DR (article 269) and becomes payable three years after obtaining residency but is rarely enforced due to the difficulty of finding out exactly what investments foreign residents have abroad. Pensions and Social Security benefits are exempt from this taxation. 182 days per year of living in the DR constitutes residence.

Downloadable from DGII website
http://www.dgii.gov.do/legislacion/C...s/TituloII.pdf

http://www.dgii.gov.do/legislacion/C...ts/TituloI.pdf

Dr. Guzman will know of any recent changes to this.

Fernandez · #7 05-15-2009, 07:03 PM

Through away your ID's, credit cards. Use nominees for accounts- maintain power of management and and stay off information bases and the internet.
Live tax free for life.

MikeFisher · #8 05-16-2009, 10:12 PM

get your money paid in the US on your account, employer does not need to keep taxes, social security may be needs to be paid, not sure on that in the US, send that monthly income by online banking to a friends/relatives aso account and take the bucks out from that account here with a debit card to that account.
is there anything been done illegal on that way?
Mike

InsanelyOne · #9 05-16-2009, 10:22 PM

Okay... maybe I'm not making myself clear. I'm an American citizen and I work for a company based IN the United States. All of my income will be generated working for the US company. Either while onsite or working remotely via the internet on their computers. As far as the US tax law goes, it matters not where I am physically located, I am liable for all taxes no different than if I were residing in the US. That is not what I'm unsure about.

It's the HR staff at my company that is concerned that they will be breaking DR laws by not withholding taxes for the DR. Lambada has been kind enough to point me toward the relevant Domincan tax law. Unfortunately I speak about 10 word of Spanish so I've got to get someone to translate it for me. But that should be enough to placate the HR people.

Mike, my employer would be breaking the law by not withholding tax and social security from my paycheck.

tflea · #10 05-16-2009, 11:44 PM

Quick (simplified) response: If you get a US paycheck, as you already stated, you pay the US taxes (and if you live here you get an approx. $85K yearly tax break on that). If you don't make money here you don't pay taxes here (again, simplified). Your company can talk to Ernst and Young, Deloitte, all the companies that do taxes for thousands of foreigners, to confirm. You can also look at:
travel.state.gov and browse around. Or, the US, INS (confusing, some of them)federal web sites. I get a US paycheck, pay all taxes applicable to the US, don't recieve any local income, and thus pay no local income taxes, and recieve the first $85K frm the US, tax free. (If I were to be so fortunate to make such). The DR is not a 'tax haven', but is very favorable to expats regarding taxes, overall. An experienced US accounting firm, or attorney, could give much more info than here stated.
I am neither an attorney nor accountant; just one opinion of an individual, living out of country for 20+ years in various places.