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Tax questions for my American friends

PostPosted: Thu Dec 08, 2016 5:08 am
by Laser
Hey guys. I'm currently writing about tax issues in the US, particularly the way income earned overseas is treated in respect to taxation. I am comparing this to the same aspect of the UK tax system. I understand that the numbers of people renouncing their US citizenship have increased dramatically over the last decade, and that this could be due to unfair treatment on tax.

If anyone could share their own experiences or give me any direction in this, I'd really appreciate it.

NB This is for an academic essay for uni.

Re: Tax questions for my American friends

PostPosted: Thu Dec 08, 2016 6:14 am
by Turky
We (US citizens) actually have what's called a Foreign Earned Income Exclusion, such that if we're living abroad long-term, we can be exempt from taxes. I suppose the logic is that we're not living in the US or benefiting from any of our tax dollars.

However, the qualifications are fairly rigid, and don't accommodate for short-term visits to other countries. You basically have to be in the foreign country for one full year, with only a limited return to the U.S. (30 days or less). Otherwise, you potentially could be double taxed on your income.

Do people have to "file" for taxes in the U.K. each year? My wife here in China is absolutely baffled by the whole process. At my job here, my taxes are deducted from my pay, and that's that. One of the small perks of living in a country that's still in a transition from third-world to first-world.

But, I have no plans to renounce my citizenship, at least not for a Chinese one. Chinese people need a visa to enter most other countries, especially developed ones. It's quite a hassle. So I'd never downgrade my passport in such a way. I'd have to be offered a citizenship in like, Australia, UK, or the likes of those places to even consider it.

Re: Tax questions for my American friends

PostPosted: Fri Dec 09, 2016 6:24 am
by Laser
Thanks! I've just looked into foreign earned income exclusion and it looks like it's capped at 100k + housing expense, so that explains the renounced citizenships.

In the UK, all employers are required by law to deduct tax from their employees' income at source. Most people would not have to file a tax return, only those who have income from trading, savings, property etc.

Re: Tax questions for my American friends

PostPosted: Sun Dec 25, 2016 7:12 pm
by Turky
Yea, 100k per year that is. And the amount does go up from one year to the next to account for inflation. So for working class or middle class, they're better off keeping citizenship. But if your income is on a corporate level, then you might consider renouncing.

Re: Tax questions for my American friends

PostPosted: Fri Dec 30, 2016 6:25 pm
by Ramshi
(Don't quote me on this) I have a friend, who along with his parents, are dual US/Aus passport holders but are residents of Australia - but apparently his dad still gets income tax notices from the US sent over every year (even though he doesn't earn income in the US).

Not sure if that adds anything for you...