Issues living and working abroad: taxes

 

DSCN1451Trip update: We spent last weekend in Tofino, which was so special, that I have decided to devote next week’s post to the visit. The rest of the week, I have been working on the book translation and taking daily rides around Vancouver. Spanish Banks is a favourite destination, where we lean against a log in the sand and read, or just watch the traffic in the roadstead and the people on the beach. The sea birds provide a fairly entertaining show, too. 

 

DSCN1461Today, we went to the 17th Annual Burnaby Blues and Roots Festival. Like many such events, it took place outdoors in a park on the lawn. We tested out our new low-slung camp chairs from MEC. Much more comfortable than sitting cross-legged for hours on the ground. From Billy Dixon and the Coco Mamas, to Colin James and Cécile Doo-Kingue, this event was a treat for the eyes and ears.

From now on, I will not attempt to provide a trip update in every post. Instead, each post will either be an article about living and working on the road, a sea story, or a trip report from my continuing travels. This will allow me to devote the proper amount of attention to the topic for the week. I hope that you find the new format more enjoyable and each post more relevant. This week I continue the series on “Issues living abroad.” The last post in this series was on 21 June 2016.

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My own experience with taxes when travelling is coloured by my specific situation: I am American, now travelling mostly in the European Union (EU), a physical resident of both Italy and the United States, but a fiscal (tax) resident only of the USA. I have only travelled as a tourist outside North America and the EU, so I can’t comment on taxes in Africa, South America, or Asia. There is no substitute for careful research, using your own particular residence, citizenship, and location data. I would also suggest checking multiple sources when using the internet, being especially careful of information from blogs (yes, like this one), comment threads, and social media. Get help if you are not absolutely sure that you understand the turgid prose in the official websites, and get help from a native reader of the language if you have to leave your own. For example, I read Italian and French websites in those languages, checking the English translation against the original to decide if I can trust the translation.

First, there are taxes that almost everyone pays: sales taxes in the USA, Value Added Tax (VAT) in the EU, General Sales Tax (GST) in Canada, and noisome little duties like customs on incoming mail and sojourner’s tax (also called “lodging tax”). The latter is usually levied by the municipality; the others are usually national or provincial/regional/State. Unless you are a documented non-profit, you can’t escape them. However, if you are passing through, you may be able to obtain a refund of the VAT if you are a non-EU citizen leaving the EU. Before there was an EU, VAT (and GST) refunds used to be a smooth process at the last border: just save all your receipts and visit the refund office with them on the way out. The logic is the same, but it’s more complicated now, so I only plan on obtaining a refund if I have a very expensive item to declare, to make the refund worth the hassle. Since leaving the US a year ago, I have not bought anything worth trying to get the VAT refunded.

Then there is the issue of income tax, if you are staying so long that you need something more than a tourist visa (like my elective residence visa in Italy). The USA has tax treaties with 67 countries at last count; Canada with 110 countries (https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z and http://www.fin.gc.ca/treaties-conventions/treatystatus_-eng.asp). If you are a citizen of one of these countries, the provisions apply to you, too. In my case, I am careful not to hold any financial accounts outside the USA, and I earn no income from outside the USA. By keeping my business in Virginia, and all my bank accounts and credit cards in the USA, I keep my status as a tax resident of the USA clear for all who would challenge it, and I pay my income taxes only in the USA. The foreign exchange transaction fees that I pay to use my American credit cards total less than the charges I would pay for an Italian credit card. I give up something on the exchange rate every time that I draw cash, but, because all my money comes from the US, I would have that burden regardless of where I keep the money short-term. Also, occasionally I have to pay cash when I encounter an entity that won’t accept a “foreign” credit card. That has happened only twice so far (the Italian wireless company TIM and a now-defunct Italian mail-order bookstore).

EU and non-EU citizens going to Canada and the USA will encounter similar issues in reverse. If you are going to be staying for a while, get the correct visa, and adjust your tax and residence status so that you can keep it clear while you are in North America. Your immigration status (and tax liability) can change if you overstay the terms of your visa (for example, staying for than six months in one year).

Then there are the little taxes of living and working anywhere. For example, I have both American and Italian Tax ID numbers. I need them to arrange for utilities to the flat, renew my Italian Sojourner’s Permit or Virginia Driver’s Licence, and apply for various services in either country (e.g. Medicare or the Italian National Health Service). I pay fees and duties for all these items, but they do not change my tax status or my immigration status.

I am not a tax attorney or an immigration lawyer. If you need more information than you can find on your own, I suggest that you consult one (or two – I find the information is sometimes contradictory from one expert to the next, but the exercise of clarifying it teaches me something each time). If you have comments, clarifications, or experiences to share, I welcome them here.DSCN1458

Next week, another sea story. Until then,

Smooth roads and tailwinds,

Jonathan.

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