Income Tax on foreign earnings?

InsanelyOne

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Oct 21, 2008
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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?
 

las2137

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Sep 1, 2008
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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.
 
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InsanelyOne

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Oct 21, 2008
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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

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Oct 21, 2008
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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

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Mar 4, 2004
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www.ginniebedggood.com
Have a look at Ley 11-92 of May 31, 1992, commonly known as
the Tax Code (C?digo 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/CodigoTrib/Documents/TituloII.pdf

http://www.dgii.gov.do/legislacion/CodigoTrib/Documents/TituloI.pdf

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

Fernandez

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Jan 4, 2002
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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

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Feb 28, 2006
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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

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Oct 21, 2008
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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

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Jun 11, 2006
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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.
 

mike l

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Sep 4, 2007
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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.

This is also my interpretation and I am also not an Attorney Or CPA.

For countries with tax treaties you only pay tax in the country you are earning the income in.

So if you are a resident of the DR and earning an income from DR sources you would pay tax in the Dr but not liable for tax in another country that has a treaty with the DR.

Not meaning to confuse you but the IRS does make it difficult to determine withholding but in your case HR can rest assured they are in no way, shape or form required for back up witholding for any Country whatsoever.
 

GringoCArlos

Retired Ussername
Jan 9, 2002
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It's that time of year again...

InsanelyOne, yes you are liable to the US for taxes on your income, no matter where you live in this world. But, you report your income at the beginning of your 1040 and then add the 2555 form and can claim an exemption of up to $91,400 against your 2008 income (basically wiping that amount off the table before you start claiming other deductions and calculating your tax liabilties on the remaining income.

To be able to claim this "Foreign Earned Income Exclusion" you must qualify in one of two ways: either you are physically within US territory for less than 35 days during the tax year or you can have legal residency in another country.

Your employer must legally only withhold the SS and Medicare taxes and pay their match. They have no duty to the DR to withhold DR taxes from your income. That is up to you and is your responsibility.

Have your pay deposited into a US bank account (and it is very unlikely that your employer has the capability to deposit your pay into a foreign bank account anyway. You can most easily do this by claiming 35 exemptions on your (W-4???) that you give to your US payroll department.

You can establish your absence from the US for any 365 day period, not based on a calendar year - talk to a tax expert who deals with foreign employment and taxation, and not just the H & R Block office down on the corner - they won't know enough about this to help you and may get you in trouble.

Here's my recommendation for advice: Jane Bruno. She only does foreign tax returns, she is both a CPA and a tax attorney, and she is great. You can reach her at: Welcome to or at janebruno1@gmail.com

You can tell her Carlos in Santo Domingo told you to contact her. Good luck.
 

bryan1258

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Dec 24, 2007
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And if you draw an income from your investments in the DR as a foreigner. Do you pay tax in the DR.
 

Lambada

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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.

You're most welcome. And actually you made yourself totally clear. You were asking about taxation in the DR. Had you been asking about taxation in the US I would never have responded because.........I'm a Brit. living in the DR with no knowledge nor interest in the US taxation system (other than I smile each time I see how much the paper version weighs :cheeky:).
 

TOOBER_SDQ

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Nov 19, 2008
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InsanleyOne.

Click the link Abuela posted. It has all of the information you need. The other posters are also mostly correct. I am not too sure about the 91k USD that Gringo Carlos mentioned. I thing it is 87.5k USD.

Anyway, if you think you will pass the "Physical Presence Test" of being outside of the US for more than 35 days in one year, submit IRS Form 673 to your employer. This document stops your employer from deducting withholding tax from your salary.
When tax time rolls around, you pay taxes on earnings above 87.5k USD.

There is no escape from Social Security/ Medicaid deductions.

Again. Read the government link Abuela posted. All the information is in there.
 

GringoCArlos

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