It seems like there are several people here doing remote work for US based companies. I’m a software engineer looking to do the same and had a few questions. Note that I’m not a US citizen.
Did you start your own business and get hired as an independent contractor? My company told me that this misclassifies employees as independent contractors and they don’t want to go this route to avoid legal issues. If you indeed did this, what steps did you have to take to make it work?
I get double taxed and pay taxes in both countries. I can claim some foreign credit but it only covers a small amount of my earnings. If you’re not a US citizen, what I say doesn’t really apply… I know plenty of foreigners from Europe who pay no taxes to either country by claiming non resident in their country of citizenship.
Just as a general rule, under common law (US etc.) there are strong precedents, even new ones for the gig economy era, for sham contracting schemes being found invalid. If you want an “employee-like person” to be a true independent contractor, you need to go out of your way to make it valid. The reason why it’s still so popular seems to be that (1) most people don’t realize they can sue for recognition as employees, and/or (2) they can be fired easily either way and don’t want to risk antagonizing their employers.
@jimbob132 FYI, I have an open work permit (through Gold Card) and I’m fine with paying tax (even double tax) since the compensation is much higher even with double tax and has more interesting work.
@yyy Are you saying that the legality is a gray area but many employers still hire foreign contractors?
You should not be getting double taxed, that is, paying tax to both countries on the same portion of income. Can you explain what is happening? I’d like to find out since my wife and I will be in the same boat as you when we move to Taiwan.
Actually, this is a common problem for us Americans. Once you stay in Taiwan for a certain number of days in a year (183, I think), you become a tax resident here. And Uncle Sam taxes you no matter where you are.
(Note that this is just my understanding of things, IANAL by any means – if you’re super worried about it I’d consult with a lawyer)
I believe as a non-US citizen working remotely for a US company as an independent contractor, the company you are contracting for will probably have you fill out some version of the W8 form (W-8BEN if you’re billing as an individual, or an W-8BEN-E if you own a foreign company) which you will hand to the company and then the company will hand to the US gov’t when the company files taxes.
They should help guide you through the process though (it’s for their tax burden, not yours)
Unless you want to open a U.S. company, I wouldn’t think you’d have to interact with the IRS at all – the company you’re working for is using the W8 on their own taxes.
The advantages of opening a U.S. company would be that you could open a U.S. bank account for it, which might make getting paid easier / cheaper, but that seems like a lot more hassle than it’s worth for you.
You may also have better legal recourse if you had a U.S. company if they try to screw you (but again probably still not worth it)
As long as the company is willing to wire money to a Taiwanese bank account (or use something like TransferWise / Paypal) I wouldn’t think you’d have any issues and wouldn’t need to pay any U.S. tax.
As to whether to open up a business in Taiwan (or get paid as an “individual”) I have no clue which is better tax / liability wise in Taiwan. I wouldn’t think that being an individual or Taiwanese company would have any sort of bearing on things from the U.S.'s perspective.
Thanks @justinram11 for your response. I had a few more questions. Here are some things I heard from my US based company:
An independent contractor is required to do work that is different and has narrower scope than what full-time engineers do. For example, as a full time software engineer, I had access to all the internal documents and webpages, and could contribute to any part of our software stack and work on cross-team projects. However, independent contractors must be brought in to do particular (narrow scope) projects and do not have the same level of access to documents.
As a consequence of the above point, independent contractors should only be with a particular company for a short period of time (several months) until their required projects are completed. Having no end date in sight and having similar responsibilities/scope as a full-time engineer has legal risks.
How much of this is true/enforced? Do remote workers who have set up businesses in Taiwan have to switch employers often? Is the work very different?
According to this website (section " What is the cost of making a mistake if the worker lives outside of the US?") it looks like it would be an issue for the company if Taiwan that had an issue with it, not the U.S.
I’ve only heard about the contractor / employee scope issue being a problem for U.S. citizens acting as employees, I don’t think I’ve ever heard of that being an issue for foreign talent (and don’t think it makes much sense, since you don’t pay SocialSecurity, Medicare, and couldn’t benefit from U.S. unemployment insurance).
And at any rate, I would think it would be up to the U.S. company to worry about that (they would be the ones that would have to pay additional U.S. taxes for social security, medicare, and unemployment insurance – you wouldn’t be fined at all). So I’d think it’s more a risk that the company is taking on (if they don’t have an issue with it than I’d think you would be fine, unless you are trying to convince them that this is a legal arrangement, then you might have some more work and clarification to do).
TL;DR - Americans are screwed in that we can’t really ever totally escape being taxed, but in almost all instances we shouldn’t ever be taxed twice either.
Yeah, but Uncle Sam allows you to claim foreign tax credits for any tax paid to a foreign entity, so that at the very least you can deduct what you pay in Taiwan from what you owe the IRS. This is in addition to the FEIE (foreign earned income exclusion) that allows you to exclude the first ~105k USD earned AND the FHE (foreign housing exclusion) which allows you to exclude an amount equal to your cost of housing on top of that.
And this is all despite there being no formal tax agreement between the US and Taiwan. Now I haven’t done any of this myself, so I feel like there’s a chance of discrepancy in practice vs theory, but the rules are laid out pretty clearly on the IRS website. And I’ve had conversations with my CPAs about many things related to this…with the above just being assumed. Next time I’ll actually ask directly about the basic premise to verify that it is correct.
My understanding though is that if you are a US citizen working as either an independent contractor, or [your own] U.S. company, you’re still subject to the 15% Social Security and Medicare tax.
The only way around this afaik would be to work for a foreign company (including your own).
This may or may not apply to the US scenario, but the majority of world governments absolutely hate people working for themselves. It reduces the amount they can take from you in taxes, and it makes their job of tax collection harder. In the UK and Europe, the onus is upon you to prove to the tax authorities that you’re a bona fide independent business. Typically this means you must show that you work on your own projects, and/or that you work for multiple clients - and even then, the gov’t may unilaterally decide that you’re actually an employee. It seems likely (from your initial post) that the situation in the US is similar.
However if you are based in Taiwan it really ought to be much more clearcut, since the US company is contracting with a Taiwanese company (ie., yours) to provide a service. It only really gets awkward if you’re working a 9-to-5 job at the client’s site - in that event you’re under the local jurisdiction, with all that that entails. If you’re 100% remote, I don’t see that there’s an issue.
Yep, that’s my understanding as well. If you’re employed then your FEIE applies to your salary, but if you’re self-employed you owe the ~15% for SS and Medicare (15% only applies to the first 100k or so of income, beyond that the rate is ~2%) The workaround is to create your own offshore business, however then you will no longer accrue years into the SS and Medicare systems.
As I explained in the other thread (linked to in my previous post), the courts in Taiwan disagree with each other – sometimes it’s even the same court (rotating judges) disagreeing with itself – and the highest authorities have so far failed/refused to clear it up. I don’t know of any recent survey on how common a practice it is here.
The safe bet is, if you try to convince the government (by which I mean the executive/administrative authorities and the administrative courts) that an employee-like person is not an employee, you are more likely to fail than to succeed.
