In a muddle about paying tax while abroad

[TwigletsMakeMeViolent]

I'm very confused about where I am supposed to be paying tax - sorry, I've googled but am lost.

I am a freelancer from Australia, living in South America. My main client is in the UK. I have a British passport, so I have a bank account there, file returns and pay tax there.

I have a new client in the US. They have agreed to send the payment to either my UK bank or my Australian bank account. I don't have a bank account here in South America (there's a lot of red tape involved and since only my husband earns local currency it didn't make sense to make the effort).

So the question is - where would I pay tax on the US income? Australia? Or because I am currently resident here in South America, would I pay tax here?

Why are you paying UK tax? Do you mean personal income tax?

I'm a chartered accountant (caveat - a Canadian one) - really you can only be tax resident in one jurisdiction at a time, and that would be where you are "ordinarily resident". Most countries have 5 or 10 point tests for this sort of thing. How long have you lived in SAmerica and how long are you staying? Have you ever lived in the UK? Are you still filing tax returns in Australia? Where do you own a home? Tax status /= citizenship either by the way, they have almost nothing to do with each other!

I think you need some advice from someone IRL - see if you can find a chartered accountant amongst the expats where you are living or something.

Whatever you do, try your damndest to never have anything to do with the IRS. Once they have your claws into you, they never let you go.

Thank you!

I (we) have a property in Australia. I file a tax return there each year.

Yes I meant income tax. I lived in the UK for 10 years before moving here and the bulk of my work is still there, hence filing a return there. Have lived here in South America for 5 years. I do not earn any income from this country.

Good advice about the IRS - that sounds scary and I have no intention of adding a third country to my confusing tax mess...

"really you can only be tax resident in one jurisdiction at a time and that would be where you are "ordinarily resident"" - Ah. Interesting. You're right, I probably do need to speak with someone.

Sorry - missed part of your question. We will be here for one more year only, and are planning to return to Australia. The reason we pay tax in Australia is because our house currently has tenants in it.

I would also suggest using an accountant in the UK as you may not be paying tax in the right country at the moment

I would take advice from someone with US tax experience before undertaking any work for a US client. I would think it very likely that there would be some US reporting obligation, ie you may not be able to avoid dealing with the IRS.

I live in one EU country, with international clients inside and outside the EU but not USA. My husband works from home in one EU country but his office is in another so have some experience.

My understanding is you should pay tax (personal and business)in the country you are resident and, where the work is being carried out. So you should be paying tax where you live and where you are doing the work, regardless of where the end client is. In addition, some countries make citizens file tax returns wherever they live or own property. So I would say you should be paying tax in South America and filing your Australian tax return.

It doesn't make any sense for you to pay UK tax - you're not a resident or citizen so surely have absolutely no obligation to that country. There may be VAT / trade restrictions that make it difficult for you to work with UK clients and quite frankly if you're leaving in a year and the South Americans aren't chasing you for not paying taxes it might be easier to continue as is. For me, I have different VAT rules depending on the country the invoice is in but pay tax where I live and where the work is carried out.

Thanks very much, all.

I spoke to an accountant in Australia who confirmed I should pay my US job tax here in South America.

Re: my UK tax payments, I have used a UK accountant the last couple of years and he has never mentioned that I shouldn't be paying tax in the UK!? I'm going to look into that some more.

Thanks.

Glad you are speaking to an accountant! Some countries have tax treaties (UK/Canada and UK/Oz for sure, not sure about USA) where you declare income earned in that country but you get foreign tax credits for the tax you have paid in the country where you are tax resident. I have a feeling the IRS might be wanting you to file a return even if there is no tax payable to them because you are declaring the income and paying tax on it elsewhere. Tis all a bit of a minefield, as you are discovering! At least most jurisdictions agree on the fact that you should only be taxed on the same dollar once.

Thanks! Yes it's a bloody minefield, I'm not smart enough for this!