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Declare the pennies on your eyes...
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Sashadroogie



Joined: 17 Apr 2007
Posts: 9551
Location: Moskva, The Workers' Paradise

PostPosted: Fri Feb 24, 2012 7:03 am    Post subject: Declare the pennies on your eyes... Reply with quote

As EFL teachers, most of us are not earning millions of anything per annum, so I imagine we are not paying too much income tax. However, it might be interesting to compare tax systems where we work.

To start off, in Russia, once you've been in the country for X number of months (six, I think) then you are taxed at the usual local rate of 13%. However, most companies only declare a portion of salary, known as your 'white' salary, so the resulting income taxes paid are minimal. Quite corrupt, but even Duma members engage in this, so....

What about other posters? And can somebody explain for me the logic of a home country taxing earnings abroad? Strikes me as double-taxation, not to say immoral. Quite literally going beyond jurisdiction, surely?
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HLJHLJ



Joined: 06 Oct 2009
Posts: 898

PostPosted: Fri Feb 24, 2012 8:09 am    Post subject: Reply with quote

I don't really understand the tax system in Ecuador, but I will do my best. Income tax varies according to the status of the business you work for. It seems to vary from about 10%-15%. Some people have to file taxes twice a year, some every month, it seems that is allocated randomly when you get your tax ID code.

However rent, food (shop and restaurant), medicine and education are all tax deductible. You just keep your receipts and claim it all back. So I don't really understand what the point of it all is. If everyone is claiming back virtually everything they have paid in, why bother in the first place?

Is it just USA that taxes income from other countries? In the UK you usually pay UK tax on any money earned there, and tax on local earnings in the country it was earned in. There are some countries with tax agreements, so you can pay all your tax there, or all in the UK, but it's designed to prevent double taxation, rather than to cause it.
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fluffyhamster



Joined: 13 Mar 2005
Posts: 2730
Location: UK > China > Japan > UK again

PostPosted: Fri Feb 24, 2012 11:27 am    Post subject: Reply with quote

If I'd had to pay (or save up for) UK rates of taxation on what I was earning whilst in Japan, I'd've literally starved there. Thankfully HMRC isn't AFAIK really set up to pursue expats (it's not even set up to pursue people domiciled in the UK but offshoring profits LOL), and if it were, I couldn't honestly see the point in TEFLing at all. (Edit: I see HLJHLJ's explained how it works in the UK better than I could've). That is, part of the appeal of working for example in Japan was the low income tax (didn't ever seem more than 15% on average), low consumption tax (5%, though on all products incl. food), and "optional" health insurance (though the national one, kokumin kenko hokin/kokuho/KKH, is very cheap in the first year, as one has no previous Japan earnings from which to calculate the rate it "should" be). In comparison, at least a third of one's wages in the UK are immediately gone on income tax and NHI, whilst VAT is at least 17.5% (probably more like 20% now, but not quite sure what the current rate is), and fuel and utility bills are becoming unaffordable/blatantly greedy.

HLJHLJ wrote:
If everyone is claiming back virtually everything they have paid in, why bother in the first place?

I'd imagine it's to give the government a little extra revenue in the interim between the taxation and its reclamation. But of course, it costs money to administer the system, so I'd assume it makes a loss overall (unless enough people forget to reclaim in time or something).
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spiral78



Joined: 05 Apr 2004
Posts: 9486
Location: On a Short Leash

PostPosted: Fri Feb 24, 2012 1:59 pm    Post subject: Reply with quote

I'm not sure where the idea comes from that US citizens pay taxes on income earned abroad. That only kicks in if one earns more than something like the equivalent of 90,000 USD. Unlikely that too many TEFLers fall into that category - hence we aren't paying US taxes on foreign income. Though we have to file yearly.

What I consider far dodgier is the FBAR requirements, which dictate that US citizens must report the highest amount each year in any foreign account containing more than the equivalent of 10,000USD. This requirement apparently has been around for a decade, but was not well-advertised. The penalties for not reporting an account are high - up to 15,000 for each year not reported. For those of us who were honestly unaware of the requirements, that's a black cloud overhead...the FBAR people don't necessarily 'have to' apply penalties, but as I read the regulations, they 'can'.
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ecocks



Joined: 06 Nov 2007
Posts: 886
Location: Gdansk, Poland

PostPosted: Fri Feb 24, 2012 4:28 pm    Post subject: Reply with quote

For 2012, US citizens are allowed to earn up to $95,100 before being taxed by the Internal Revenue Service.

So, no, not many American TEFL teachers are going to be owing taxes for their salaries.

You may be liable for FICA/Medicare taxes (13.3 or 15.3% of income depending on whether the tax cut gets extended) if you are self-employed under the definition of the IRS. Of course, since you're not paying into the system, you're not building any credit with the Social Security Administration for future benefits.

In Ukraine, I paid a flat 10% of gross sales each following month on all payments received by the company I set up there. Some clients still paid in cash though which was a major headache until the accountant began treating it as a retail sale of a service. For some reason that didn't occur to her until I kept insisting that there had to be a way to do a cash transaction when your car was repaired and not all of the charge was parts.
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HLJHLJ



Joined: 06 Oct 2009
Posts: 898

PostPosted: Fri Feb 24, 2012 5:13 pm    Post subject: Reply with quote

Although it's good to hear the tax limit is high for USA ex-pats, it still doesn't sit well with me. The principle of it just seems unfair on every level.

What I earn abroad is between me and the country I work in, it's no business of the British government. If I choose to have savings there, that's not their business either. They don't get to dip their sticky paws in my wage packet here just because of a coincidence of birth there.

I guess USA taxation is none of my business either, but the unfairness of it riles me. Embarassed
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Sashadroogie



Joined: 17 Apr 2007
Posts: 9551
Location: Moskva, The Workers' Paradise

PostPosted: Fri Feb 24, 2012 6:11 pm    Post subject: Reply with quote

That is rather how it strikes me too: grossly unfair.

Glad I'm not alone.
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spiral78



Joined: 05 Apr 2004
Posts: 9486
Location: On a Short Leash

PostPosted: Fri Feb 24, 2012 6:13 pm    Post subject: Reply with quote

I seem to be the only one around who is uneasy about FBAR. I find this much more disturbing than the possibility that I might ever have to pay US taxes on my foreign income Shocked Sad
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Sashadroogie



Joined: 17 Apr 2007
Posts: 9551
Location: Moskva, The Workers' Paradise

PostPosted: Fri Feb 24, 2012 6:15 pm    Post subject: Reply with quote

FBAR is not something known to me, so I don't feel anything about it. Except tha same hostility to a government helping themselves to income when abroad. Strange things these...
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spiral78



Joined: 05 Apr 2004
Posts: 9486
Location: On a Short Leash

PostPosted: Fri Feb 24, 2012 6:21 pm    Post subject: Reply with quote

Would you like making an official report regarding your foreign bank account details to your 'home' government, assuming that all of the money in any such account was earned honestly, and entirely abroad?

'Dear tax officials from my home country:

Here is the info you requested.

My foreign bank name, address, and contact details
The name and contact details of any other person appearning on the account
My foreign bank account numbers
The highest amount this account has had in it over the past twelve months converted to USD

Best regards,
US citizen living/working abroad, with zero US/US dollar income
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Sashadroogie



Joined: 17 Apr 2007
Posts: 9551
Location: Moskva, The Workers' Paradise

PostPosted: Fri Feb 24, 2012 6:25 pm    Post subject: Reply with quote

Of course not. I'd refuse outright. In fact, I may even feel the urge to dump crates of tea into the harbour...
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spiral78



Joined: 05 Apr 2004
Posts: 9486
Location: On a Short Leash

PostPosted: Fri Feb 24, 2012 6:29 pm    Post subject: Reply with quote

That's my point - simply not reporting such a bank account allows them to impose fines up to 15,000 USD per year not reported.


If they were imposing this on accounts with much more money than 10,000 USD - like millions or something, the argument that the purpose is to catch people hiding US income might be reasonable. But 10,000 USD is attainable even on a TEFL salary, Very Happy Shocked and we and others at this level of income are very unlikely to be hiding vast sums (or any sums at all) from legitimate taxation in the US.
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Sashadroogie



Joined: 17 Apr 2007
Posts: 9551
Location: Moskva, The Workers' Paradise

PostPosted: Fri Feb 24, 2012 6:33 pm    Post subject: Reply with quote

Perhaps a sticky thread re taxation in different countries might be an idea. It's a question that comes up an awful lot...
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spiral78



Joined: 05 Apr 2004
Posts: 9486
Location: On a Short Leash

PostPosted: Fri Feb 24, 2012 6:36 pm    Post subject: Reply with quote

I guess it's probably also useful to discuss whatever responsibilities expats have to their home countries in terms of filing and declaring (and possibly paying) taxes when they are living abroad.....

Not many newbies considering a move abroad are entirely aware of either end (home/new country) in terms of paperwork and tax requirements.
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johnslat



Joined: 21 Jan 2003
Posts: 12696
Location: Santa Fe, New Mexico, USA

PostPosted: Fri Feb 24, 2012 6:42 pm    Post subject: Reply with quote

US citizens

File every year even though you pay no taxes due to the Foreign Earned Income Exclusion.

"If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is now adjusted for inflation ($91,400 for 2009, $91,500 for 2010, $92,900 for 2011, $95,100 for 2012). In addition, you can exclude or deduct certain foreign housing amounts."

If you don't file, it could come back to bite you someday.

Regards,
John
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