10 ms·

Isn't USA even worse? If you move as US citizen to EU, you would need to pay bot h local EU tax and USA tax right? (I am not a USA citizen, this is legit questi

Isn't USA even worse? If you move as US citizen to EU, you would need to pay bot h local EU tax and USA tax right? (I am not a USA citizen, this is legit question)

laurencerowe 1y ago
Double taxation treaties negate this somewhat, but there are a bunch of edge cases.
- notTooFarGone 1y ago
  You have to file your taxes every year in the US either way. You can't even renounce your citizenship without paying a lump sum.
  - laurencerowe 1y ago
    It would be a bureaucratic pain but if I were to move back to Europe (having become a US citizen) I don’t expect I would end up paying any tax to the US after applying the foreign tax credit. But there could be a whole lot of complexity around stuff like ETFs and mutual funds and whether they were recognized by both countries.
  - philjohn 1y ago
    And because the tax years don't line up, it's more costly than filing just in the US, or just in the EU, plus if you moved with a company and were granted RSU's in the US, or keep property or assets in the US ... it's just a pain to calculate properly. Have friends who regularly spend 10x more than I do my accountant for my tax return because of this.
dustincoates 1y ago
Not in most cases. According to this estimate, who comes from an organization that is against US citizens abroad having to file[0], 77% have AGI "well below" the cutoff where you would have to pay taxes. For those that are above that threshold, you can deduct the taxes you pay in your home country agains what you would have been charged in the US. For almost everyone in the EU, that is a higher rate than the US taxes, so you don't pay anything on that European income. _However_, you do still have to pay taxes on your US income if you're abroad. So if you are making money from freelancing with US companies (and, I assume, they aren't paying a European business you have set up), then you'll pay US taxes there, but due to tax treaties you are generally not double taxed. You do, also, have to file every year. 0: https://www.taxfairnessabroad.org/blog/americans-abroad-by-the-numbers#:~:text=Of%20the%205-9%20millions,are%20the%20IRS's%20own%20figures. https://www.taxfairnessabroad.org/blog/americans-abroad-by-t...
hiAndrewQuinn 1y ago
US-EU transplant here. No, the United States does not have anything even vaguely similar like this. Seriously putting forward the idea of an exit tax on anyone who owns more than 1% of any LLC worldwide would in all likelihood be deeply politically unpopular. It goes against the very name and spirit of a limited liability company, for one. For two (real ballpark number here) about 1 in 10 Americans would actively be subject to a German style exit tax like this, concentrated among working adults. You're probably instead thinking of income tax, which the US does levy worldwide contrary to virtually every other nation on Earth and is, I can tell you from personal experience, not fun. There is a a much narrower exit tax for US citizens who wish to actually give up their citizenship outright (not just move out) but that generally only comes into play for anyone with $2 million or more in net worth, and exists probably to discourage tax evasion, to my understanding. There is truly nothing remotely like the "you have to pay us if you own 1% of any LLC anywhere and move out" approach Germany has.
- DrBazza 1y ago
  > You're probably instead thinking of income tax, which the US does levy worldwide contrary to virtually every other nation on Earth and is, I can tell you from personal experience, not fun. That's certainly what I was thinking of, given I have a few US friends here in the UK. Isn't the way to stop that to simply give up dual citizenship?
  - fyrn_ 1y ago
    You won't be double taxed, the US taxes the difference between your local income tax rate and the US federal tax rate. So if you live in London you're not paying any US tax because the UK income tax rate is higher. It helps stop rich people from "totally live in <tax haven>". If only we had that for companies.. I think where people get confused is that it's implemented as a tax credit which is equal to the income tax you pay locally. On top of that the first $130k earned is also exempt, so it only applies to high earners as well
    - potatototoo99 1y ago
jwr 1y ago
The US does not have an exit tax for businesses, but has an absolutely horrible tax system in which expats are treated badly. The reporting requirements for expats are insane: all bank/brokerage/whatever accounts with max levels during the year, FATCA and FBAR forms, and the cherry on top: Form 8858 ("Foreign Disregarded Entities", whatever that is) which is needed for your self-employment and for each of your rental properties. If you think this is easy, look it up — https://www.irs.gov/forms-pubs/about-form-8858 https://www.irs.gov/forms-pubs/about-form-8858 It's pretty much impossible to file your taxes yourself, you will never get it right. You have to pay specialized accountants, some of which will charge you >$1500 to prepare a yearly return with self-employment and rental. Then come the actual taxes to pay, which are the least of all problems. Expats are treated this way because they have no lobbying power.
- hiAndrewQuinn 1y ago
  I can confirm this from experience. The instant your situation becomes more complicated than "I work one full time job and have no investments to my name whatsoever" you are in for a brutal time without an accountant by your side. On the other hand, if you do have an accountant by your side, you potentially expose yourself to some of the most powerful labor arbitrage on the planet as a tech worker. Making $100k remotely from the US might sound like a bad deal until you live in a country where the average wage is $20,000. Like all things US tax wise, you are disproportionately rewarded for being clever and reading a lot.
- ivankra 1y ago
  US totally does: https://www.irs.gov/individuals/international-taxpayers/expatriation-tax https://www.irs.gov/individuals/international-taxpayers/expa... - long-term (8y+) green card holders may need to pay up. One big difference is that the clock only start ticking after you get green card, whereas with Germany any residence year counts. Oh, and citizens of course aren't affected - since US continues to tax them wherever, but Germany like almost all other countries practices residence-based taxation.
  - graemep 1y ago
    It is very close to being all other countries. AFAIK the only other country that taxes non resident citizens is Eritrea - and the US has said its unfair they do it!

Isn't USA even worse? If you move as US citizen to EU, you would need to pay bot h local EU tax and USA tax right? (I am not a USA citizen, this is legit question)

laurencerowe 1y ago

Double taxation treaties negate this somewhat, but there are a bunch of edge cases.

notTooFarGone 1y ago
You have to file your taxes every year in the US either way. You can't even renounce your citizenship without paying a lump sum.
- laurencerowe 1y ago
  It would be a bureaucratic pain but if I were to move back to Europe (having become a US citizen) I don’t expect I would end up paying any tax to the US after applying the foreign tax credit. But there could be a whole lot of complexity around stuff like ETFs and mutual funds and whether they were recognized by both countries.
- philjohn 1y ago
  And because the tax years don't line up, it's more costly than filing just in the US, or just in the EU, plus if you moved with a company and were granted RSU's in the US, or keep property or assets in the US ... it's just a pain to calculate properly. Have friends who regularly spend 10x more than I do my accountant for my tax return because of this.

dustincoates 1y ago

Not in most cases. According to this estimate, who comes from an organization that is against US citizens abroad having to file[0], 77% have AGI "well below" the cutoff where you would have to pay taxes. For those that are above that threshold, you can deduct the taxes you pay in your home country agains what you would have been charged in the US. For almost everyone in the EU, that is a higher rate than the US taxes, so you don't pay anything on that European income. _However_, you do still have to pay taxes on your US income if you're abroad. So if you are making money from freelancing with US companies (and, I assume, they aren't paying a European business you have set up), then you'll pay US taxes there, but due to tax treaties you are generally not double taxed. You do, also, have to file every year. 0: https://www.taxfairnessabroad.org/blog/americans-abroad-by-the-numbers#:~:text=Of%20the%205-9%20millions,are%20the%20IRS's%20own%20figures. https://www.taxfairnessabroad.org/blog/americans-abroad-by-t...

hiAndrewQuinn 1y ago

US-EU transplant here. No, the United States does not have anything even vaguely similar like this. Seriously putting forward the idea of an exit tax on anyone who owns more than 1% of any LLC worldwide would in all likelihood be deeply politically unpopular. It goes against the very name and spirit of a limited liability company, for one. For two (real ballpark number here) about 1 in 10 Americans would actively be subject to a German style exit tax like this, concentrated among working adults. You're probably instead thinking of income tax, which the US does levy worldwide contrary to virtually every other nation on Earth and is, I can tell you from personal experience, not fun. There is a a much narrower exit tax for US citizens who wish to actually give up their citizenship outright (not just move out) but that generally only comes into play for anyone with $2 million or more in net worth, and exists probably to discourage tax evasion, to my understanding. There is truly nothing remotely like the "you have to pay us if you own 1% of any LLC anywhere and move out" approach Germany has.

DrBazza 1y ago
> You're probably instead thinking of income tax, which the US does levy worldwide contrary to virtually every other nation on Earth and is, I can tell you from personal experience, not fun. That's certainly what I was thinking of, given I have a few US friends here in the UK. Isn't the way to stop that to simply give up dual citizenship?
- fyrn_ 1y ago
  You won't be double taxed, the US taxes the difference between your local income tax rate and the US federal tax rate. So if you live in London you're not paying any US tax because the UK income tax rate is higher. It helps stop rich people from "totally live in <tax haven>". If only we had that for companies.. I think where people get confused is that it's implemented as a tax credit which is equal to the income tax you pay locally. On top of that the first $130k earned is also exempt, so it only applies to high earners as well
  - potatototoo99 1y ago

jwr 1y ago

The US does not have an exit tax for businesses, but has an absolutely horrible tax system in which expats are treated badly. The reporting requirements for expats are insane: all bank/brokerage/whatever accounts with max levels during the year, FATCA and FBAR forms, and the cherry on top: Form 8858 ("Foreign Disregarded Entities", whatever that is) which is needed for your self-employment and for each of your rental properties. If you think this is easy, look it up — https://www.irs.gov/forms-pubs/about-form-8858 https://www.irs.gov/forms-pubs/about-form-8858 It's pretty much impossible to file your taxes yourself, you will never get it right. You have to pay specialized accountants, some of which will charge you >$1500 to prepare a yearly return with self-employment and rental. Then come the actual taxes to pay, which are the least of all problems. Expats are treated this way because they have no lobbying power.

hiAndrewQuinn 1y ago
I can confirm this from experience. The instant your situation becomes more complicated than "I work one full time job and have no investments to my name whatsoever" you are in for a brutal time without an accountant by your side. On the other hand, if you do have an accountant by your side, you potentially expose yourself to some of the most powerful labor arbitrage on the planet as a tech worker. Making $100k remotely from the US might sound like a bad deal until you live in a country where the average wage is $20,000. Like all things US tax wise, you are disproportionately rewarded for being clever and reading a lot.
ivankra 1y ago
US totally does: https://www.irs.gov/individuals/international-taxpayers/expatriation-tax https://www.irs.gov/individuals/international-taxpayers/expa... - long-term (8y+) green card holders may need to pay up. One big difference is that the clock only start ticking after you get green card, whereas with Germany any residence year counts. Oh, and citizens of course aren't affected - since US continues to tax them wherever, but Germany like almost all other countries practices residence-based taxation.
- graemep 1y ago
  It is very close to being all other countries. AFAIK the only other country that taxes non resident citizens is Eritrea - and the US has said its unfair they do it!