9 ms·

Visas deter US-based startups from hiring foreign talent, but on the flip side, US taxation laws deter US-based talent from leaving the country. I would love t

Visas deter US-based startups from hiring foreign talent, but on the flip side, US taxation laws deter US-based talent from leaving the country. I would love the idea of working for a startup in Berlin, but to make financially comparable, I'd have to be paid about 30% more[0] just to offset the cost of paying double taxes (both to the US, and to Germany). I'm ignoring factors like COLA, other expenses, etc., but for a US citizen this is a major deterrent to living abroad, even temporarily. I guess a cynic would say that this is just the system "working as intended", though that just raises the question of whose intentions it's working for. I would love to live in a foreign country for a few years in my 20s (the easiest time to do it), and assuming I eventually move back, the US will already get a cut of any foreign income I made via sales tax (when I spend it), capital gains (when I invest it), and (eventually) the estate tax. [0] Edit: Apparently this figure is off - see discussion below. The tax/financial implications still do appear to be a hurdle, it's just (unsurprisingly) even more complicated than I realized.

toomuchtodo 13y ago
Any taxes you pay out of the US are credited against your US tax liability. http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Tax-Credit http://www.irs.gov/Individuals/International-Taxpayers/Forei...
rb2k_ 13y ago
> US taxation laws deter US-based talent from leaving the country They do? I know Americans still have to pay taxes while living abroad, but they can exclude up to $97600 per year from their US taxable income which is a nice start. (And that "Earned Income Exclusion" is rising every year: http://taxes.about.com/od/taxhelp/a/ForeignIncome_3.htm http://taxes.about.com/od/taxhelp/a/ForeignIncome_3.htm)
- gst 13y ago
  Isn't there a tax treaty between Germany and the United States to avoid double taxation?
- deleted 13y ago
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GoldenMonkey 13y ago
The first ~$97K earned in a foreign country is not taxable on your U.S. return. http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion http://www.irs.gov/Individuals/International-Taxpayers/Forei...
- discardorama 13y ago
  That may be the case; but the documentation aspect (where you have to document every bank account, every investment, every property ownership, etc.) is a royal PITA from what I've heard.
philiphodgen 13y ago
If you are a U.S. citizen working in Berlin and paying German income tax, you will not be double-taxed on the income. The USA will give you credit for the tax paid in Germany. See Form 1116. Others have mentioned the Foreign Earned Income Exclusion. See Form 2555. You will, however, pay two metric shit-tonnes in professional fees getting your U.S. tax returns prepared because the international tax rules are so ridiculous. The operating principle in U.S. tax law is "If you are doing something abroad, you must be Mafia ^H^H^H^H^H a drug lord ^H^H^H^H^H a thieving bastard tax cheat ^H^H^H^H^H^H terrorist." (The Poster Child of Evil has changed over the years, but the pig-headedness has remained constant). Disclaimer: I am an international tax lawyer.
- chimeracoder 13y ago
  > Disclaimer: I am an international tax lawyer. Alright, I'll take your word for it then. > You will, however, pay two metric shit-tonnes in professional fees getting your U.S. tax returns prepared because the international tax rules are so ridiculous So, instead of getting shafted by paying Uncle Sam, I'll get shafted by paying a tax attorney. :) Either way, there is a financial disincentive to working abroad, and that's not taking into account the fact that this is a disincentive to look for jobs abroad (speaking for myself, I'd want to figure out the financial implications before seeking employment abroad, and this creates yet one more hurdle).
  - philiphodgen 13y ago
    There is an extreme financial disincentive for Americans to work abroad. If you travel frequently to Dubai (as an example) as I do, it will astonish* you to discover very few Americans working there, but tons of British, Australian, South African, etc. people busily making a living, building a business, etc. The reason is taxation. Americans working in Dubai (no income tax there) must still pay U.S. income tax and pay a ton to get the tax returns done correctly. A British citizen working in Dubai pays nothing to Inland Revenue and does not file a U.K. income tax return. Question: who is cheaper to hire, if you are an employer in Dubai? Hint: that's why all of the international bankers are NOT American. ------- * Sarcasm. EDIT: this is one reason why our law firm has a booming business in expatriation -- people giving up U.S. citizenship/green cards.
flyinglizard 13y ago
Are you sure you'll be paying taxes twice? AFAIK, countries signed on mutual tax treaties only tax you for the difference between the domestic tax rate and what you paid in the other country. Being that US has a lower tax level than Germany, this difference will be negative, so effectively zero US tax. I think the problem with US tax codes is that as a citizen you need to pay tax for any revenue you collected regardless of where you are physically located, but taxes you paid in treaty countries are subtracted from the total.
deleted 13y ago
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berlincitizen2 13y ago
Mind you that the cost of living in Berlin is nowhere near the cost of living in the Valley. A 40 square meter flat here costs just around 500€ ( less than 700$). I hear it's about three times as expensive in the valley. You get plenty of restaurants around for less than 10€. Other note: medical insurance is mandatory and covered by your taxes. It just doesn't make sense to compare salaries like this, you need to compare what you get for it. Note: I'm working for a young startup in Berlin, my girlfriend might have to refuse a postdoc in the states as I wouldn't be allowed to follow her because of VISAs problems.
- mahyarm 13y ago
  NYC & SF are silly compared to the rest of the USA. I can go live in Seattle for that rent when I was there 3 years ago. I don't get state income tax either, which further increases my income. I have cheap, quick, direct flights to NYC & SF from Seattle too. Austin is probably a similar situation.
- biafra 13y ago
  Medical insurance is not covered by taxes. It is propertinal to your income up to a limit (Beitragsbemessungsgrenze 2014: 48.600 EUR). It is capped there around 600€ per month. Half of it is payed by the employer and not deducted from your income before taxes. If you reach that limit you may also apply for a cheaper so called private insurance.
trusche 13y ago
> I'd have to be paid about 30% just to offset the cost of paying double taxes (both to the US, and to Germany) This is plain wrong. The US and most (all?) EU states have agreements for the avoidance of double taxation in place. I live and work in Ireland as a German and US citizen. I pay my taxes here, and have to file in the US, but can deduct all my Irish taxes as "foreign taxation credits" or some such, effectively paying nothing to Uncle Sam. Here's the US-Irish agreement: http://www.revenue.ie/en/practitioner/law/double/usaprot.html http://www.revenue.ie/en/practitioner/law/double/usaprot.htm.... I'm sure you can find one for Germany.
vellum 13y ago
and (eventually) the estate tax This depends on how much money you're leaving behind. The estate tax only kicks in above $5,250,000.

toomuchtodo 13y ago

Any taxes you pay out of the US are credited against your US tax liability. http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Tax-Credit http://www.irs.gov/Individuals/International-Taxpayers/Forei...

rb2k_ 13y ago

> US taxation laws deter US-based talent from leaving the country They do? I know Americans still have to pay taxes while living abroad, but they can exclude up to $97600 per year from their US taxable income which is a nice start. (And that "Earned Income Exclusion" is rising every year: http://taxes.about.com/od/taxhelp/a/ForeignIncome_3.htm http://taxes.about.com/od/taxhelp/a/ForeignIncome_3.htm)

gst 13y ago
Isn't there a tax treaty between Germany and the United States to avoid double taxation?
deleted 13y ago
[deleted]

GoldenMonkey 13y ago

The first ~$97K earned in a foreign country is not taxable on your U.S. return. http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion http://www.irs.gov/Individuals/International-Taxpayers/Forei...

discardorama 13y ago
That may be the case; but the documentation aspect (where you have to document every bank account, every investment, every property ownership, etc.) is a royal PITA from what I've heard.

philiphodgen 13y ago

If you are a U.S. citizen working in Berlin and paying German income tax, you will not be double-taxed on the income. The USA will give you credit for the tax paid in Germany. See Form 1116. Others have mentioned the Foreign Earned Income Exclusion. See Form 2555. You will, however, pay two metric shit-tonnes in professional fees getting your U.S. tax returns prepared because the international tax rules are so ridiculous. The operating principle in U.S. tax law is "If you are doing something abroad, you must be Mafia ^H^H^H^H^H a drug lord ^H^H^H^H^H a thieving bastard tax cheat ^H^H^H^H^H^H terrorist." (The Poster Child of Evil has changed over the years, but the pig-headedness has remained constant). Disclaimer: I am an international tax lawyer.

chimeracoder 13y ago
> Disclaimer: I am an international tax lawyer. Alright, I'll take your word for it then. > You will, however, pay two metric shit-tonnes in professional fees getting your U.S. tax returns prepared because the international tax rules are so ridiculous So, instead of getting shafted by paying Uncle Sam, I'll get shafted by paying a tax attorney. :) Either way, there is a financial disincentive to working abroad, and that's not taking into account the fact that this is a disincentive to look for jobs abroad (speaking for myself, I'd want to figure out the financial implications before seeking employment abroad, and this creates yet one more hurdle).
- philiphodgen 13y ago
  There is an extreme financial disincentive for Americans to work abroad. If you travel frequently to Dubai (as an example) as I do, it will astonish* you to discover very few Americans working there, but tons of British, Australian, South African, etc. people busily making a living, building a business, etc. The reason is taxation. Americans working in Dubai (no income tax there) must still pay U.S. income tax and pay a ton to get the tax returns done correctly. A British citizen working in Dubai pays nothing to Inland Revenue and does not file a U.K. income tax return. Question: who is cheaper to hire, if you are an employer in Dubai? Hint: that's why all of the international bankers are NOT American. ------- * Sarcasm. EDIT: this is one reason why our law firm has a booming business in expatriation -- people giving up U.S. citizenship/green cards.

flyinglizard 13y ago

Are you sure you'll be paying taxes twice? AFAIK, countries signed on mutual tax treaties only tax you for the difference between the domestic tax rate and what you paid in the other country. Being that US has a lower tax level than Germany, this difference will be negative, so effectively zero US tax. I think the problem with US tax codes is that as a citizen you need to pay tax for any revenue you collected regardless of where you are physically located, but taxes you paid in treaty countries are subtracted from the total.

deleted 13y ago

[deleted]

berlincitizen2 13y ago

Mind you that the cost of living in Berlin is nowhere near the cost of living in the Valley. A 40 square meter flat here costs just around 500€ ( less than 700$). I hear it's about three times as expensive in the valley. You get plenty of restaurants around for less than 10€. Other note: medical insurance is mandatory and covered by your taxes. It just doesn't make sense to compare salaries like this, you need to compare what you get for it. Note: I'm working for a young startup in Berlin, my girlfriend might have to refuse a postdoc in the states as I wouldn't be allowed to follow her because of VISAs problems.

mahyarm 13y ago
NYC & SF are silly compared to the rest of the USA. I can go live in Seattle for that rent when I was there 3 years ago. I don't get state income tax either, which further increases my income. I have cheap, quick, direct flights to NYC & SF from Seattle too. Austin is probably a similar situation.
biafra 13y ago
Medical insurance is not covered by taxes. It is propertinal to your income up to a limit (Beitragsbemessungsgrenze 2014: 48.600 EUR). It is capped there around 600€ per month. Half of it is payed by the employer and not deducted from your income before taxes. If you reach that limit you may also apply for a cheaper so called private insurance.

trusche 13y ago

> I'd have to be paid about 30% just to offset the cost of paying double taxes (both to the US, and to Germany) This is plain wrong. The US and most (all?) EU states have agreements for the avoidance of double taxation in place. I live and work in Ireland as a German and US citizen. I pay my taxes here, and have to file in the US, but can deduct all my Irish taxes as "foreign taxation credits" or some such, effectively paying nothing to Uncle Sam. Here's the US-Irish agreement: http://www.revenue.ie/en/practitioner/law/double/usaprot.html http://www.revenue.ie/en/practitioner/law/double/usaprot.htm.... I'm sure you can find one for Germany.

vellum 13y ago

and (eventually) the estate tax This depends on how much money you're leaving behind. The estate tax only kicks in above $5,250,000.