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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

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.
  - spikels 13y ago
    This effect is biggest in low tax countries because of the credit US citizens end up paying the HIGHER of US and local income taxes (more or less - rules are complex). Also see relatively few Americans in Hong Kong and Singapore which have low tax rates like Dubai. Unlike almost everyone else in the world there is no benefit for Americans to work in low tax countries because they still end up paying US tax rates. If a company hires an Austrailian and an American in Hong Kong the American ends up with less after tax income. So the draw to these places is much less for US citizens.
    - vasilipupkin 13y ago
      There is still a benefit, because you pay only federal income taxes, but not state taxes and you do not pay various other taxes such as medicare surcharge on investment income. So if you are from a high tax state in the U.S. ( California or NY ), it may still make sense.
- macspoofing 13y ago
  >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 If you don't want to do something, you can always rationalize it. If really wanted to work in Berlin or elsewhere, you'd do it, and it wouldn't be a big deal.
  - chimeracoder 13y ago
    > If really wanted to work in Berlin or elsewhere, you'd do it, and it wouldn't be a big deal. This is simply getting at the notion of the premium - how much I value working abroad. A more formal way of asking this question, assuming for simplicity a $100K/year salary: "How attractive (measured in dollars) is the idea of working in Berlin?" If it's worth $30,000/year, you'll do it as long as you can make 70% of your US salary or more. Otherwise, it's not worth it. It's not a matter of "not wanting to do something" - it's a matter of the opportunity cost. In this case, the opportunity cost of working abroad for US citizens is high (see philiphogden's comments), so the only people who will do it are the people who can rationalize taking a financial hit. So yes, the answer is "you want it, just not enough". But the following question is, "how much should someone have to want to work abroad in order to do it?"
    - thetrb 13y ago
      Berlin is a relatively cheap place to live. So depending on where you live now you might actually need much less money when living in Berlin.
      - mahyarm 13y ago
        Most of the US (not NYC, DC, SF) is far cheaper than Europe in general. Even Seattle is cheaper on average.
        PavlovsCat 13y ago
        > Even Seattle is cheaper on average. Unless you mean "cheaper than Europe in general", I guess these sites could use your input: http://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=United+States&country2=Germany&city1=Seattle%2C+WA&city2=Berlin http://www.numbeo.com/cost-of-living/compare_cities.jsp?coun... http://www.expatistan.com/cost-of-living/comparison/seattle/berlin http://www.expatistan.com/cost-of-living/comparison/seattle/...
mbesto 13y ago
> 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. Really? All I did in my tax returns was say "I made this much outside of the US and paid this much in taxes". As long as the percentage is higher than you would have paid in the US, than you owe nothing. In the case that you don't...well then you might want to hire an accountant to "get creative".
- oijaf888 13y ago
  Did you make sure to file the FBAR report on all your foreign bank accounts and other financial accounts such as any mandatory retirement accounts? I believe the basic part of filing taxes (such as that) is pretty easy, the hard part is when you have to disclose every account that you may be considered to have control over and in some cases pay taxes on it. I think I saw somewhere else that you may have to pay US income tax on the gains in your German retirement account, even though its similar to social security and you have no access to it.
  - mbesto 13y ago
    > Did you make sure to file the FBAR report on all your foreign bank accounts and other financial accounts such as any mandatory retirement accounts? Yes. That's even easier than a tax return. You simply put in "This account exists from this bank in this country, and holds X amount"
    - oijaf888 13y ago
      It's interesting that you've found it so easy, first hand antecedents are always useful. Everything I've read about living in another country and having any sort of investments or tax deferred retirement accounts in that country seems like it turns into a paperwork nightmare, especially if you invest in foreign mutual funds.
outworlder 13y ago
When you are done backspacing, take a look at international tax rules in Brazil, specially regarding the taxes you must pay if you are an employee working for a foreign company. Oh wait, you won't find any, because you are not allowed to. The way to do it is to create a company, even if it just you. Then you'll be able to receive international transfers from foreign companies, provided you have signed a contract. And, after that, we can start talking about taxes. Considering that brazilian companies spend, on average, 2600 hours per year dealing with (domestic!) taxes, as opposed to 325h on average in the US, well...
simonebrunozzi 13y ago
Is it so just because tax rates are higher in Germany, or for other reasons?

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.
- spikels 13y ago
  This effect is biggest in low tax countries because of the credit US citizens end up paying the HIGHER of US and local income taxes (more or less - rules are complex). Also see relatively few Americans in Hong Kong and Singapore which have low tax rates like Dubai. Unlike almost everyone else in the world there is no benefit for Americans to work in low tax countries because they still end up paying US tax rates. If a company hires an Austrailian and an American in Hong Kong the American ends up with less after tax income. So the draw to these places is much less for US citizens.
  - vasilipupkin 13y ago
    There is still a benefit, because you pay only federal income taxes, but not state taxes and you do not pay various other taxes such as medicare surcharge on investment income. So if you are from a high tax state in the U.S. ( California or NY ), it may still make sense.
macspoofing 13y ago
>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 If you don't want to do something, you can always rationalize it. If really wanted to work in Berlin or elsewhere, you'd do it, and it wouldn't be a big deal.
- chimeracoder 13y ago
  > If really wanted to work in Berlin or elsewhere, you'd do it, and it wouldn't be a big deal. This is simply getting at the notion of the premium - how much I value working abroad. A more formal way of asking this question, assuming for simplicity a $100K/year salary: "How attractive (measured in dollars) is the idea of working in Berlin?" If it's worth $30,000/year, you'll do it as long as you can make 70% of your US salary or more. Otherwise, it's not worth it. It's not a matter of "not wanting to do something" - it's a matter of the opportunity cost. In this case, the opportunity cost of working abroad for US citizens is high (see philiphogden's comments), so the only people who will do it are the people who can rationalize taking a financial hit. So yes, the answer is "you want it, just not enough". But the following question is, "how much should someone have to want to work abroad in order to do it?"
  - thetrb 13y ago
    Berlin is a relatively cheap place to live. So depending on where you live now you might actually need much less money when living in Berlin.
    - mahyarm 13y ago
      Most of the US (not NYC, DC, SF) is far cheaper than Europe in general. Even Seattle is cheaper on average.
      - PavlovsCat 13y ago
        > Even Seattle is cheaper on average. Unless you mean "cheaper than Europe in general", I guess these sites could use your input: http://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=United+States&country2=Germany&city1=Seattle%2C+WA&city2=Berlin http://www.numbeo.com/cost-of-living/compare_cities.jsp?coun... http://www.expatistan.com/cost-of-living/comparison/seattle/berlin http://www.expatistan.com/cost-of-living/comparison/seattle/...

mbesto 13y ago

> 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. Really? All I did in my tax returns was say "I made this much outside of the US and paid this much in taxes". As long as the percentage is higher than you would have paid in the US, than you owe nothing. In the case that you don't...well then you might want to hire an accountant to "get creative".

oijaf888 13y ago
Did you make sure to file the FBAR report on all your foreign bank accounts and other financial accounts such as any mandatory retirement accounts? I believe the basic part of filing taxes (such as that) is pretty easy, the hard part is when you have to disclose every account that you may be considered to have control over and in some cases pay taxes on it. I think I saw somewhere else that you may have to pay US income tax on the gains in your German retirement account, even though its similar to social security and you have no access to it.
- mbesto 13y ago
  > Did you make sure to file the FBAR report on all your foreign bank accounts and other financial accounts such as any mandatory retirement accounts? Yes. That's even easier than a tax return. You simply put in "This account exists from this bank in this country, and holds X amount"
  - oijaf888 13y ago
    It's interesting that you've found it so easy, first hand antecedents are always useful. Everything I've read about living in another country and having any sort of investments or tax deferred retirement accounts in that country seems like it turns into a paperwork nightmare, especially if you invest in foreign mutual funds.

outworlder 13y ago

When you are done backspacing, take a look at international tax rules in Brazil, specially regarding the taxes you must pay if you are an employee working for a foreign company. Oh wait, you won't find any, because you are not allowed to. The way to do it is to create a company, even if it just you. Then you'll be able to receive international transfers from foreign companies, provided you have signed a contract. And, after that, we can start talking about taxes. Considering that brazilian companies spend, on average, 2600 hours per year dealing with (domestic!) taxes, as opposed to 325h on average in the US, well...

simonebrunozzi 13y ago

Is it so just because tax rates are higher in Germany, or for other reasons?