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relocation to Houston under company transfer - tax questions

relocation to Houston under company transfer - tax questions

Old Oct 29th 2011, 2:56 pm
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Default relocation to Houston under company transfer - tax questions

Hi Everyone,

It looks as if I'll be transferred to Texas on an L inter-company transfer visa. I saw the very useful wiki page for things to ask for. I still have some questions though and your thoughts would be very helpful:

I will probably being going for a fairly short-term period of between 1-2 years. We are starting a new office over there. I am unsure which company entity is best to pay me and whether to pay in GBP or USD. I understand my UK tax liability is based upon residency - but how does that affect my tax status (e.g. is it even possible for the UK company to pay me even if I am no resident in the UK?). I obviously have a personal pension here that I would prefer to continue contributing too. Or alternatively if the US company pays me, how does that work exactly? I understand tax matters there are based upon citizenship. (too good to be true, but on the face of it it's like I could almost not pay tax at all according to the two tax authorities involved).

I own a property here in the UK that I currently rent out, although all the income from it is swallowed up by the mortgage expenditure. I wonder if that can work in my interest somehow in terms of tax matters.

It is probably all not that straightforward, and I'll probably need to take some advice before negotiating with my employer on terms and conditions. I'm not exactly sure where I would go for such advice as I wouldn't imagine every tax advisor has got experience in this area. If anyone could recommend a firm in central Scotland that would also be very helpful.

Thanks in advance for your thoughts/recommendations.
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Old Oct 29th 2011, 9:18 pm
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Default Re: relocation to Houston under company transfer - tax questions

I'll try and help with a bit of your post. You will not be a resident of the US. You will be here on a temporary visa. There is a difference. I found this bit confusing as I always wanted to say I was a resident. Yes you can be paid by a UK company and you can be paid in GBP. My husband is. His company has to work out a hypothetical tax which is the equivalent of the monthly PAYE. We have to file both US and UK tax returns and KPMG helps with this. We declare our income from our leased UK property on our UK and US tax returns.
We are in a much better position by being expats and being paid in GBP. This means we keep the UK terms and conditions regarding holiday, paternity leave etc. It also gives us entitlements to housing allowances, cost of living allowances etc.
I believe there is a section in WIki that is a guide to the sorts of packages you can ask for. As a basic guide we get;
Housing allowance to rent a property
Utilities paid for
Cost of living increase on salary
Business class travel for all family members to move to US
All belongings packed and shipped, then unpacked here
Additional air transit for some belongings
Medical care
Dental care
We got a cash allowance to allow us to buy new appliances
Optional loan from the company at a low rate to purchase cars
Schooling from 3 years old
Cost of living allowance
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Old Oct 29th 2011, 11:55 pm
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Default Re: relocation to Houston under company transfer - tax questions

Weeze, I think you are mixing things when saying he will not be resident, as resident for immigration purposes is different from resident for tax purposes. He will be subject to US income tax just like anyone else, but if he receives his salary in the UK, he´ll be entitled to double tax relief. He should get tax advice in the US as he´ll probably be better off by being paid in the US
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Old Oct 30th 2011, 12:51 am
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Default Re: relocation to Houston under company transfer - tax questions

Originally Posted by godisaclog View Post
I understand tax matters there are based upon citizenship. (too good to be true, but on the face of it it's like I could almost not pay tax at all according to the two tax authorities involved).
I think you might be mixing things up a bit.

For US citizens, they have to pay tax worldwide no matter where they are residing. US citizens in the UK are filing US taxes. US citizens in Khazikstan are filing US taxes, etc. For Yanks, citizenship is a pretty big deal when it comes to taxes.

For most people residing in the US, it's based on where they are living. By and large most people who are in the US, working physically in the US (regardless of where they are being paid) are liable for US taxes.

Last edited by penguinsix; Oct 30th 2011 at 12:55 am.
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Old Oct 30th 2011, 1:33 am
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Default Re: relocation to Houston under company transfer - tax questions

Originally Posted by penguinsix View Post
I think you might be mixing things up a bit.

For US citizens, they have to pay tax worldwide no matter where they are residing. US citizens in the UK are filing US taxes. US citizens in Khazikstan are filing US taxes, etc. For Yanks, citizenship is a pretty big deal when it comes to taxes.

For most people residing in the US, it's based on where they are living. By and large most people who are in the US, working physically in the US (regardless of where they are being paid) are liable for US taxes.
I agree and they will be taxed on worldwide income (except possibly the first year) but any foreign tax on unearned income (rental, stocks, etc.) can be used to offset possible US taxes owed on that income. Also mortgage interest, expenses, and depreciation can be decucted to offset rental income for US taxes.
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Old Oct 30th 2011, 2:39 am
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Default Re: relocation to Houston under company transfer - tax questions

Originally Posted by Michael View Post
I agree and they will be taxed on worldwide income (except possibly the first year) but any foreign tax on unearned income (rental, stocks, etc.) can be used to offset possible US taxes owed on that income. Also mortgage interest, expenses, and depreciation can be decucted to offset rental income for US taxes.
Yes, they are 'taxed' on worldwide income, but there are several rather significant deductions and exemptions, such as the foreign earned income exclusion, the foreign housing exclusion, and the foreign tax deduction, etc. It's likely most US citizens won't actually owe any taxes living overseas, but it's also generally recommended that they file nevertheless (even if they don't owe) as overseas taxpayers are getting some extra scrutiny now as part of the anti-money laundering efforts.
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Old Oct 30th 2011, 2:56 am
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Default Re: relocation to Houston under company transfer - tax questions

Originally Posted by penguinsix View Post
Yes, they are 'taxed' on worldwide income, but there are several rather significant deductions and exemptions, such as the foreign earned income exclusion, the foreign housing exclusion, and the foreign tax deduction, etc. It's likely most US citizens won't actually owe any taxes living overseas, but it's also generally recommended that they file nevertheless (even if they don't owe) as overseas taxpayers are getting some extra scrutiny now as part of the anti-money laundering efforts.
I was referring to residents of the US.
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Old Oct 30th 2011, 11:41 am
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Default Re: relocation to Houston under company transfer - tax questions

Originally Posted by Michael View Post
I was referring to residents of the US.
Ooops.

I always get confused about new residents and their taxes. Is there a specific type of visa in which there is no US income tax? I'm assuming a journalist visa would not incur US income tax, but was wondering if anyone has put in a wiki which visas do and do not incur US income tax situations?
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Old Oct 30th 2011, 5:13 pm
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Default Re: relocation to Houston under company transfer - tax questions

Originally Posted by penguinsix View Post
Ooops.

I always get confused about new residents and their taxes. Is there a specific type of visa in which there is no US income tax? I'm assuming a journalist visa would not incur US income tax, but was wondering if anyone has put in a wiki which visas do and do not incur US income tax situations?
Those on J1 and L1 who will only be here in the US for a short period can be exempt, as long as NIC is being paid. Thing is, if they then stay in the US longer, they have to back pay what they didn't have to and with any possible penalties that they might have incurred.
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Old Oct 31st 2011, 5:20 pm
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Default Re: relocation to Houston under company transfer - tax questions

A decent ex-pat package will include tax preparation in both UK and US for both partial and full years of your tour. I'd negotiate on this; expecially if you're going to be travelling around the US - since you will also need to file State returns.

Personally, if the majority of your expenses once in the US are going to be in USD, I'd elect to get paid in USD; why take FX risk?
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Old Oct 31st 2011, 6:49 pm
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Default Re: relocation to Houston under company transfer - tax questions

Originally Posted by IPM View Post
A decent ex-pat package will include tax preparation in both UK and US for both partial and full years of your tour. I'd negotiate on this; expecially if you're going to be travelling around the US - since you will also need to file State returns.

Personally, if the majority of your expenses once in the US are going to be in USD, I'd elect to get paid in USD; why take FX risk?
Thanks everyone for your responses so far. I think I'd better speak to a tax advisor

Are there any other advantages to being paid in USD? The majority of expenses in the US will be in USD, but I hope to be able to save a lot more money (in GBP) during my period in the US than I would be spending. Is foreign exchange the primary risk?

Can someone clarify the offsetting of cost on my UK mortgage on a US tax return or US housing rental? If I make a net loss of 200 GBP in the UK on my mortgage interest + maintenance costs, does this allow me to offset that on my US tax return, or in some other way?
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Old Nov 1st 2011, 1:11 am
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Default Re: relocation to Houston under company transfer - tax questions

CoL isn't really that much different in the US to the UK...so unless the company is paying for a lot of your stuff in the US so that you'd have less out goings than you would in the UK, don't expect to be making much more in the way of savings.

The tax deductions depend on residence status, as in how many days in the year you've been resident in the US. If your move is for such a short time period and depending on when you move over, you might not be able to make much in the way of deductions, but if you plan well, you might. You really need to do the numbers.
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Old Nov 1st 2011, 1:17 am
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Default Re: relocation to Houston under company transfer - tax questions

Ouch there's some dodgy stuff in this thread!

Do NOT confuse "residency" for immigration purposes as having anything to do with "residency" for tax purposes.

Regardless of your immigration status, you are "resident" for tax purposes if you meet the "Substantial Presence Test".

And yes, paying no tax is far too good to be true... because it isn't true. You will either pay tax in the UK, or in the US.
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Old Nov 1st 2011, 8:18 am
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Default Re: relocation to Houston under company transfer - tax questions

To go with the post above, from the UK side, consider that if it is not a permanent move, you may well be considered 'ordinarily resident' in the UK by HMRC.
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