Tax Planning advice (Primarily contracting for US company)


#1

Hello nomads,

Due to a recent US work visa rejection (H1B), I’m considering turning to freelancing and being a digital nomad. My former employer (US based start-up) wants me to continue rendering my services as a contractor/freelancer (so I have a confirmed major client and I’ll probably take on other minor clients on the side). From the get go I want to get my taxes right and I was hoping you seasoned nomads can assist me. Some of the key aspects of my case are:

  1. I hold an Indian passport and as long as I don’t stay in India for 182 days I’m considered non-resident (No taxes on foreign income as long as services are not rendered in India, otherwise 30% tax).

  2. I may have to visit the US occasionally, so having a tax-residency in a country with a US tax-treaty may be beneficial (I maybe incorrect here).

  3. I’m willing not to be a perpetual traveller and put down roots in a low tax country that offers easy tax residency with low-taxes.

  4. Will incorporating in a tax-friendly help my case? Or will just perpetual travel be enough to completely avoid taxes?

P.s. If any of you offer sound tax advice for a fee and are aware of international taxation laws (especially US tax laws), do let me know.


#2

I am Australian and non-resident for tax purposes because I am out of AU for more than 183 days per year. Had same similar issue. I did look into Panamanian residency but in the end didn’t need it. I had a Stewart Patton, US tax attorney, create a structure where I can sell into the US and not pay US tax. Here’s an article that may help: https://ustax.bz/non-us-entrepreneurs/


#3

Thank you, so much. I’ll reach out to Stewart.


#4

Are these tax structures expensive to create and maintain? What’s your experience been like?


#5

I think it was around $2k to set up and $1k to maintain annually. Don’t remember the exact price. It’s a lot cheaper than paying tax in Australia. He’ll be able to advise on your US tax liability–which I am pretty sure will be zero–but won’t be able to advise on Indian tax.


#6

I have not work with US companies yet, but I also needed a freelancing structure for customers around the world, including the USA. Since 2014 I run an LTD in the UK it’s a perfect solution for my digital nomad activities. Maybe it will work for you too.


#7

Some context: I work with American start-ups remotely, while living outside the US, and I do not have any visas/American citizenship… so I’m writing this from my experience so far:

  1. FYI Most employers will want you to fill out the W-9 form to get paid/have their accounting paperwork in line. Since you are not a resident, you will not have a TIN (Taxpayer Identification Number), so this is your first accounting department hurdle.
    This is the W-9 form --> irs(dot)gov/pub/irs-pdf/fw9.pdf

  2. Instead, this form seems to be the correct way about it, as an international contractor, either as an individual or an enterprise.
    W-8 BEN form --> irs(dot)gov/pub/irs-pdf/fw8ben.pdf
    W-8 BEN-E, if you are a larger company --> irs(dot)gov/pub/irs-pdf/fw8bene.pdf

  3. Keep good records of what you receive/convert! ie what the exchange rate was on the day you received payment and/or when and how much you converted. This helps once you file all as your regular income, as you would normally do.

No issues so far! Hope this helps!
Also not a bad idea consulting an international accountant/tax lawyer, if you’re doing high volume!

**FYI Start-ups LOVE using payment apps like Bill(dot)com, however these don’t operate outside the US. :cry: I use paypal a lot to go around the issue of USD money transfer, but make sure you add ~4.5% to your total to cover their fees!
Paypal fees depend on country --> paypal(dot)com/ca/webapps/mpp/merchant-fees

***Last point - when working this way, as a contractor with no residency of any kind - NEVER MENTION YOU FREELANCE IN THE USA while crossing the border. EVER. :warning:
If you do NOT have the paperwork to work there - you do NOT MENTION anything work related. Otherwise, they will question you, reject you, and often times - ban you from entering. All trips are strictly personal, pretend your clients are friends and do not use the word CLIENT.


#8

thanks @da5ha!