Foreign Taxation while Abroad
U.S. Citizens and Greencard Holders
You might have tax obligations in the country you visit. Generally, most countries have a 183-day residency rule that determines whether a person establishes residency in that country. If you establish residency, you are being taxed on your world-wide income in that country. Contact, the equivalent of the Internal Revenue Service in the country to find out what the rules for that country are.
If there are tax obligations, U.S. tax treaties or conventions with many foreign countries entitle U.S. residents to certain credits, deductions, exemptions, and reduced foreign tax rates. In this way, you may be able to pay less tax to those countries or even avoid double-taxation. See Publication 901 for more details. And more information in the U.S. Tax section of this website.
Most countries have equivalents to Social Security and Medicare payments which have to be paid if you are taxed in that country. There are a few exceptions for countries with a so-called Totalization Agreement. See here for a list of countries. Generally (except for Italy) the rules of the Totalization agreements are as follows: if still working for a U.S. employer and being sent abroad for less than 5 years, Social Security and Medicare are being withheld in the U.S., if staying longer than 5 years, Social Security is being withheld in the visiting country. If you are hired in the country, by an institution / company in the country, Social Security and other benefit payments like Unemployment and Disability Insurance etc. are withheld in the country.
Note: Foreign Taxation while Abroad is a very complex topic with different rules and regulation for each country. Only accountants or lawyers specialized in the employment rules of each country can give you appropriate advice.
All Others
If you are resident alien for tax purposes, all above applies to you for the tax year in which you are in that status.
If you are a non-resident alien for tax purposes in the U.S., you can become a tax resident of the visiting country under the same rules as above. However, when it is time to do your tax return, you might want to look into whether there are tax treaties between the visiting country and the country where you were previously a tax resident. Generally speaking, that would be the country where you lived for at least 183 days before you came to the U.S. You need to check the residency rules for that country to know for sure.
Last Updated: April 7, 2009
