Tax Implications of Working Abroad
Are you a resident of the United States hired to perform in a production being shot in a foreign country and you are uncertain as to the tax implications of this type of work? If so, you are not alone.
As more film productions and locations go global, many U.S. resident actors are faced with tax issues they would not face while working domestically. If you are one of them or are considering accepting work that will take you outside of the United States, keep reading for basic information that may be useful as you navigate your way through various international tax structures.
Foreign withholding taxes and the effects on non-resident performers
Many countries have implemented a withholding tax on income derived from non-resident actors for activities within their respective territories. In general, the term “non-resident” applies when a an actor normally lives and works in one country but travels temporarily to another country to work for a short period of time.
In most instances, foreign withholding tax rules will apply regardless of whether the actor provides services independently or through a loan-out corporation.
What is considered “taxable income”? Some countries impose a tax on all income derived from work within their respective territories, including such direct expenses as travel, lodging and per diems, while others allow for deductions of such expenses.
Following are a few specific examples of the various foreign taxes imposed on non-resident performers:
United Kingdom (UK)
Avoiding Double Taxation
When a performer is subject to foreign withholding taxes, it sometimes can result in the performer being taxed twice, particularly in instances in which a performer is hired as an individual. The end result is that the performer will be taxed once in their home country and once in the foreign country where the work was performed.
To avoid double taxation, U.S. resident performers may take the amount of any qualified foreign taxes withheld during the year as either a foreign tax credit or as an itemized deduction. If you intend to claim the foreign tax credit or deduction, you should make it a practice to request a tax certificate, in your own name, from the payer (employer), which states your earnings and the taxes withheld in the foreign country. If a tax certificate is not available, try to obtain another form of documentation that will verify this information. You then can use either the certificate or document to support any claim for a foreign tax credit and/or deduction in the United States.
To claim the foreign tax credit or deduction, you will need to complete IRS Form 1116 and attach it to your Form 1040 or Form 1040NR; you must itemize deductions on Form 1040, Schedule A, to choose the deduction. More information regarding the foreign tax credit can be found at the Internal Revenue Service website at www.irs.gov/taxtopics/tc856.html.
For More Information
This article is designed to introduce you to the various foreign entertainer taxes and the effect such taxes may have on your work; it is by no means the final word on the issue. See also:
As always, you should consult with your tax adviser or accountant with questions specific to your circumstances.