International tax law governs how much taxes must be paid by:
- United States Citizens receiving income from foreign countries, and
- Foreign Nationals and Foreign Corporations receiving income in the United States
If you are a U.S. citizen, you are taxed on any income that you earn whether it is earned in the United States or abroad. Generally, the rules for income, estate, gift and estimated tax are the same whether you are living in the U.S. or abroad.
You also must file additional documents with the IRS if any of the follow is true:
- Are a shareholder of an international corporation
- Receive large gifts from a foreign person
- Own part of a foreign trust or receive disbursements from a foreign trust
- Are receiving interest on foreign bank accounts
Your taxes depend on what kind of foreign national you are: resident alien or non-resident alien. A foreign national is a resident alien if he or she:
- Has a green card, or
- Has been physically present in the United States for 183 or more days during the current tax year, or
- Chooses to be a resident alien for tax purposes.
If a foreign national does not meet one of the above three criteria, then he or she is a non-resident alien:
- Resident Aliens – Resident aliens are taxed exactly the same way United States citizens are.
- Non-Resident Aliens – Non-resident aliens are subject to different taxes than a resident alien. Non-resident aliens’ U.S. business income is taxed just like a U.S. citizen’s would be. They are also taxed 30% on all other sources of income generated in the United States (i.e. interest payments).
Foreign corporations also must pay taxes on any income generated in the United States, including business income and other sources of income (i.e. investment returns).
Tax law by itself is very complex and frustrating. International tax laws can be even more confusing. A tax attorney or financial lawyers can help you understand how international tax law affects you or your business. If you ever face an audit because of international taxes, a lawyer can help you get through the process.