Difference between income tax laws: Canada, the United States, and Argentina

[jbeans]

Hi there!!

I'm doing some research about the difference between Canadian and United States income tax laws, and I'm wondering if anyone can offer a little perspective on the topic, but I'd also be interested in knowing what the important differences are between the income tax laws of Argentina and these two countries. It's an interesting topic, but can get intricate and hard to understand.

Thank you in advance!!

 

[ghost]

You are doing comparative Tax Law research on this forum??? The differences between the 3 systems will fill volumes.

 

[jbeans]

No kidding, that's why I'm hoping someone with a little more personal experience in navigating at least two of those could outline the major differences. I don't know any dual/triple citizens of the U.S./Canada/Argentina personally, but I figured that there had to be at least a couple on baexpats.

 

[LostinBA]

No kidding, that's why I'm hoping someone with a little more personal experience in navigating at least two of those could outline the major differences. I don't know any dual/triple citizens of the U.S./Canada/Argentina personally, but I figured that there had to be at least a couple on baexpats.

Like the UK and many other commonwealth countries, Canada taxes citizens and residents based on residence. If you leave Canada and "break all ties", you don't have to file or pay income taxes to Canada. The US has a far more restrictive system insofar as if you are an American citizen or deemed to be a "resident for tax purposes" you must file and pay income taxes. It's an onerous system and means that Americans must continue to file and pay for their entire lives. US "residents for tax purposes" must continue to file and pay until they are no longer considered to be this status. Any non-US person can earn this status by being present on the US over a specific amount of time during 1-3 years. The USA has a little known credit for foreign earned income called the "Foreign Earned Income Tax Credit" that allows you to claim about 80K USD US uax exempt but you're supposed to have paid tax on this money to the tax jurisdiction you earned it in. The laws on this are mirky and no 2 tax attorneys will interpret the IRS tax code the same. I think the IRS wants to keep it a bit confusing. Some do not pay any taxes on that money while others pay the lower of the 2 tax rates...Anyway, this case seems to require that the US have a tax treaty with the country in question. Neither Canada not the USA have a tax treaty in place with Argentina. This means that US citizens would have to file for monies earned here and pay taxes in both jurisdictions (double taxation - no representation...haha, bad joke). The Argentine system seems to have been rewritten to say that after 180 days anyone is considered to be a tax resident and must pay Argentine taxes on worldwide income. However, like most things here, the tax code was so badly written than it can be interpreted 1000 ways from Sunday. If you are never legally considered a resident (ie. you can claim to be a perma-tourist), realistically you will never have to pay.

 

[citygirl]

I agree in general with the above regarding the obligation of a US citizen to pay tax on his or her worldwide income. However, I would add several corrections/comments to the above regarding the foreign income exemption.

1) The Foreign Income Exemption is 92,900 USD, not 80.
2) In addition to that amount, you may be entitled to deduct or exclude certain foreign housing expenses as well as food.
3) You can be entitled to the above if you meet the bonafide residence test or physical presence test in a foreign country and have your tax home in the foreign country.
4) The IRS doesn't go investigating to confirm if you have paid taxes in your foreign country of residence.

Regarding the rest, LostinBa is correct in stating that if you exceed that income threshold, as US resident, you would have to pay taxes on the income earned in Arg as well as paying in the US as there is no treaty. However, I believe you would only pay double on the amount over 92,900 USD.

Example: You earn 100,000 for work performed outside the US. Assuming you meet the requirements, you would be exempt from paying income tax on the first 92,900. The remaining 7,100, USD, you would have to pay federal income tax on. If you are paying income tax in the country of your residence, you would pay the applicable income tax and then on the 7,100, you would have double taxation.

Side note on Argentine income tax which I find interesting (which is far too complicated for me to even attempt to explain - suffice to say, I rely on my accountant here). If your employees make less that 10K pesos a month, the assumption is that the individual will pay and it is up to them to pay their income tax. Once their monthly income exceeds the 10K threshold, the company must withold income tax and pay on the employee's behalf. i guess the gov't is not that confident that the employees would pay?!