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Payments from the US to translators based in Europe
Thread poster: Ketty Federico

Ketty Federico  Identity Verified
Italy
Local time: 14:16
Member (2011)
German to Italian
+ ...
Sep 24, 2013

Hi everyone,

disclaimer to my question: I might be stating something wrong, I will report just what I was told and ask you to help me verify whether this is true or not.

Until now, I have always only worked with clients and agencies based in Europe (I am an Italian translator based in Germany). Also when I was working with clients overseas, they always also had an european subsidiary or partner company for invoicing purposes.

I now have contacts with some US based agencies and more than one colleague told me that "all payments received from overseas are TAX FREE" and that you can receive them on your paypal/bank account and these are not subject to any taxation.

I found this pretty strange, so...

Questions:

1) Do you know whether this is true or not, and could you provide some legal support to this?

2) Does this mean that those payments do not need to be declared?

I hope that I am not saying something completely wrong (but my colleagues sounded quite sure about that) and I thank you and appreciate your help.


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Nicole Schnell  Identity Verified
United States
Local time: 05:16
English to German
+ ...
It means that no taxes will be withheld by your US-customer. Sep 24, 2013

You still have to declare all of your income, no matter where it came from.


HTH


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Sheila Wilson  Identity Verified
Spain
Local time: 13:16
Member (2007)
English
+ ...
My experience Sep 24, 2013

I've had one US client who paid me substantial amounts, and they got me to sign a W8 form to register me as a "non-US" supplier (can't remember the exact term). This meant that they didn't have to withhold a significant portion of my fee to cover possible US taxes. But it didn't mean my local government didn't want to get its hands on the money!

I've worked occasionally for other agencies, involving much smaller amounts - just like working for local companies except that the payment often arrives as USD. Tax is no different - most tax authorities around the world are interested in your world-wide earnings; the government of the place you register as working from (i.e. on your invoices) wants as big a cut as possible.


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Ketty Federico  Identity Verified
Italy
Local time: 14:16
Member (2011)
German to Italian
+ ...
TOPIC STARTER
Your answers... Sep 24, 2013

... are exactly what I expected to get. I can't see myself why it should work differently, but as the others around me were saying something different and I couldn't find any help on the web. I thought that I had my Proz colleagues who are a precious resource and source of information.
I also had to sign this W8 paper once and what I understood is exactly what you said: they wouldn't withold taxes on their side (of the world).


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Tomás Cano Binder, BA, CT  Identity Verified
Spain
Local time: 14:16
Member (2005)
English to Spanish
+ ...
Of course they are NOT tax free!! Sep 25, 2013

Who said such thing?

In Europe no money you earn or receive is tax free (well, maybe some state lottery is tax free for a certain period of time). Any amounts you invoice to non-EU customers (US-based or from any other location) have to be included in any tax returns/tax statements you do depending on your location and nationality.

Even if you are paid via Paypal and the money never touches a bank account, that money is NOT tax free and tax authorities have access to Paypal's information if and when they need to, so the safest for your peace of mind is to promptly declare that money too and pay taxes for it.


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Tomás Cano Binder, BA, CT  Identity Verified
Spain
Local time: 14:16
Member (2005)
English to Spanish
+ ...
Find better friends as tax consultants... Sep 25, 2013

Ketty Federico wrote:
... are exactly what I expected to get. I can't see myself why it should work differently, but as the others around me were saying something different and I couldn't find any help on the web.

It will be sad to hear to your friends complain about the fines they had to pay (when they are discovered with black money in the hand). Even if they are not caught today, they will some day. Tax authorities always take their time, but they'll find you alright. For your peace of mind in the long run, and also to contribute to the wellbeing of the community around you, do the right thing.


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Marie-Helene Dubois  Identity Verified
Spain
Local time: 14:16
Member (2011)
Spanish to English
+ ...
lost in translation? Sep 25, 2013

A lot of people mix up (income) tax with VAT.
One thing is whether or not you have to charge VAT and quite another is whether or not you have to pay income tax (you always have to do the latter).
I reckon your friend meant that you didn't have to include VAT in your invoices. I can't imagine anyone thinking that income may be tax free, regardless of where it comes from. Whoever it is probably got VAT (which is in fact a tax) and income tax mixed up.


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Ketty Federico  Identity Verified
Italy
Local time: 14:16
Member (2011)
German to Italian
+ ...
TOPIC STARTER
Thanks! Sep 25, 2013

Well, of course before posting this question I was asking the person concerned whether she didn't mean VAT... but apparently she didn't.
It's sad to make a fool of oneself but when people sound so convinced and sure of what they are saying, one starts wondering whether one didn't miss out on something THAT big.
Fiscal fidelity is something which I take very seriously and I'd be happy to hear more colleagues (and I am talking of people spread all over Europe) do the same... Unfortunately this is not always the case, and it's more common to hear them talk about sneaky tricks and how to avoid paying stuff.
I quote an Italian economist saying "Le tasse sono belle" ("Taxes are wonderful") and I think the same as this wouldn't only allow us to work for a better society and better services, but also to gain more respect for our profession.
I do hope this culture spreads a bit more around, especially considering the hard times we are experiencing (also because of this leaks in the system).


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Tom in London
United Kingdom
Local time: 13:16
Member (2008)
Italian to English
I agree but Sep 25, 2013

I strongly agree with everything that has been said. One should always pay one's taxes and not be constantly looking for ways of avoiding them (if you don't pay your taxes, then I will end up having to pay more).

HOWEVER I believe that under certain circumstances, U.S. citizens who are temporarily living abroad are exempt from paying tax on any income they receive in their country of temporary residence.

I'm not sure how that works but I've had a number of American friends (U.S. academics temporarily posted to Italy for a year) who have told me they were benefitting from it.

If that's all true, then it may go some way to explaining the original post in this thread.

[Edited at 2013-09-25 09:25 GMT]


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xxxnrichy
France
Local time: 14:16
French to Dutch
+ ...
It's much simplier than that Sep 25, 2013

Ketty Federico wrote:

I now have contacts with some US based agencies and more than one colleague told me that "all payments received from overseas are TAX FREE" and that you can receive them on your paypal/bank account and these are not subject to any taxation.


What they mean is that there is no income tax or whatever other tax withheld at the source in the US.


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Melanie Nassar  Identity Verified
United States
Local time: 15:16
German to English
+ ...
US taxes Sep 25, 2013

As far as I know, a US citizen or resident who spends at least 6 months of the year abroad is not subject to US income tax up to a certain level of income (about $90,000 now, I think, so I'm safe this year).

We are, however, subject to social security taxes and of course, income tax in the place of residence. This is not a direct response to the original poster, but to Tom in London.


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Łukasz Gos-Furmankiewicz  Identity Verified
Poland
Local time: 14:16
English to Polish
+ ...
US taxes Sep 25, 2013

Yes, the IRS with its colonial attitude towards the rest of the world wants you to file its forms just because your client happens to be a US entity.

At least grocery shops in Europe don't have to file W8's just because their cash-paying clients have American accents!

The sad thing is you may also need to apply for an EIN. Just don't apply for the normal TIN, as that will take forever to get and formalities such as sending them the ORIGINAL of your ID documents (!!!) or copies certified not even by a notary (they don't accept that) but the very government body which issued your ID document (and those bodies in other countries may not even have any sort of procedure for issuing such certified copies). On the other hand, as long as you're an entrepreneur, they don't mind giving you an EIN in a phone conversation that lasts a grand total of 10 minutes.

So get an EIN, not a TIN, if they force you to apply. But sometimes they won't. It seems that some requirements that exist on papers aren't enforced in practice (such as the requirement to have a US-issued number).

Somebody tell the IRS to shove that attitude please.

And there must be some way for American companies to purchase services abroad without needing to withhold 30% tax, come on! How can the economy even survive that kind of thing?

[Edited at 2013-09-25 15:27 GMT]


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Nicole Schnell  Identity Verified
United States
Local time: 05:16
English to German
+ ...
Erm, Łukasz. Sep 25, 2013

Łukasz Gos-Furmankiewicz wrote:

Yes, the IRS with its colonial attitude towards the rest of the world wants you to file its forms just because your client happens to be a US entity.

At least grocery shops in Europe don't have to file W8's just because their cash-paying clients have American accents!

The sad thing is you may also need to apply for an EIN. Just don't apply for the normal TIN, as that will take forever to get and formalities such as sending them the ORIGINAL of your ID documents (!!!) or copies certified not even by a notary (they don't accept that) but the very government body which issued your ID document (and those bodies in other countries may not even have any sort of procedure for issuing such certified copies). On the other hand, as long as you're an entrepreneur, they don't mind giving you an EIN in a phone conversation that lasts a grand total of 10 minutes.

So get an EIN, not a TIN, if they force you to apply. But sometimes they won't. It seems that some requirements that exist on papers aren't enforced in practice (such as the requirement to have a US-issued number).

Somebody tell the IRS to shove that attitude please.

And there must be some way for American companies to purchase services abroad without needing to withhold 30% tax, come on! How can the economy even survive that kind of thing?



This is not correct. Technically, the IRS has nothing to do with this form. The W8-BEN stays with the client and will never be forwarded to the IRS. Should the outsourcer be audited - and only then - this signed form serves as a proof that the translator is neither a US citizen, nor a US resident and that no taxes needed to be withheld. Has to do with our money laundering laws.

Also:
The German translator does NOT need any EIN or TIN. US American EINs and TINs are for American-based employers and companies only. Anything else is a fairytale.


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Łukasz Gos-Furmankiewicz  Identity Verified
Poland
Local time: 14:16
English to Polish
+ ...
... Sep 25, 2013

Nicole Schnell wrote:

Also:
The German translator does NOT need any EIN or TIN. US American EINs and TINs are for American-based employers and companies only. Anything else is a fairytale.


People from other countries report needing and getting EINs and TINs because of being so required by their US clients (or platforms that manage sales of e.g. copyrights), and the form does come from the IRS (along with an instruction that beats rocket science as far as I am concerned, not to mention that it orders you to classify yourself according to US business organisation types, not those from your jurisdiction), even though it stays with the client.


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Nicole Schnell  Identity Verified
United States
Local time: 05:16
English to German
+ ...
Maybe they were instructed by a less than sufficiently informed PM Sep 25, 2013

Łukasz Gos-Furmankiewicz wrote:
People from other countries report needing and getting EINs and TINs because of being so required by their US clients (or platforms that manage sales of e.g. copyrights), and the form does come from the IRS (along with an instruction that beats rocket science as far as I am concerned, not to mention that it orders you to classify yourself according to US business organisation types, not those from your jurisdiction), even though it stays with the client.



I wouldn't be surprised.


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