Non-US citizen freelancing in the US remotely

Question

I'm hoping someone can point me in the right direction. I've spoken to no fewer than 3 accounting firms - one huge international one here in Sweden and they say they're not allowed to advise on international tax laws, and two in the US who never bothered to reply to me after an initial back-and-forth.

I am resident in, and a citizen of Sweden. My primary source of income is freelance work - the vast majority of which is with US clients.

All I want to know is if I'm supposed to be paying tax in the US on my US-earned income (all my income is earned remotely, from Sweden - I've never set foot in the US). I just can't find a definitive answer to this. Some places say I should, and that any US declaration is deductible on my Swedish tax return due to a relief from double taxation clause in a SWE/US tax treaty.

Other places say that my obligation ends by simply providing a W8-BEN form to the US entity who hired me.

All I want to do is pay what I'm supposed to, to the right place but why does it have to be so damn complex? Would really appreciate any pointers in the right direction!

Answer 1

From poking around the IRS website (http://www.irs.gov) it appears as if you will not owe income tax in the United States. I am not a lawyer or a tax professional, so I can't definitively answer this for you.

Most of the information is about nonresident aliens working in the US or having a US spouse.

However, you may find something applicable in this publication from the US Internal REvenue Service.

http://www.irs.gov/pub/irs-pdf/p54.pdf Tax Guide for U.S. Citizens and Resident Aliens Abroad because there is a section discussing tax treaties.

You may have to write (email) the IRS directly with your question.

But from where I sit, it seems to me that the US company hiring you is treating you as a business entity (i.e. a Sole Proprietorship), so it would be handled as a company doing business with a US company.

If your hiring company does not send you a tax form showing your US income, you are very likely in the clear.

edited to add I discovered this paragraph in the publication noted above (on page 16). I think you are NOT obligated to file or pay taxes in the US (emphasis mine):

The source of your earned income is the place where you perform the services for which you received the income. Foreign earned income is income you receive for working in a foreign country. Where or how you are paid has no effect on the source of the income. For example, income you receive for work done in Austria is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City.

Answer 2

For what it's worth, I thought I'd give some follow-up to this. I was finally able to get in touch with a US-based international accountant, and she let me know that in my particular situation I was not liable to taxation in the United States. There can be some edge cases, so of course if in doubt, you should always try and seek professional assistance, but in a nut-shell, if you're not based in the US, and you have no offices, staff, or presence in any way (including advertising) in the US then you are likely to not be tax-liable there (but again - seek professional opinions).

Answer 3

https://www.linkedin.com/pulse/us-companies-can-legally-hire-foreigners-living-other-rich-mba/

"Non Residents"

“As a general rule, wages earned by nonresident aliens for services performed outside of the United States for any employer are foreign source income and therefore are not subject to reporting and withholding of U.S. federal income tax.”

Answer 4

I am not a tax professional but do have a bit of experience with transatlantic issues. I also know a CPA who has experience with international tax matters.

Generally speaking, the rule is that you must file US income tax returns if either:

• You are a US person (anybody physically in the US, or a US citizen or US permanent resident regardless of where they are in the world). In that case, your whole income is subject to US taxation.
• Part of your income derives from the USA. In that case, only the income that came from the USA is subject to US taxation.

You may not have to pay any extra taxes based on the treaty, but you would still have to file a US income tax return.

The big question is whether your income qualifies as originating from the USA. My guess - and that's all it is - is that if you are incorporated, the corporation's income counts as US income, and your own income would simply be a Swedish salary.

Answer 5

I am in a similar situation in Australia and for all I know, you need to fill in W8ECI, and still need to file a tax return at the end of the US financial year. this form apparently can be used for freelancer, this will allow the Payer in US to withhold tax in a graduated tax rate like a US tax resident. Otherwise, you will be deducted eith the full 30% withholding amount before you are paid.