Is It Smart To Have My Foreign Employer Pay Me In Their Country?

September 4, 2008 8:22 AM

Being a 21st Century kind of guy I find myself now doing long-term work for a few companies overseas (India and the U.K.). I would like to be able to open a bank account in each country and just get the money I need via ATM. I'm thinking that since the dollar sucks it would probably be better financially for me long term. Is this a smart move? How hard is it for citizen of the US open a bank account in a foreign country? Do I have to report that income? And if so will I end up getting taxed twice?
posted by chartreuse to work & money (17 comments total)

Well, you'd pay tax in the country you are paid in first off. That'd be 18% basic rate in the UK, plus tax on interest in the accounts.

Not sure about India.

And if you earned over $80,000 abroad, you'd be liable for tax on money earned over that amount. Plus you'd need to report every penny earned abroad in your US tax return.
posted by Happy Dave at 8:52 AM on September 4, 2008

I can't answer to the US tax issues, but I do know it's bloody hard to open a bank account in the UK without proof of a UK address. Are you after info pertinent to withdrawing money in these countries or just getting paid in these currencies and maximising your return on the exchange rate?
posted by goo at 8:55 AM on September 4, 2008

Based on an earlier thread I looked towards Ireland. AngloIrish was all together happy to have me open a Euro based savings account with them. It's more like an ING account, not a current/checking account though. No debit card, but no minimums either. I started looking into further options (Permanent TSB) but haven't tried yet. The trick seems to be to ignore the website and call or email and ask about US citizens. For AngloIrish I needed to get my bank to fill out a form and stamp it with their bank stamp (used to cancel checks, I think). They'd had to do that for loans before but never an account application, but AngloIrish was happy with it.

With Ireland you'll need to apply for DIRT redemption. I haven't looked at avoiding claiming the income with IRS. It isn't new income for me anyway but having an offshore account as is seems like enough of a flag that I want to avoid doing anything else suspicious.
posted by jwells at 8:56 AM on September 4, 2008

You get credit for tax paid in other countries toward your US income taxes, though it's not necessarily a wash--you may still owe some US income tax as well.

And of course you report all the income you earn in other countries on your US income taxes. Unless you like going to court with the IRS.

See an accountant.


As for the bank account thing, that's just a matter of filling out paperwork. It's not at all difficult to open a bank account regardless of your citizenship.
posted by Sidhedevil at 8:58 AM on September 4, 2008

If you have an account at a bank with branches in the UK (like HSBC, for instance), you can open a UK account via your US bank branch.

Or you can open an international account with a UK company, like LloydsTSB.
posted by Sidhedevil at 9:03 AM on September 4, 2008

I'm thinking that since the dollar sucks it would probably be better financially for me long term. Is this a smart move?

Currency isn't a very good investment, and it's debatable whether or not keeping cash in euros or some other currency is a better idea than keeping it in dollars. Some say that the dollar will continue to fall, others say that it has been artificially pushed down and will eventually correct. Basically, holding cash in any of the major currencies is relatively equivalent, and if you want to actually invest it rather than spend it you should go with real investments such as stocks and bonds.

How hard is it for citizen of the US open a bank account in a foreign country? Do I have to report that income? And if so will I end up getting taxed twice?

It's possible, but slightly more of a hassle than opening a US bank account. And yes, you will need to report the income, and you will get taxed on it. The details on how much or how little you will need to pay in taxes vary depending on your situation, but in general you're not going to be saving any money on taxes. You should talk to a tax expert about what options would be best for you, but in general a foreign bank account doesn't have too many benefits over a normal US one.
posted by burnmp3s at 9:06 AM on September 4, 2008 [1 favorite has favorites]

Done this - it is entirely possible. Visit a local branch in each country in person, with lots and lots of ID. They will probably need a couple of weeks to check you out, if you don't have a US account with the same bank. It helps if the bank knows you, so Sidhedevil's suggestion of HSBC is a good idea.
In the UK, you will need to fill out a tax-exemption form, as otherwise your account will be assessed for tax by the UK government. You can manage the account online, with most UK banks. But expect to receive slightly lower interest rates on savings accounts - most of the more competitive accounts have specific exclusions for non-residents. I expect the situation is similar in India. In the US, you will need to file a "foreign account interest" tax form with your normal tax return, so make sure that you keep all of your statements of interest received. It is not a big deal here (the US) and not normally a cause for audit - you can do this with Turbotax.
Do be aware however, that there are fairly strict rules about how much currency you can import or export from a country. This includes bank balances. So if you let the account accumulate cash, you may not be able to transfer it to the US easily, at a later date.
posted by Susurration at 9:57 AM on September 4, 2008

I did a significant amount of work for a Tokyo company last year (I don't live in Japan). Half of the time the client deposited money into a Japanese account (I used to live in Japan, which is why I had the account - I would never be able to set up a bank account there without residency), and half the time funds were wired to my bank account in the country where I live. I can't access my Japanese bank account from here - I have to travel to Japan to do banking, or ask someone else to do it. And even if I timed the transaction according to the twists and turns of currency exchange rates, it's really expensive to purchase any foreign currency other than the USD in Japan.

However, when payments were wired to my bank account here, I usually took a hit. In one transaction I basically lost about $3000 (these were large contracts, at least for me). But I needed the money to pay a few bills, and I haven't figured out an easy option for transferring large amounts of money quickly from Japan to the country where I live.

Luckily, my country has a tax treaty with Japan - all overseas income must be (voluntarily) declared, but there is no tax by Japan on that overseas income as long as I don't have Japanese residency (and as long as I'm paying tax on the income).

But if I continue to do work with these folks, I will most likely get the money wired directly to my home bank account. It's just too complicated.
posted by KokuRyu at 10:38 AM on September 4, 2008

you don't want an Onshore account in the UK (and it would be very hard to get without proof of fixed UK address). You'd be better off with an Off-Shore account in Jersey (an island off the UK Coast) or somewhere similar.

I'm currently living in the UK but not a citizen, so I can have all my income paid into an offshore Bank account and then I don't have to pay Tax on the Interest. (as Long as i never bring the money that is earning interest into the UK).

ALso, I think its a lot easier to get a Jersey account from abroad.


Regarding currencies: in a way you are in a 'safer' position by keeping your money in different currencies (as your currency position is 'hedged') however - if you are just goign to eventually spend it all in the USA then - this hedged position could actually be exposing you to greater Currency risk? if that makes sense? - perhaps it deosn't.
posted by mary8nne at 10:43 AM on September 4, 2008

Maybe you're right, maybe you're wrong, but the dollar is no longer a one-way bet.
posted by Kwantsar at 10:50 AM on September 4, 2008

UK banks are often horrible even if you have a UK address. You can try Lloyds TSB. Jersey sounds like an interesting suggestion. But are you sure want the money in pounds? I mean, Euros are great, you can imagine retiring to Spain, Portugal, Croatia, etc. But you'd never choose to live in England. I'm not sure the pound serves as an effective hedge either, tracks the dollar somewhat.

If you have family in India, then sure keep some money there for retirement investing, helping relatives start businesses, etc. India also makes for some interesting investment opportunities, if you see their currency improving. If your crazy, maybe you could be paid there, buy stock there, have the stock certificates mailed here, and eventually sell them on an American exchange. No idea if that works.

Is your employer eating the charges from conversion? If not, you still might find their rates better than yours. I mean, you can use sites like xe.com to move money yourself, saving on bank rates, but your employer can get better rates from them if they have multiple contractors abroad. So why not ask your employer to use them?

See also my old question on this topic (and it's tags).
posted by jeffburdges at 12:28 PM on September 4, 2008

My father-in-law who was born in and lived in India until he was 25, whose parents still live in India, and who travels there at least twice a year acted like it was a big deal when he found a bank that would open an account in his name in India. Not sure what you should take from that info, but that's what I got.
posted by Slarty Bartfast at 1:43 PM on September 4, 2008

1st) Find out what fees your bank is currently charging you. Tell your bank that you are considering switching to a foreign bank, ask if they offer any helpful services.

2nd) Ask XE.com & co. what their rates are for your volume of transfers. If your employer has more foreign consultants, also ask if their rates might be significantly lower.

3rd) Discuss the options with your employer once you have the above numbers. They might jump at the chance to pay their foreign consultants more by using non-bank services. If not, you may still need their help opening a bank account.

Btw, you can use a foreign bank account either to move money by a service like XE.com or merely to hold that money and disburse it by bank card.
posted by jeffburdges at 1:48 PM on September 4, 2008

It sounds like you're planning to keep the money in a foreign currency account and withdraw money using an ATM from that account in the US. That's going to lose you a lot of money because the bank charges a huge percentage for each currency conversion. I only have experience with a rupee denominated account that I withdrew money from in the US but the amount of money involved was really large.
posted by peacheater at 2:27 PM on September 4, 2008

You can research the various transaction costs. Credit cards were better than ATMs, and even competitive with specialty currency services, but many credit card companies have hiked their rates from 1% to 3%. ATMs are still usually better than ordinary bank wire transfers (maybe 2%, not sure).

Anyway, I suspect that a company with foreign consultants would happily use financial services like xe.com that reduce the cost of transfers. Chances are they have some potential foreign transactions, like buying equipment, that are not so flexible about paying bank costs themselves.
posted by jeffburdges at 4:55 PM on September 4, 2008

In short: what you want to do is possible, but it's not beneficial to you unless you're super rich.

I wanted to do this as well, because I receive checks in pounds, Euros, and other currencies, and I thought it might be a good idea to have bank accounts in each country so I could do direct deposit instead of having to deposit checks in my US account.

As it turns out, very few banks are willing to open accounts for non-residents, and the ones that do (HSBC, for example) have some hefty fees and requirements. For example, BNP Paribas (France) will give you a checking account, but you must deposit 8000 euros into a low-interest "holding account" which secures the checking account, and you can't touch the 8k until you close the account. HSBC's maintenance fees for checking accounts are so high that I would be losing about 3-5% of my total account balance every month for no reason.

In the end, I found a US credit union who would deposit international checks with no holding period, no fees, and a direct conversion into USD based on market rates. They also only charge a 1% fee for ATM withdrawal, so it has been great to use them for everything. Plus I don't have to worry about paying taxes in foreign countries or reporting foreign bank accounts to the IRS (which you must do if the balances exceed 10k). I hear that most credit unions are just as easy to work with, so it might be something to explore.
posted by helios at 5:32 PM on September 4, 2008 [1 favorite has favorites]

You can get your payments via an ATM, but without getting a bank account, by signing up for a debit card from Payoneer, and having the people who you are working for pay you via the site. You should be able to get the Payoneer card through eLance or a similar outsourcing site.
posted by lsemel at 11:39 PM on September 4, 2008