Learn about Taxes While Working Abroad

Learn about incurring payroll taxes, including Social Security, and other tax implications while performing international activities for Columbia University.

Details

Although taxes are imposed on Columbia work internationally just as they are imposed for work in the U.S., precisely which taxes are owed is often less clear. University departments should work with the Office of General Counsel (OGC) to seek the advice of local legal counsel or other local experts on tax exemptions and the application processes.

It is particularly important to consider foreign tax requirements for:

  • operations with Columbia employees spending more than 90 days in a country without a tax treaty with the U.S., or more than 180 days in any country (see the IRS page on Tax Treaties for additional information)
  • programs that hire staff locally in an international location; or
  • programs that generate revenue abroad (including sponsored funds that leave the country of origin).

Foreign taxes paid by employees may be offset, at least in part, by reductions in U.S. federal taxes due to the foreign tax credit, foreign earned income exclusion, foreign housing exclusion, and/or foreign housing deduction. In general terms, University units and staff working internationally should carefully consider:

  • Personal Income Taxes and Withholding (U.S. and Foreign)
  • Payroll Taxes (Including Social Security)
  • Program and Grant Revenue and Purchases

For assistance with taxes, please contact the Tax unit in the Office of the Controller.

Columbia and/or its employees may incur foreign payroll taxes for work abroad. These may include taxes for:

  • Social security or comparable pension or benefits plans
  • National health care;
  • Unemployment insurance;
  • Workers’ compensation;
  • Housing funds;
  • Severance funds; and
  • Other taxes.

In most countries, each tax is calculated as a percentage of gross income (up to a defined ceiling). Each tax may be “employee-paid” (reducing net income), “employer-paid” (increasing employment cost), or a hybrid.

Unless they are employed by a separate host-country entity, U.S. citizens or permanent residents working overseas are typically subject to U.S. FICA taxes (i.e. social security and Medicare) instead of, or in addition to, host-country payroll taxes.

A small number of countries have so-called “totalization agreements” with the U.S., which clarify social security tax requirements for cross-border employees. Where no totalization agreement exists, it may be necessary to pay social security taxes in more than one jurisdiction.

For additional information on these agreements refer to the U.S. Social Security Administration’s website International Programs and Resources.

Columbia’s practice is not to provide tax advice to employees. Employees working overseas should consult their personal tax advisors with respect to their individual tax obligations.

United States

The U.S. taxes its citizens and permanent residents on worldwide income. Columbia University employees who are U.S. citizens or permanent residents must file U.S. tax returns even if all their income is earned abroad. However, individuals working or taxed abroad may benefit from certain tax deductions and credits such as:

  • the foreign tax credit (see IRS Pub. 54 – here is the link to Pub. 54) for foreign taxes paid; and
  • the foreign earned income exclusion, foreign housing exclusion, and foreign housing deduction (see IRS Pub. 54 – here is the link to Pub. 54) for those who reside or are present in a foreign country for most or all of a tax year.

For more information, see the IRS page on U.S. Citizens and Resident Aliens Abroad.

Employees on a U.S. payroll who expect to qualify for the foreign earned income exclusion may file IRS Form 673, which allows Columbia not to withhold U.S. federal taxes from their pay. There are also residency considerations at the state (and potentially the city) level that differ from the federal regulations. Again, employees are advised to consult with a tax professional to discuss their individual circumstances and filing obligations.

Employees on a U.S. payroll who are not residents of New York and who are working outside the U.S. may file a New York Non-Residency Declaration, so that Columbia will not withhold New York state taxes from their pay. Refer to the New York State Department of Taxation and Finance for additional details.

Foreign Countries

Individuals working overseas are often subject to foreign income taxes, even if their salary is paid in the U.S. In many countries, as in the U.S., the employer is responsible for withholding income taxes from pay, so tax payment is a shared responsibility between Columbia and the employee. There are two personal tax issues to consider:

  • Is Columbia (or a related entity) responsible for withholding taxes from an employee’s pay; and
  • Is the employee responsible for paying taxes?

In some countries, both conditions apply; in others, only the second one; in a few, neither. In most countries, employees based abroad only trigger tax liability after a certain length of stay in country. It is usually dictated by the amount of time in country for any reason, not the number of work days. Often, that threshold is at least 90 days, and in countries that have tax treaties with the U.S. (see the IRS page on Tax Treaties for additional information) the threshold for U.S. residents is generally 180 or more days in a year. For certain occupations, the threshold may be longer; for example, some treaties have a provision allowing professors to teach in country for up to two years without becoming a tax resident.

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