Non Resident Alien Tax

[Eldubb]

Hi All,

I'm an Australian living in Turkey but i work currently as a contractor for a US company based in Los Angeles. I've been told by my Turkish Accountant that if my US company pays me as an employee instead, I will be tax exempt in Turkey and the US company would withhold my taxes. This would be better for me as currently Turkey takes about 35% of my income because I earn in USD and therefore i reach the higher tax brackets very quickly. There is a Tax Treaty with the US and Turkey, and the US would withhold less than 20% if i were an employee.

My US company told me that I cannot be an employee unless i can fill out an i-9 form (Employment Eligibility Verification) - which i do not meet the requirements.

Is there another way for me to lower my taxes here? Can i open an account in Estonia or Georgia or something?

 

[Larin]

You are clearly not a US employee (as your company has clearly pointed out). As you are a freelancer based in Turkey. Therefore you pay taxes in Turkey. The only way to lower your taxes would be to establish a company and reduce your taxable income by subtracting certain eligible expenses. Barring that your other option is to leave Turkey and settle in a lower-tax jurisdiction.

 

[Eldubb]

I know i am not an employee currently, but why can i not become an employee of a US company? Are you telling me no US company hires NRA employees who work remotely from other countries? That doesnt make sense

 

[joffreylol]

my guess is that you would need to have US work permit in order for US employer to hire you and that's why you aren't eligible

 

[Sols]

I know i am not an employee currently, but why can i not become an employee of a US company? Are you telling me no US company hires NRA employees who work remotely from other countries? That doesnt make sense

Correct. They are not employees. Instead, they are contractors, which it sounds like is your current arrangement. Non-resident employment is very complicated. For example, your US client might have to register as an employer in Turkey and pay Turkish social security contributions and other payroll taxes. There can be other complications, such as figuring out if payroll taxes are due in US.

Is there another way for me to lower my taxes here?

It's a question best asked to a Turkish tax adviser. However, I'm not aware of any meaningful tax saving methods in Turkey. Make sure you optimise deductions and take advantage of all possible incentives. But aside from that, Turkey is a high tax jurisdiction with a shoot first, ask questions later mentality to enforcement.

Don't live in Turkey if you don't want to pay Turkish taxes.

Can i open an account in Estonia or Georgia or something?

Won't help. Those companies become tax resident in Turkey and have to comply with Turkish taw law, same as a local Turkish company. Of course, there is a chance you will get away with it. But do you really want to risk fines, penalties, and even Turkish prison just to save on taxes.

 

[Larin]

I know i am not an employee currently, but why can i not become an employee of a US company? Are you telling me no US company hires NRA employees who work remotely from other countries? That doesnt make sense

As @joffreylol mentioned to be a US employee you will need to have a US work permit. US companies can hire full-time employees abroad, but they would need to do that either by opening a local company, or using a local payroll processor (employer of record). In either case, you would be a Turkish-based employee and they would have to ensure that they are compliant with all of the local taxes, just like any Turkish company.

 

[Eldubb]

Thanks for everyone's input.