I'm thinking of taking a 1-3 year sabbatical. I won't be working, but it's possible for me to have unearned income:
- Qualified and unqualified dividends
- Short term and long term capital gains
- Traditional IRA to Roth IRA conversions
I plan to be traveling around Europe, Australia, Canada and East Asia, staying medium term 30 - 120 days (depending on the tourist visa allowance and how I'm feeling) in some countries. I'll have a permanent USA address but may be outside of the USA for entirety of the sabbatical.
I've made peace with the USA taxing all forms of income, so I fully expect everything to be taxed as if I stayed in the USA. My next concern would be if I would get double-taxed somehow by foreign countries, or that I have to keep documentation and file a tax return with foreign countries.
Is taxation of unearned income by foreign countries on the tourist visa, when staying a few months at a time at the country, possible? What should I look out for? I'm not looking for country specific advice, but to have a very general idea of if unearned income can be taxed and if so, how it might be taxed, so that I can understand and know if it is something I should be planning.
USA expat and foreign taxes on unearned income
Re: USA expat and foreign taxes on unearned income
You would need to look at the country specific detail, although you say you do not want it. Each country will hold their specific laws as far as time in country and how that applies to tax residency. I would bet 120 day stays would not subject you to tax requirements. Usually PWC and KPMG have country briefs you can find on the internet to explain tax residency for specific countries. Just google Tax Residency and the countries you are considering.
Re: USA expat and foreign taxes on unearned income
I have not heard of any country (at least countries that I would consider visiting) taxing tourists for income.
- Hyperborea
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Re: USA expat and foreign taxes on unearned income
The US will do it - have you been there? Canadians who spend the winter in the US (allowed 6 months) can become subject to US tax. It takes less time than that too if you do it yearly then the 3 year weighted averaging rule will get you. The same can happen to Americans in Canada too.
However, if the OP is staying 120 days or less then they are likely to be ok.
It’s not just that facts don’t seem to matter anymore. It’s that it doesn’t seem to matter that facts don’t matter.
Re: USA expat and foreign taxes on unearned income
Hyperborea wrote: ↑Mon Jul 26, 2021 4:39 amThe US will do it - have you been there? Canadians who spend the winter in the US (allowed 6 months) can become subject to US tax. It takes less time than that too if you do it yearly then the 3 year weighted averaging rule will get you. The same can happen to Americans in Canada too.
However, if the OP is staying 120 days or less then they are likely to be ok.
Sorry. I did not consider the snow bird situation as I don't really view them as tourists. I was writing under the assumption that someone visiting a country using a tourist visa (or via visa-free method such as Canadian and EU citizens coming to the US) as a "normal tourist."
I should have been more careful and said I have not heard of any country (at least countries that I would consider visiting) taxing tourists for income in OP's situation.
I did not know the 3-year rule. Thank you for the information. Looking more into it, it seems that there are also exemptions to this 3-year rule based on a number of factors. In any case, if this situation applies, I wouldn't call them "tourists," but as I said above, I should have written my response better and more precise.