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Paying Foreign Taxes
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I am booked to speak for an Indian company in Denver. I was just informed that Indian tax law requires me to pay 15% of my total fee to the Indian government. So, my question is twofold:
- It seems odd to me given that the event is in the USA and I am a non-resident of India that I would have to pay a government tax. (Most EU nations have a form which can be notarized to prove you are a non-resident and thus not subject to their taxes.) Does anyone have specific experience speaking to Indian companies and dealing with the 15% tax levy?
- For those of you who speak internationally or speak regularly for international firms, do you have a system by which you increase your fee to absorb the tax levied, or do you deal with the tax and take it as a business expense?
— Lu Ellen Schafer
- An Indian client told me to write Net Payable on my invoice in order to get my fee without them taking out the tax. That info is ten years old but I have been doing it ever since and have not had an issue.
- I don’t see why you should have to pay their tax. You may have to give them a Residency Certificate like you have done with other European clients. That is what I do.
— Steven Howard
Any taxes you pay to a foreign government can be used as a tax credit on what you owe the IRS. There are some additional forms you’ll have to file to claim the credit, but any tax person can provide you with the appropriate forms.
— David Lim
I state upfront my fee EXCLUDES any India withholding tax.
— Bill McCurry
My experiences . . . Speaking in UK, Canada, New Zealand, Australia and Portugal . . . I discuss w/clients that their investment is $X plus reasonable expenses such as airfare (identify if anything beyond back of bus cheapest), hotels, ground transport, food, printing handouts, A/V needs, and all taxes or fees due to their local government. Amazingly I have never had any issues arise about taxes, never paid anything except to Uncle Sam.
— Jim Frazier
While I’m not familiar with India law, the logic of it is clear enough. They can’t tax stuff that happens outside of India. BUT, if you live in India, it might be treated as India income, which they could then touch.
One of the things I run into is that there are LOTS of experts out there who really aren’t. If you were informed by the company, they may not really understand how the law works outside of India -- they’re only used to how it works in India.
Alternatively, the COMPANY might have to pay a tax (kind of like US use tax), but that doesn’t mean YOU have to pay the tax if you’re not there and the service is performed here.
- Ask them to show you the actual Indian law that specifies this.
- Ask them to explain to you how they can do this in the US?
- Ask to talk to their chartered accountant (as CPAs are known outside of the US)
— Alex Brown
I am going through a similar experience with Azerbaijan. They have an 18% value added tax (VAT), due on just about any sale or professional services performed in the country. As I understand it, the VAT is like a US state sales tax, due on all purchases or sales of certain types of items. Unlike US sales tax, VAT often applies to services like speaking.
You can generally deduct it as "foreign taxes paid" on your income tax (check with your accountant to be sure). Some countries might have a way to get a refund of VAT paid after you leave, but that policy may not apply if you have provided the services to someone else of that country.
Some of these programs are designed primarily for shoppers who are purchasing items in the country, and who want a refund of the VAT paid for their purchases. You can check with an accountant familiar with the particular country to see what programs are available. You might find that you are simply unable to get that money back.
How to deal with it on rates? Negotiate! Setting appropriate allowances for travel expenses is critical when going to an unfamiliar place.
Sometimes you might need to ask for a premium speaking rate, to cover the multi-day travel and recovery times involved in going from the US to Asia or India. You should factor in local VAT to ensure that you are left with a net payment that makes your speech worthwhile financially to you. Foreign buyers might resist paying a premium, but they most will understand that your published rates might not apply for very long-distance engagements. If they are not able to understand your needs, you may need to walk away from the deal.
— Janelle Barlow
If you don’t push back on this, they will do exactly as they please.
I would insist that whatever taxes need to be paid in India are picked up by the company. It strikes me as pretty outrageous that you would pay tax on work done in the U.S.
I always book my foreign work as net taxes, so they pick up that tax themselves. I do know it is possible to deduct that tax against your U.S. taxes, but none of this is particularly easy.
Just indicate your terms. You may not get the work as a result, or just assume you are speaking your fees minus 15%. If you are willing to do that, then no problem. But pushing back is required to make it work exactly the way you want.
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