Should I Pay Taxes on Payment Received via Payoneer: Navigating Global Tax Obligations

In a world where payments can be sent and received swiftly and globally, paying taxes on those transactions can be confusing. Given the global nature of transactions facilitated by platforms like Payoneer, the question often arises – should I pay taxes on the money I received on Payoneer, and who do I owe taxes to?

Understanding the Nature of the Transaction

The answer to this often comes down to why the money was sent, rather than how it was sent. This is a crucial point that helps in understanding the tax implications. All countries have detailed tax laws on what attracts taxes, and these laws can vary widely.

United Kingdom Examples

If you sell household goods you bought for your own use and no longer need, and you accept payment via Payoneer, you do not pay tax. If you sell goods you bought for resale as part of your business, you need to pay tax on the profit. If you act as a contractor and get paid by Payoneer, you may need to pay company corporation tax or income tax depending on whether you have set up a company. If you sell goods as part of a trade and make over the annual threshold, and that item attracts VAT (value-added tax), you need to pay VAT on the sale.

These examples illustrate the complexities of tax obligations, which can be further compounded by factors like the minimum threshold of income below which no tax is levied, and the ￡1000 exemption for a side business.

Global Perspective and US Citizens

For anyone dealing with global transactions, the tax laws of the country where you reside play a pivotal role, but the tax laws of other countries also come into play. If you are an American citizen, regardless of where you reside, you MUST pay taxes to the United States. This is based on the principle of citizenship-based taxation, a system that the United States uses, which is currently the only developed country to implement.

According to the Internal Revenue Service (IRS), all US citizens must pay taxes on their worldwide income, which includes income earned abroad. Even individuals like Hunter Biden attempted to avoid this by claiming citizenship in Ukraine, but the IRS identified his transactions and reminded him that he owes taxes on all his worldwide income.

However, it is also important to comply with the tax laws of the country in which you earned the money. In the case of self-employment income over the Internet, this is typically the country where you reside. The United States allows for a tax credit against the foreign income taxes paid to another country, which helps mitigate double taxation issues.

Other Countries and Tax Obligations

While the primary focus might be on the US for American citizens, taxes in other countries can also come into play. For instance, if you are involved in a transaction with a company or individual in a different country, you may need to pay taxes to that country.

It is essential to understand and comply with the tax laws of all relevant countries. This includes:

The income earned and the country where it was earned. Local tax laws and thresholds. Tax treaties and agreements between countries.

Understanding these laws and obligations can help you navigate the complexities of global tax obligations effectively.

Conclusion

While the method of payment (Payoneer, PayPal, bank transfer, etc.) is not the determining factor for tax obligations, the reason for the transaction and the country where you earned the money are crucial. As a US citizen, you are required to pay taxes to the United States on your worldwide income, and you must also comply with the tax laws of the country where the transaction was made. Efficiently handling these obligations involves staying informed about the tax rules of multiple countries and utilizing available tax credits and exemptions.