Unusual circumstances re: move to Hungary

Hi,

Welcome to the forum!

Having dealt with US visas a few times, I would expect reciprocity in PITA and braindead bureaucracy :-)

You are probably best off staying as a tourist and not locate your job/enterprise here: taxes are crushing and all you get in return is very lousy "free" health care. (free = the time you waste in lines would have bought you far superior service.)

Worse crimes would have lapsed even if you were a fugitive, having actually done the time so long ago should not prevent you from anything anymore as far as I know. The only time I was ever asked for a criminal record in Europe was when I applied for a German public service job.

I hope others here will be able to provide specifics.

Thanks for the response!

And thanks for the info. regarding the taxes.

That said, all I have to do is log onto my computer and I'm "at work". I do contract work for a marketing company. And while their "headquarters" happen to be in the U.S., everything is done over the Internet. So there really wouldn't be anything to MOVE, you know?

I guess my biggest concern is: Am I at some point going to be asked to leave, etc. because I've overstayed? Or can I just keep extending my stay as a tourist?

I'm aware that I may sound like a total moron with these questions, lol. But so much of this is beyond me. Most of the "official" pages I've found are total nightmares to navigate!

Thanks again!

Normally, when you travel to Europe as a tourist you have to show a return ticket within the allowed US citizen Visa time limit of 90 days. If you want to extend your stay you can ask in Hungary for an extension. You will be asked many questions, and you will need to show you have fiscal means to stay in the country among other tasks. It is more difficult to get residency and that normally is started from the US.

Whether you pay taxes in Hungary or the US on your income will depend on your nexus and the nexus of the income. There is a tax treaty between the US and Hungary which covers all the possible income types and what, if any, taxes you pay in Hungary on US sourced income. US citizens have it the worst as the US is the only country in the world that taxes citizens no matter where they live on the planet. And you can not get out of that living abroad. The IRS will want to hear from you each April 15th no matter where you live on the planet.

Since last year Hungary has had a 20% flat tax. Whether that is more or less than what you pay now in the US depends of course on your total US taxable income. The Hungarian VAT (similar to US sales tax) is now 27% (jaw dropping high). And also since last year the law changed (according to my accountant) and even US citizens Hungarian residents have to pay the social health care tax just like any Hungarian if you have any income at all while in Hungary: it no longer apparently matters where that income originates.

Finally, there is no Social Security agreement between the US and Hungary. So if you want to claim Hungarian residence, and are self employed, you have to still pay the US Social Security SE tax as if you were in the US, even if you are not.

I found the Hungarian immigration office fully competent. The paper work to fill out was significant, and I had to go back several times, but the office personnel were very helpful explaining what I lacked and what I needed to do.

Regarding your "past" that is difficult to say. When I first came to Europe (Switzerland) I had to get a background check from the police in my home state and I was finger printed by the police in Switzerland so I am now registered in the Interpol network. As I was moving from Switzerland to Hungary, I simply had to sign a statement saying the Hungarian Government could request any such information as they deemed necessary to complete my application (which of course could include background checks). How your case will affect any application I can not say, but you may try calling the Hungarian Embassy in the US to see if they can provide information.

klsallee wrote:

... US citizens have it the worst as the US is the only country in the world that taxes citizens no matter where they live on the planet. ...

Philippines also does the same.

I believe in the USA, you have an USD 80K tax free allowance p.a. when overseas. That's quite generous, so "electing" to still be US resident for tax purposes might well be more advantageous than the lower thresholds over this way. I think to qualify for the 80K exemption, you need to be physically outside the USA for 11 months.

fluffy2560 wrote:

I believe in the USA, you have an USD 80K tax free allowance p.a. when overseas. That's quite generous, so "electing" to still be US resident for tax purposes might well be more advantageous than the lower thresholds over this way. I think to qualify for the 80K exemption, you need to be physically outside the USA for 11 months.

It is called a Foreign Earned Income Exclusion, not a free allowance, as it is voluntary and you have to apply for it by filling out form 2555. But by filing form 2555 so you may forfeit the option for taking a foreign tax credit as they are mutually exclusive. Which option is better depends on the sources of your "income". For example, Form 2555 only includes "Foreign" income. Income from US sources, nor money made from rentals, dividend or other sources declared by the IRS as not "earned" are not included no matter where they are sourced. So if most of ones "income" is from rental property outside the US, one may be better off taking the foreign tax credit.

The Foreign Earned Income Exclusion rate varies each year as adjust for inflation (currently at $92,900 for 2011) and the total can be further reduced. For example, if your employer provides housing, that is included as part of your "foreign income" by the IRS and counts for your total foreign income. So some US Expats end up with actually less than than the allowed maximum as an actual "salary" exclusion.

In short, electing to take Foreign Earned Income Exclusion takes some review of one's income sources and can be complicated.

And the US Congress often considers eliminating foreign income exclusion so it is not a forever guarantee for US expats.

If you are a US citizen you are a US citizen for tax purposes by default no matter where you are. Else, there are rules one must follow regarding tax nexus both form the IRS and from your resident country. One can simply not live in Hungary and "elect" to be just taxed in the US. Only a spouse of US citizen/resident can "elect" to be a US resident for tax purposes, and that is only for the IRS, it has no bearing on the spouse's local national tax status and obligations.

Finally, the 11 month rule only applies if you are not claiming residency in a foreign country and this is called the Physical Presence Test. If a US citizen/resident claims residency outside the US that person can be in the US for extended periods without care to the 11 month period by applying under the Bona Fide Residence Test.

fluffy2560 wrote:

Philippines also does the same.

I checked. You're right. Thanks, I learned something today.

klsallee wrote:

fluffy2560 wrote:

Philippines also does the same.

I checked. You're right. Thanks, I learned something today.

I've worked in the Philippines a couple of times, so that's how I knew.

klsallee wrote:

... One can simply not live in Hungary and "elect" to be just taxed in the US. Only a spouse of US citizen/resident can "elect" to be a US resident for tax purposes, and that is only for the IRS, it has no bearing on the spouse's local national tax status and obligations. ..

Yup, I believe also that the tax treaty will probably say that if the US tax is lower than that which would have applied locally, then the locals tax office have the right to claim the difference, although I expect they rarely do for ordinary individuals. 

What I meant about "electing" to be a US tax resident was (legitimately muddying the waters) by doing things like spending 1/2 one's time in the USA, 1/2 in Hungary where all sorts of rules and subjective taxman type decision making comes into play, like the 183 days in country, domicile, residence and ordinarily resident, centre of one's social and family life, etc etc.

The US I think probably does not have the concept of domicile, resident and non-resident for tax purposes. The UK has these and it's often a source of confusion for everyone.

fluffy2560 wrote:

I believe also that the tax treaty will probably say that if the US tax is lower than that which would have applied locally, then the locals tax office have the right to claim the difference

It actually depends on the type of income among other issues. See Article 20 of the US-Hungarian tax treaty when Hungary exempts US sourced income from tax or not (note: what is considered US sourced income is detailed in the Treaty and US tax code and I will not get into that here).

http://www.irs.gov/businesses/internati … 87,00.html

fluffy2560 wrote:

What I meant about "electing" to be a US tax resident was (legitimately muddying the waters) by doing things like spending 1/2 one's time in the USA, 1/2 in Hungary where all sorts of rules and subjective taxman type decision making comes into play, like the 183 days in country, domicile, residence and ordinarily resident, center of one's social and family life, etc etc.

Ah. Got it. Okay.

The two tests for US Citizens as explained above are for the Foreign Earned Income Exclusion. If one exists, a tax treaty provides additional specifics in case of conflict on foreign income on US Citizens living abroad (i.e. having two domiciles, where is the center of vital interests, etc.). In the absence of a treaty, US Citizens are responsible for paying US taxes on their world wide income. Getting credits for foreign taxes paid can reduce US tax burdens on US Citizen residents with foreign income to help avoid double taxation.

Companies have different tests and rules.

See for example Articles 4 and 5 of the US-Hungarian tax treaty.

fluffy2560 wrote:

The US I think probably does not have the concept of domicile, resident and non-resident for tax purposes.

Yes, it actually does. For example, there are US tax forms for non-resident aliens who owe US taxes, such as Form 1040NR. But how that differs from UK law and legal definition or concepts I can not say since I do not know UK tax law.

At 70,000+ pages and growing the US tax code covers just about everything. Often multiple times. And in different ways.