# Switching from US Office to UK Office - Where to take signing bonus?



## TickTock (Apr 13, 2016)

Hi everyone -

Thanks in advance for the advice... 

Situation: US citizen taking a job with a UK-based firm. I will start in the US office next week and move to the UK after 2 months. They have given me the option to receive the signing bonus (~$40K) in the US right after I start, or in the UK after I move over there. 

What's the best move for me tax-wise? Based on some quick research, my initial thought is to take it in the US, since if I take it in the UK I'll be taxed on it there + in the US. 

Other info - base salary is $150K or so. Dual citizen with an EU country. 

Thanks


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## Nononymous (Jul 12, 2011)

I would take it mid-Atlantic, during your flight over, thus avoiding any tax.


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## iota2014 (Jul 30, 2015)

Nononymous said:


> I would take it mid-Atlantic, during your flight over, thus avoiding any tax.


Au contraire, if I'm not mistaken. Both countries tax worldwide income, and FEIE wouldn't apply. Double taxation. 

OP, why not take it in whichever country you intend to live in longterm - so at least you get some value from tax paid.


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## Bevdeforges (Nov 16, 2007)

As a US citizen, you'll always have to declare it and pay tax on it on your US returns. Not sure of the treatment for FEIE purposes anyhow. And as already said, once resident in the UK, you'll have to report worldwide income there, too. So ultimately, you could be looking at paying the tax in your country of residence at the date of receipt of the signing bonus, and then using the tax treaty and/or tax credits to cover in the other country.

Where they pay your bonus (or your salary for that matter) doesn't affect its taxability on either side.
Cheers,
Bev


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## TickTock (Apr 13, 2016)

Thanks for the responses, everyone. 

Am I correct in that even if I move to the UK halfway through a tax year, I will still be taxed in the UK on worldwide income for the first half of the year once I file? 

Either way, it sounds like the decision is really a wash and I should decide based on other factors, not tax. 

Thanks!


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## BBCWatcher (Dec 28, 2012)

Nononymous said:


> I would take it mid-Atlantic, during your flight over, thus avoiding any tax.


No, that doesn't work. Income received/earned in international waters or airspace is not "foreign" in the U.S. tax code.

I think the question is whether this signing bonus income would be classified as foreign earned income for purposes of the Foreign Earned Income Exclusion. It would if received in the U.K. (after arriving in the U.K.) for U.K. employment....

....But it doesn't matter, or at least it shouldn't. The U.K. tax rate is likely to be comparable to or a bit higher than the U.S. tax rate on that income.

I think I'd choose to take the income sooner rather than later (since there's some time value to money) and with the possibility (but certainly not guarantee) that the U.K. won't tax that income, on the bet that the hypothetical U.K. tax rate would be higher. That income will also help you qualify to make at least nondeductible Traditional IRA contributions back in the United States for you and your spouse, i.e. it'll be U.S. earned income for those purposes (I assume).

I don't think this'll be a gigantic, life changing difference either way, but I think I'd lean toward taking the income in the U.S.


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## BBCWatcher (Dec 28, 2012)

iota2014 said:


> Double taxation.


Nope. Both countries have foreign tax credits, and they also have social security and tax treaties. The absolute worst case is the total tax will be the higher of the two countries' tax rates on that income, and there's a possibility of doing better than that.


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## Bevdeforges (Nov 16, 2007)

TickTock said:


> Thanks for the responses, everyone.
> 
> Am I correct in that even if I move to the UK halfway through a tax year, I will still be taxed in the UK on worldwide income for the first half of the year once I file?
> 
> ...


Just be careful - the US has a different tax year than does the UK. The US taxes based on a calendar year and the UK on an April to April tax year (I think it's April 6th to April 5th). 

I would also check the rules about that signing bonus to see whether or not it is eligible for exemption under the FEIE. If there is any sort of provision stating that you have to remain with the company for a fixed period of time after you start, that could influence the treatment. (And, because it's connected to your UK employment, I would suspect the UK tax people would want to assure their part of the take somehow, even if paid in advance of your move.)
Cheers,
Bev


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