Dr. Ecommerce

4 Jul 2001, UK

Dear Dr. Ecommerce:

When a programmer offers his work on the Internet what income tax does he pay and to which country?

Jean-Pierre

Dear Jean-Pierre:

That depends...

Assuming you are a freelance programmer, you pay income tax in the country in which you reside and work - regardless of where your clients are based. You should also note that most countries have special tax forms for the self-employed. Check with your tax office or accountant for details.
If you live in work in two or more countries, perhaps you live in the UK but spend a lot of time on the client's site in France, then you may have to pay some income tax in both countries. You really need to start talking to an accountant who specialises in such situations to ensure you pay your taxes. A good accountant, of course, will help organise the situation to minimise your tax burden.
If you are working full time as a freelance programmer and are earning a substantial income, you may want to think about forming a limited liability company. This can often reduce your tax burden as well as limit your personal liability in the event something goes horribly wrong.
Of course if you are working in several countries, are earning a substantial income and have a really good accountant, you can pay income tax in any country you want! But for goodness sake, don't let anyone know I told you that!

Good luck,

Dr. Ecommerce