Cathay Pacific has said that new laws being enforced by the U.S. authorities will mean that it will withhold 30 percent of U.S. pilots’ pay and pass it on to the IRS along with personal information. The decision is being disputed by legal experts in Hong Kong who say that U.S. laws are not applicable in Hong Kong since that country does not have jurisdiction here.
According to some reading of the law U.S. pilots in Hong Kong can even sue the carrier for violation of their contracts. Also, Cathay cannot pass on personal information to a third party without the consent of the concerned pilots.
While a company based in Hong Kong is not legally obliged to withhold the tax and pass it on to U.S. authorities, Cathay said that as it operates flights to the U.S., it needs to comply with the U.S. regulations to avoid other problems. Under FATCA, the U.S. could withhold 30 percent of Cathay’s U.S. income if it did not comply with the rules about withholding pay from U.S. citizens it employs.
The Waiting Game
Many U.S. citizens working abroad are affected by this law. They already have to pay income taxes in two countries. However, if their employers withhold a part of their pay and remit it to the U.S. IRS each month this could cause cash flow problems for them. Moreover, those employees who can claim deductions will have to wait for a refund instead of just paying a lower tax.
This is a serious issue. The politicians have overspent and over obligated and now the hard workers of America, here or abroad, are being asked to foot the bill. It does not matter according to many because they will just spend that money too.
If you work abroad and have to pay income taxes to the U.S. authorities you should consult a tax lawyer who can advise you about the new withholding requirements. This will enable you to plan your tax payments and claim all the deductions you are eligible for.