EP NowStoreAcademySupportCommunityProducts by Country
Blog Home

The Production Accountant’s Guide to Foreign Taxation

Answers to common questions about tax treaties, tax codes and how paying foreign taxes can impact US taxation if your production is filming abroad.
April 18, 2023

Becky Harshberger

It’s a big world out there. Filming in a foreign country opens up exciting opportunities to seek out unique scenery, take advantage of incredible incentive programs, and tap into top-notch talent. But before your production decides on where to roll cameras, it’s critical to understand how foreign taxes may impact your production.

As is most often the case with anything related to taxes, foreign taxes – or taxes paid to a foreign country – have the potential to get complicated quickly. In this post, we’ll look at some nuanced rules that will help productions plan ahead to accommodate successful international filming. We’ll also talk about special considerations that may impact decisions regarding the hiring of talent, managing the filming schedule and managing your payroll. 

Foreign tax basics

Like the US, many countries collect taxes on employee wages, property rentals, purchases and other transactions. The first thing you need to learn about foreign taxes is where to look for answers. Enlisting the help of EP’s team of tax experts is the obvious choice, but if you’re striking out on your own, looking for your destination’s foreign tax treaty is a good place to start. Tax treaties will answer high-level tax treatment questions and will define basic terms (but won’t go into the fine print).

In addition to understanding what a tax treaty is and how it works, there are a few other things you should understand about how foreign taxes impact productions.  
Below, I’ll explain:  

  • How tax treaties work
  • What happens when tax treaties expire
  • What to do when you’re in a country that doesn’t have a tax treaty
  • How to find answers to tax questions that a tax treaty doesn’t address
  • How foreign taxes impact US federal and state tax filings
  • Using loan-out companies in foreign countries

Let’s get started!

Foreign taxation FAQs

What is a federal tax treaty, and how does it work?

The US has a federal tax treaty that covers working in a foreign country for less than 183 days. That means US productions filming in a foreign country for less than 183 days are exempt from having to pay employment related withholding and social security tax.  
This treaty goes into effect when all the following are true

  • A company is employing people who are working for a US-based business
  • That company’s employees are being sent to a foreign location to perform services for the US-based business (the production company)
  • The US-based production company does not have a physical presence, meaning there are no employees or assets that exist or work full-time in that foreign location

When all of these conditions are met, there are typically no foreign withholdings required on those services while the tax treaty is active.

Of course, there are some exceptions:

  • Some treaties have a clause stating that tax withholding is required for specific actors 
  • In-front of camera actors, stunt actors, directors, and sports athletes are commonly found in production related foreign tax clauses
  • Some treaties include a film credit that requires withholding for non-citizen employees 

What happens when you hit day 184?

At this point, tax treaties no longer apply. If a US production will be in a foreign country for more than 183 days in a rolling 365-day period, the rules of tax engagement will come from the foreign country’s internal tax code. Full employment taxation may be required in this case.

For budgeting purposes, it is important to notify EP in advance if your US production will be filming in a foreign country for more than 183 days, so the tax code rules are applied starting on day one. If foreign taxation is applied after the 183-day mark, the rules are retroactive.

What if the country you’re filming in doesn’t have a tax treaty?

Some countries, for example Argentina, don’t have a tax treaty in place with the US. In this situation, turn to the country’s tax code to learn how they handle foreign tax.

What are the tax implications for a US-based production filming in the UK?

A 20% withholding requirement exists for all US on-camera actors working in the UK. However, if the actor earns less than $20,000 USD they are exempt from paying any UK taxes. Actors can also apply for a tax variation to reduce the tax rate if they qualify.

It is important to note, there is no distinction between income received by an individual and income paid to a loan‐out company. If an actor is being paid as an employer (not using a loan-out), it is EP policy to cease US federal withholding for an individual working in a foreign jurisdiction with a withholding requirement, in order to eliminate double taxation of US taxes and foreign taxes.

There is no withholding for behind-the-camera crew members, so long as they are present less than 183 days. In that case, they would continue to be subject to US taxation.

What is a ‘foreign tax code’ and when I should use it?

Countries that have treaties in place simplify withholding questions, but there are nearly always additional factors that must also be considered. To address these factors, every country has an internal tax code – just like the IRS code in the US – which provides additional information on withholding requirements and tax credit qualifications and information.

Additionally, tax treaties typically only cover how to tax select employment pay types. To ensure proper taxation, look at the country's tax code to find out if and how they tax things like non-residents, box rentals, per diem, hotel, food and travel expenses. Most tax codes and forms are only published in the country’s native language and would best be interpreted by a local tax expert.

Examples of additional information you’re likely to find in the tax code include:

  • Specific withholding rules for certain roles
  • Details on what steps need to be taken to obtain tax credits (i.e., must withhold tax on both cast and crew)
  • Waivers for specific people (i.e., a dual citizen or one who has a second home in a foreign location)

A word of caution: digging into foreign tax codes isn’t something you can confidently rely on Google to do. It's best to consult with a tax or legal advisor.

woman using laptop computer.jpg

The impact of foreign taxes on US taxation

How does the US federal government handle foreign taxes?

The IRS code provides tax exemptions when paying foreign taxes if an individual is an expat -defined as being out of the US for 330 days in a rolling 12-month (365 days) time frame. If you’re out of the country for more than 183 days, but less than 330 days in a rolling 365-day time frame, and you’ve been subject to foreign taxation, you may be double-taxed.

The outcome of this situation really depends on each persons tax situation and the amount of foreign taxes paid versus the amount of US taxes owed.

How does paying taxes in a foreign country affect federal tax responsibility in the US?

US Citizens and Permanent Residents are required to report and pay federal taxes on their worldwide income. However, they may be able to apply a foreign tax credit to the total income on a US federal tax return, which would reduce US federal tax obligations.

The ability to use this credit will depend on each person's tax situation. You may or may not be able to use credit for the full amount of foreign taxes paid in a calendar year (January to December). Check with your tax advisor well before December 31 and make sure that your total foreign and federal tax withholding can adequately cover your full tax responsibility for the year.

How does foreign tax impact US state tax obligations?

Unlike the federal government, states do not have tax treaties with foreign countries. That means your resident state will expect taxes to be withheld from your worldwide income in most cases.

A handful of states – including Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming – don’t collect any income tax. Meaning employees who call one of the states listed above their resident state are not required to withhold state taxes when employed in a foreign country.

Many states are ‘silent’ on wages earned outside of the resident state – meaning they don’t have specific legislation or tax codes that address the topic. In this case, the state defaults to the IRS Code, which specifies that residents are taxed on worldwide income. On the flip side, some states do have a specific tax code that states residents only need to pay taxes on wages earned while physically working in the state. These residents will not owe taxes on worldwide income. Employees who are paid through EP will automatically have taxes withheld or not withheld based on current state legislation regarding how foreign taxation is handled.

Can you use a US loan-out in a foreign country?

Absolutely! But to do so, you need to ensure that the loan-out company is classified by the IRS as an S Corp, not a C Corp. Why? An S Corporation enables the individual working for the corporation to pass foreign taxes onto the owner’s personal tax return by using a credit against their federal tax liability. A C Corporation does not allow foreign tax to flow to a personal tax return—and worse yet, C Corps can’t use foreign tax to reduce US federal tax. Thus, they’re double-taxed.

Foreign tax best practices

To make sure your production is set up for success, please communicate all international production plans with the team at EP as soon as possible. Our tax experts will share the latest information on your shooting location’s tax requirements and will let you know if any changes are needed to best support your production. We’ll also let you know what, if any, foreign taxation is required, help you manage your international payroll, and more!

This blog contains general information we are providing on a subject that may be of interest to you. Nothing in this blog should be considered tax advice. You should consult with your tax or legal advisors regarding the applicability of any of these rules to your specific circumstances and how best to handle them.

Related Content

Expert Advice_Sam Collett

Spotlight: Sam Collett, UK Production Accounting and Incentives Expert

Meet the Senior Partner at FLB Accountants, an Entertainment Partners company specializing in UK media and...
Topic: Spotlight
SQUARE_Step up to Production

EP Partners with PGGB to Deliver Step Up to Production Accountant Programme

Entertainment Partners and PGGB deliver online training programme for new and aspiring production...
Four panelists discuss co-production-square

Unlocking the Myths and Benefits of Co-Production

Learn the difference between an official co-production and PSA, and how to leverage these opportunities to...
EP Newsroom-Thumbnail-PGGB

Million Youth Media Wins The Duke of Edinburgh Film & TV Inclusion Award 2024 at PGGB Talent Showcase

The Duke of Edinburgh Film & TV Inclusion Award presented to Million Youth Media, an organisation offering...
Blue square with white letters and UK flag: Changes to UK Paternity Leave Regulations

Changes to UK Paternity Leave Regulations

Effective March 8th, modified paternity leave to provide more flexibility for UK fathers.
Topic: Alerts

Do the Math: Production Accountant Shortage Equals New Hollywood Careers

“Accounting is usually not the way in” to the film business, says Nancy Rae Stone of the California Film...
Big Ben, London

5 Things to Consider Before Transitioning to the UK’s New AVEC Regime

A comprehensive overview to help determine if you should use the UK’s new incentive regime to fund your...

The Ongoing Push to Stem the Production Accountant Shortage

EP's Jill Hewitt gives Jackie Keast an update on its current training programs to address the industry’s...
Image thumbnail of three female panelists

Payroll Insights for Budgeting Success in 2024

Learn about tax and legislative changes directly impacting production workers and reshaping production...
Man holding two children

A State-by-State Guide to Paid Family Leave

Understanding Paid Family Leave (PFL) programs across the US and their potential impact on production...
Blue tile stating UK announces minimum wage updates

UK Government Announces Minimum Wage Updates

National Living Wage and National Minimum Wage rates increase for 2024.

SXSW Launches in Australia with Premiere of Baz Luhrmann’s ‘Faraway Downs’

Jill Hewitt, production accountant on 'Faraway Downs' attends inaugural SXSW Sydney in support of Luhrmann...
Master Series Thumbnail Square UK Productions

UK Production: Sites, Services and Studios

Learn about UK incentives, infrastructure and production innovation spanning from London to Wales,...

Entertainment Partners Makes Commitment to UK Production with Film & TV Partnership Programme

Find out how EP is partnering with the leading UK training organisations to close the skills gap, increase...
Disability Insurance

State-by-State Guide to Disability Insurance for Production Accountants

A comprehensive overview of State Disability Insurance (SDI) and how these figures impact production...
Entertainment Partners Logo Thumbnail-square

NFTS and Entertainment Partners (EP) Establish Partnership to Support the Future of Film and Television Production

By supporting the National Film and Television School through this new partnership, Entertainment Partners...

NFTS, Entertainment Partners establish partnership

EP the entertainment payroll and production technology company joins as a prominent new Patron of the...

NFTS and Entertainment Partners (EP) establish partnership

The National Film and Television School (NFTS) announces a new partnership with Entertainment Partners...
Georgia Incentives Panel_sq

GA Incentives Insider: Your Questions Answered

Brian Shanaghan, Audits Manager at the Georgia Department of Revenue (GA DOR), addresses the industry's...
UK Right to Work Penalties to Triple in 2024

UK Right to Work Penalties to Triple in 2024

Find out how your production can prepare for the increased penalties for employing a worker who doesn't...
Topic: Legal
EP Blog_SQUARE_Spread of UK Production

Outside of London: How the UK Production Industry Spread Beyond the Capital

Film and TV production outside of London (OOL) is now an integral part of the UK, with world-class media...
Topic: UK
Master Series_UK Incentives Panel_Square

What's Changing in UK Production Incentives

Learn about the recent changes to the UK Creative Sector Tax Credits and how they might impact your next...
EP Blog_SQUARE_UK cultural test

Understanding the UK Cultural Test

Find out whether your film or TV show will pass the UK’s Cultural Test, a key step in qualifying for the...
EP Blog_SQUARE_EP Paymasters

Meet the Paymasters

This National Payroll Week we celebrate the hard-working payroll professionals behind Hollywood's...
Jane Corden, Managing Director, Australia and New Zealand

Spotlight: Jane Corden, Managing Director, Australia & New Zealand Operations

Meet the Australian production accounting and tax incentives expert who is helping EP invest in the future...

HMRC Answers Key Questions on New UK Audio-Visual Expenditure Credit

UK Creative Sector Department weighs in on the interpretation of some of the new legislation and guidance...
Woman using a blue and black calculator

Multi-State W2s: Taking Credit for Work State Taxes

Tax filing guidance for production workers employed in multiple states in the same tax year.
EP Blog_SQUARE_Sustainable UK Studios

The Producer’s Guide to Sustainable UK Studios

Learn how studios across the UK are taking positive steps to reduce their environmental impact.
Topic: UK
Pre-employment Checks to Consider Before Contracting Crew on UK Productions

Pre-employment Checks to Consider Before Contracting Crew on UK Productions

A comprehensive overview of the checks you may like to consider when crewing up on UK productions and what...
Topic: Legal

New BTL Training Program Launches in New Zealand and Australia

Entertainment Partners powered by Moneypenny is set to provide much-needed below the line training...

Production Incentives Update: July 2023

Lights, Camera, Incentives! Exploring the recent changes to Film Incentive Programs across the world.
EP Blog_SQUARE_Changes to UK Tax Credit

Preparing for the Upcoming Changes to the UK Creative Sector Tax Credits

Understanding the UK's Audio-Visual Expenditure Credit (AVEC), Video Games Expenditure Credit (VGEC), and...

What Does UK Government’s Creative Industries Sector Vision Mean for Film & TV?

Find out what the UK government’s new Creative Industries Sector Vision means for film and TV...
EP Blog_SQUARE_UK Virtual Production Space

The Producer's Guide to Virtual Production Space in the UK

A comprehensive overview of virtual production studios which are available to film and TV productions...
Topic: UK
EP Blog_SQUARE_Work v Resident W4

Work State vs. Resident State W-4s: Stay Compliant and Avoid Overtaxation

Key things production workers need to consider to ensure filing the appropriate W-4 in their work and...

Expanding Opportunities Through Training and Capacity Building

Location Offset eligibility requirement for a commitment to training and capacity building remains...

Welsh Film & TV Industry Goes from Strength to Strength as Key Partners Pledge Support

Bad Wolf’s Jane Tranter and other women working in Welsh film and TV recently attended a networking event...

Meet the Director

A conversation with Brian Dannelly ('Saved,' 'Pushing Daisies,' 'Queer as Folk')
Bloomberg tax logo-Newsroom-Thumbnail

Preparation and Tact Are Keys to Promptly Resolving Tax Notices

Preparation is essential to quickly resolving employment tax notices and avoiding often long and...

What Expenditure Qualifies for UK Film Tax Relief?

Find out what constitutes qualifying expenditure under the UK Film Tax Relief.
EP legal and compliance: Proposed changes to IR35 for productions

Proposed Changes to IR35 Rules: What They Mean for Productions

Proposed changes to the UK IR35 rules could end the double-tax headache that has plagued both production...
Topic: Legal

Hundreds Sign Up as Background Actors at Liverpool Registration Day

Entertainment Partners holds open registration day to encourage aspiring film and TV background actors to...

Entertainment Partners Offers Free Accounting & Payroll Courses During WGA Strike

Entertainment Partners, the global payroll and production finance firm, is offering its entire lineup of...

Payroll & Finances

PayrollResidualsSmartStartSmartTimeProduction PortalEP On LocationSmartAccountingEP LiveSmartPOCASHétPayPaymaster Rate GuideEP Residency

Manage Multiple Productions


Additional Services

Subscribe now

Be an industry insider with EP's
newsletters and alerts

LegalPrivacy NoticeSecurity
© 2024 Entertainment Partners. All rights reserved.