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Disclaimer

  • The information provided below is not legal advice and should not be relied upon as such or presented to others, including employers or prospective employers, as legal advice or official agency policy. The information is intended to serve only as generalized guidance to family members of U.S. government employees serving at posts overseas. All employees and their family members have a duty to respect local law in the country in which they are located overseas, including any local laws with respect to taxes, professional licenses, or certifications for work performed by family members while overseas. Family members who need legal advice on their individual circumstances should retain the services of a local lawyer or tax expert.

Important:

  • 3 FAM 4125 prohibits eligible family members (EFMs) from undertaking employment activities outside the mission (e.g. outside of the embassy or consulate), that do not meet with Chief of Mission approval. This would include telework for non-USG employers.
  • The Office of the Legal Advisor cannot advise on foreign law. Accordingly, EFMs seeking guidance regarding local tax or other legal obligations should feel free to consult a local lawyer or tax expert.

Telework Information:

General Guidance

While telework has become increasingly mainstream, there remains a lack of consistent legal treatment at either the international or local level. EFMs reside in more than 190 different countries, and GCLO is unable to provide specific guidance as to any particular country’s respective laws and regulations. Even though many countries do not have established policies, regulations, or legal frameworks in place to address telework, EFMs have a duty to respect local laws and regulations where they are in force. The information that follows is intended to serve as generalized guidance to EFMs serving overseas.

The EFM should establish a telework arrangement with their employer. This arrangement can designate the hours, schedule, and the “home office” of the employee. The “home office” would essentially represent the physical location of the employer to which the employee and the job are connected; the “home office” would be considered the location of the hiring, compensation, and supervision of the teleworker.

The “home office” of a family member teleworking for a U.S. employer from overseas would be the employer’s location in the United States. A telework arrangement for a U.S. citizen and employee of a U.S. employer should consider all of the following criteria:

  • Employee retains an address of record in the United States.
  • Employee is on the payroll of the U.S. employer.
  • Employee is paid in U.S. Dollars into a U.S. bank account.
  • Employee’s duties directly relate to and benefit the operations of the U.S. employer.
  • Employee has no professional role or interaction on the local economy at his/her overseas location, including:
    • Employee’s work site/space is in the employee’s personal residence and NOT in the office of a local branch of the employer or at a locally rented business space.
    • Employee’s duties do not involve business on the local economy on behalf of the U.S. employer.
    • Employee does not employ staff related to their work in the host country or possess equipment that poses security and liability issues.

Tax Implications

EFMs seeking guidance regarding their local tax or other legal obligations should feel free to consult a local lawyer or tax expert.

Additionally, EFMs seeking guidance regarding any tax exposure for themselves or their employers should feel free to consult a local tax expert. GCLO does not provide guidance to private employers. EFMs may also wish to consult any bilateral tax treaties that the United States may have with the host country.  To learn more about the impact of bilateral tax treaties on foreign tax requirements for Foreign Service family members working on the local economy or teleworking, please feel free to review the IRS Bilateral Tax Treaties.

Chief of Mission Approval

It is important that EFMs interested in telework contact their post’s Human Resources Office to understand any post-specific guidance. All family member employment outside the mission, including telework, requires Chief of Mission approval via the EFM Employment Outside the Mission Action Memo.

All requests for approval of employment outside the mission must comply with 3 FAM 4125:

3 FAM 4125  OUTSIDE EMPLOYMENT AND ACTIVITIES BY SPOUSES AND FAMILY MEMBERS ABROAD

(TL:PER-491;   12-23-2003)
(Uniform State/USAID/Commerce/Foreign Service Corps-USDA)
(Applies to Foreign Service, Foreign Service National, and Civil Service)

  1. A spouse or family member of a U.S. citizen employee may accept any outside employment or undertake other outside activity as described in section 3 FAM 4123 in a foreign country unless such employment:
    1. Would violate any law of such country;
    2. Could require a waiver of diplomatic immunity deemed unacceptably broad by the Chief of Mission; or
    3. Could otherwise damage the interests of the United States as determined by the Chief of Mission in that country.
  1. A spouse or family member should notify the principal Administrative Officer at post before acceptance of intended outside employment.
  2. A spouse or family member accepting employment abroad should bear in mind that he or she loses civil immunity from judicial process for activities relating to employment and would be subject to the payment of taxes on income from non-diplomatic employment.

Frequently Asked Questions (FAQ) about Teleworking Overseas

  1. Do I need to pay taxes to the host country government when I work outside the mission?
  2. If I telework overseas for a non-U.S. government employer, do I or my employer need to pay taxes to the host country?
  3. Can the Department of State provide documentation for my employer regarding my, or their, tax liability for telework overseas?
  4. Where can I find information on foreign-earned income and taxes?
  5. Do I need permission from the Chief of Mission to work and/or volunteer on the local economy?
  6. Where can I find resources on telework?
  7. Is a work permit required when self-employed and working out of U.S. Government (USG) leased or owned quarters?
  8. Does language from the Vienna Convention on Diplomatic Relations mean EFMs seeking telework overseas and/or their employers will not face any tax liabilities?

1. Do I need to pay taxes to the host country government when I work outside the mission?

  • EFMs have a duty to comply with the laws and regulations of the host country, including any laws with respect to payment of appropriate taxes. As a general matter, if EFMs are working outside the mission in the host country, pursuant to a bilateral work agreement or de facto work arrangement, they have a responsibility to pay local taxes.
  • Specific laws and regulations regarding payment of taxes differ by country, and the Department cannot provide advice on the laws of foreign countries.
  • EFMs seeking guidance regarding their local tax or other legal obligations should feel free to consult a local lawyer or tax expert. They may also wish to consult any bilateral tax treaties that the United States may have with the host country. To learn more about the impact of bilateral tax treaties on foreign tax requirements for Foreign Service family members working on the local economy or teleworking, please feel free to review the IRS Bilateral Tax Treaties.
  • IRS International Service: Some IRS offices have an international desk that may be of assistance.
  • Tax accountants familiar with diplomat and expat tax codes advertise in the American Foreign Service Association’s (AFSA) Foreign Service Journal. Also, the Association of American Foreign Service Worldwide’s (AAFSW) Livelines listerv can be a source of recommendations. Please visit the AAFSW website for more information.
  • The AFSA Tax Guide available on AFSA’s members-only website also provides updates to tax codes and changes relevant to Foreign Service families.
  • Finally, you can visit the Social Security’s website for a list of Social Security Totalization Agreements to prevent or reduce double taxation on social security.

2. If I telework overseas for a non-U.S. government employer, do I or my employer need to pay taxes to the host country?

  • EFMs have a duty to comply with the laws and regulations of the host country, including any laws with respect to payment of appropriate taxes.
  • EFMs interested in teleworking overseas for a U.S.- or third country-based employer should be aware that the host country may consider teleworking to still be work in their country, and may require work authorization, payment of taxes, etc.
  • Even if the host country exempts an individual with privileges and immunities who is teleworking in country from payment of taxes, the EFM’s private employer may have separate and distinct tax burdens from the individual worker.
  • EFMs seeking guidance regarding tax exposure for themselves or their employers should feel free to consult a local tax expert. They may also wish to consult any bilateral tax treaties that the United States may have with the host nation. To learn more about the impact of bilateral tax treaties on foreign tax requirements for Foreign Service family members working on the local economy or teleworking, please feel free to review the IRS Bilateral Tax Treaties.

3. Can the Department of State provide documentation for my employer regarding my, or their, tax liability for telework overseas?

  • Unfortunately, no. The Department cannot advise on the tax laws of foreign countries as they apply to private employment or private employers. Such laws and regulations may differ by country, and the Department cannot provide advice or documentation to EFMs or their private employers regarding their circumstances or tax exposure.
  • For employers seeking confirmation of an EFM’s diplomatic status, the EFM should in the first instance reach out to the Human Resources Office at the mission to request this information. Please note that a diplomatic visa is not evidence of a particular entitlement to privileges and immunities. In addition, diplomatic status does not equate to exemption from payment of taxes in the host country if the EFM is either working outside the mission or teleworking there. EFMs and their employers are encouraged to consult a local legal and/or tax expert to determine what, if any, tax liability may be incurred by teleworking there.

4. Where can I find information on foreign-earned income and taxes?

  • According to the IRS, the foreign earned-income exclusion, the foreign housing exclusion, and the foreign housing deduction are based on foreign-earned income. For this purpose, foreign earned income is income you receive for services you perform in a foreign country during a period your tax home is in a foreign country and during which you meet either the bona fide residence test or the physical presence test. For more information on this exclusion and these tests, please go to the IRS Foreign Earned Income Exclusion page.
  • The American Foreign Service Association (AFSA) produces a comprehensive and detailed tax guide available on their members-only website specifically geared for members of the Foreign Service, whether serving at home or abroad.

5. Do I need permission from the Chief of Mission to work and/or volunteer on the local economy?

6. Where can I find resources on telework?

  • There are over 500 EFMs who telework around the world. Because there is a large variance in what each host country may permit and prohibit, GCLO strongly encourages family members to reach out to the Human Resources Officer and Community Liaison Office (CLO) Coordinator at post to inquire if there are any restrictions for telework. They should be able to clarify if there are other family members currently teleworking. Email GCLO at GCLOAskEmployment@state.gov for contact information for the HRO and CLO at your post.
  • All Foreign Service family members who are teleworking should notify the principal officer of their employment activities. Please refer to the EFM Employment Outside the Mission Action Memo.

7. Is a work permit required when self-employed and working out of U.S. Government (USG) leased or owned quarters?

  • Work that is limited to the confines of the U.S. mission community does not require work authorization. For telework, including self-employment and/or freelance business, that is not limited to the U.S. mission community, if the work includes activities that have a connection to the host country or involves local residents, a work permit will likely be required. If telework, including self-employment and/or freelance business, has no connection to the host country, it is less likely that a work permit will be required. The Department cannot advise on the law in any particular host country and cannot say for certain whether that host country will believe a work permit is required. Either way, the EFM should notify post management and can use the EFM Employment Outside the Mission Action Memo in order to ensure that the activity does not violate any host country laws, require a waiver of immunity, or could otherwise damage U.S. interests. For reference see 3 FAM 4120.

8. Does language from the Vienna Convention on Diplomatic Relations mean EFMs seeking telework overseas and/or their employers will not face any tax liabilities?

  • Different countries may take different interpretations as to whether telework constitutes working in the country such that local laws apply, including any requirements regarding the payment of local taxes. Please note that the Department cannot advise on the local law of a particular host country, and EFMs and their employers are encouraged to consult a local legal and/or tax expert to determine what, if any, tax liability may be incurred in the receiving state by teleworking there. The Department recommends that payment from telework work should be made to a U.S. bank account and taxes should be paid in the United States. To the extent the EFM enjoys privileges and immunities in the host country, they may not enjoy civil or administrative immunity with respect to any actions arising out of this work.

U.S. Department of State

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