Paying yourself from a US entity while living abroad

If you own a US company but live outside the United States, the US tax treatment of what you take out of the company depends on two things: whether you are a US person, and whether the payment is for work or a return on ownership. Get either one wrong and the company can end up under-withholding, missing a reporting requirement, or paying tax it didn't need to.

For a non-US owner living abroad, salary for work performed outside the US is generally foreign-source income with no US income tax or payroll tax, while dividends from a US corporation are subject to 30% US withholding unless a tax treaty lowers the rate. For a US citizen or green card holder living abroad, all income stays taxable in the US, but salary for work done abroad can qualify for the foreign earned income exclusion of up to $132,900 for 2026. In both cases, the country where you live will also tax the income under its own rules.

Two questions decide the US treatment

Before choosing how to pay yourself, settle two facts.

Are you a US person for tax purposes? US citizens and green card holders are taxed by the US on worldwide income wherever they live. Nonresident aliens are taxed by the US only on US-source income and income connected with a US business.

What is the payment for? Compensation for services is sourced to where the work is physically performed. Dividends are sourced to where the paying corporation is organized, so a dividend from a Delaware corporation is US-source income even when the shareholder lives elsewhere.

Everything below follows from those two answers and from the company's entity type.

Non-US owners: salary for work done abroad is foreign-source

If you are a nonresident alien and you perform your work for the US company while physically outside the US, the compensation is foreign-source income. The US generally doesn't tax it, and US Social Security and Medicare taxes generally don't apply, because the services aren't performed in the US.

The company should document your status with Form W-8BEN and keep a clear record (an employment or services agreement) of the role, the pay, and where the work is performed. Work you perform while physically in the US is a different matter. Compensation for days worked in the US can be US-source income, and working in the US also raises immigration questions that sit outside tax.

For a C corporation, compensation paid to an owner is deductible if it's reasonable for the work, which reduces the corporate profit taxed at 21%. That is the main reason non-US owners who actively run their company often prefer compensation to dividends.

Non-US owners: dividends carry 30% US withholding by default

Dividends paid by a US corporation to a nonresident shareholder are subject to 30% US withholding. The company withholds the tax at the time of payment, deposits it with the IRS, and reports it annually on Form 1042 (the company's return) and Form 1042-S (the statement to the shareholder).

An income tax treaty between the US and your country of residence can reduce the rate. Treaty rates differ by country and often depend on whether the shareholder is an individual or a company and how much it owns. To claim a treaty rate, the shareholder provides Form W-8BEN (for individuals) or Form W-8BEN-E (for entities) before the payment.

Dividends are paid from profit the corporation has already been taxed on, so the combination of 21% corporate tax and dividend withholding is often the most expensive way for a non-US owner to take money out.

Loans and expense payments are reportable too

Money can leave a company in ways other than salary and dividends, and each has its own treatment.

Loans to the owner. A loan from the company to a shareholder needs to be a real loan, with a written agreement, an interest rate at or above the IRS applicable federal rate, and actual repayment. A loan that is never repaid can be treated as a dividend, with the withholding that follows.

Personal expenses paid by the company. Personal costs paid from the business account can be treated as constructive dividends, which for a non-US shareholder carry the same 30% withholding.

Form 5472 reporting. A US corporation that is at least 25% foreign-owned must report transactions with its foreign owner on Form 5472 each year. Salary, dividends, loans, and expense reimbursements paid to that owner are all reportable. The penalty for failing to file is $25,000 per form, per year.

Foreign-owned LLCs follow different rules

A single-member LLC owned by a nonresident is disregarded for US income tax purposes by default. The owner doesn't take a salary. Money moves out as distributions, and the tax result depends on whether the LLC has income connected with a US trade or business.

If it doesn't, the owner generally has no US income tax on the LLC's profit. The LLC still has to file Form 5472 with a pro forma Form 1120 every year, reporting transactions with its foreign owner, including contributions and distributions. If the LLC does have income connected with a US business, the owner files Form 1040-NR and pays US tax on that income.

A multi-member LLC with foreign partners is taxed as a partnership, and the LLC must withhold US tax on business income allocated to those partners, whether or not it's distributed.

Nonresident aliens can't be shareholders in an S corporation, so an S corporation election isn't available to a company with a non-US owner.

US owners abroad: worldwide income, with an exclusion for earned income

If you are a US citizen or green card holder living abroad, you file a US return and report worldwide income every year. Where you live doesn't change that. What changes is the relief available.

Salary for work performed abroad. This is foreign earned income. If you meet the bona fide residence test or the physical presence test (330 full days abroad in a 12-month period), you can exclude up to $132,900 for 2026 on Form 2555. Alternatively, you can claim a foreign tax credit for income tax paid to your country of residence.

Distributions and dividends. These aren't earned income, so the exclusion doesn't apply. S corporation distributions and C corporation dividends remain taxable in the US, subject to any foreign tax credit.

Payroll tax. The foreign earned income exclusion applies to income tax only. Salary paid by a US company to a US citizen is generally still subject to Social Security and Medicare taxes, and self-employment income from a pass-through LLC is still subject to self-employment tax. A totalization agreement between the US and your country of residence can assign social security coverage to one country, but not every country has one.

The structure should match where the work happens

How you pay yourself from abroad is mostly decided by facts that are already in place: your tax status, where you do the work, and the company's entity type. The planning room is in choosing between compensation and dividends, documenting that choice, and making sure each payment is withheld and reported correctly on the US side.

Inkle handles the US side for foreign-owned US companies, including the corporate returns and Form 5472 reporting that payments to a foreign owner feed into. Tax in your country of residence is a separate filing under that country's rules.

The bottom line

Living abroad changes how the US taxes money you take from your US company, but it doesn't remove the US from the picture. For non-US owners, compensation for work done outside the US is usually the cleanest route, while dividends carry withholding and every payment to the owner is reportable on Form 5472. For US owners abroad, the exclusion and foreign tax credit reduce income tax on salary but leave payroll tax and distributions in place. Decide the route based on your tax status and where the work is actually done, document it, and make sure the US filings reflect it.

Frequently asked questions

Do I pay US tax on salary from my US company if I live abroad and I'm not a US citizen?

Generally no, if the work is physically performed outside the US. Compensation is sourced to where the services are performed, so pay for work done abroad is foreign-source income for a nonresident alien. Work done while physically in the US can be US-source and taxable.

What is the US withholding rate on dividends paid to a foreign shareholder?

The default rate is 30%. A tax treaty between the US and the shareholder's country of residence can reduce it, and the shareholder claims the treaty rate on Form W-8BEN or W-8BEN-E. The company reports the payment on Forms 1042 and 1042-S.

Can a foreign owner of a US LLC take distributions without paying US tax?

If the LLC is a single-member LLC with no income connected with a US trade or business, the owner generally owes no US income tax on its profit. The LLC must still file Form 5472 with a pro forma Form 1120 every year, and the penalty for missing it is $25,000.

Can a US citizen living abroad exclude salary from their own US company?

Yes, if the work is performed abroad and the owner meets the bona fide residence or physical presence test. The exclusion is up to $132,900 for 2026, claimed on Form 2555. It applies to income tax only, not to Social Security and Medicare taxes.

Can a non-US resident own an S corporation?

No. Nonresident aliens can't be S corporation shareholders. A company with a non-US owner is typically a C corporation or an LLC.

Do I need to report payments to myself on Form 5472?

Yes, if the US corporation is at least 25% foreign-owned or is a foreign-owned single-member LLC. Salary, dividends, distributions, loans, and expense reimbursements paid to the foreign owner are reportable transactions.