One of the most common questions I get from people building businesses abroad isn’t where to incorporate.
It’s this:
“Okay… but how do I actually pay myself without blowing up my taxes?”
And it’s a fair question. Because forming a foreign company is the easy part. Paying yourself correctly—legally, cleanly, and in a way that doesn’t trigger surprise taxes in three countries—is where most nomads get tripped up.
Do it wrong, and you can accidentally:
Trigger U.S. self-employment tax
Create unexpected local tax residency
Lose the Foreign Earned Income Exclusion
Or turn a clean structure into a compliance nightmare
This isn’t about loopholes or gray areas. It’s about intentional structure.
If you’re earning globally, living abroad, and thinking long-term, the way you pay yourself matters just as much as where your company is registered.
Let’s walk through a clean, legal framework that a lot of experienced global entrepreneurs use—and why it works.
Why “just transferring money” is the fastest way to get in trouble
A surprising number of people do this:
They form a foreign company
Money comes in
They wire funds to their personal account
They call it “owner draw” and move on
That might work… until it doesn’t.
Because from a tax authority’s perspective, that looks like:
Self-employment income
Or unreported wages
Or personal income with no structure
And once that line is crossed, fixing it later is painful.
The goal isn’t to hide income.
The goal is to classify income correctly from day one.
The core idea: connect your income strategy to FEIE
For U.S. citizens abroad, one of the most powerful (and misunderstood) tools is the Foreign Earned Income Exclusion (FEIE).
If you qualify—either by:
Being physically outside the U.S. for 330 days, or
Establishing bona fide residence abroad
—you can exclude up to ~$130,000 (2025) of earned income from U.S. federal income tax.
But here’s the key word:
Earned.
Dividends don’t count.
Owner draws don’t count.
Random transfers don’t count.
Salary does.
Which is why structure matters.
The clean structure many nomads use
One common, compliant framework looks like this:
A foreign operating company (Georgia, Malta, Belize, etc.)
A U.S. C-Corp holding company
You as an employee, not a freelancer paying yourself
This isn’t exotic. It’s boring—and that’s a good thing.
Here’s how it works.
Step-by-step: how the payment flow works
1. You form a foreign operating company
This is where the business actually runs. Clients pay this company. Revenue lives here.
2. You create a U.S. C-Corp holding company
The U.S. entity owns shares of the foreign company. This gives you a clean bridge between foreign profits and U.S. tax rules.
3. You are hired as an employee of the foreign company
Not as a contractor. Not as an owner draw.
As an employee.
4. You pay yourself a regular salary
Paid directly from the foreign company’s bank account
Set below the FEIE limit
Paid consistently, like real payroll
5. You claim FEIE properly
You file Form 2555 and document:
Physical presence or residency
Your salary as foreign earned income
That salary—up to the FEIE cap—can be excluded from U.S. federal income tax.
6. Excess profits are handled separately
If the business earns more than your FEIE-covered salary:
The foreign company distributes profits to the U.S. C-Corp
The U.S. C-Corp pays you qualified dividends
Those are taxed at capital-gains rates (≈ 23.8%), not ordinary income rates
Two income streams.
Two different tax treatments.
Both legal.
Why this structure works so well
This setup does a few important things at once:
✔ Avoids self-employment tax
You’re an employee, not a sole proprietor. That alone can save tens of thousands over time.
✔ Maximizes FEIE benefits
You’re using FEIE exactly as intended—on earned income.
✔ Gives dividend flexibility
You don’t force all profits into salary. You choose how and when to distribute excess income.
✔ Creates legal separation
Your personal finances stay cleanly separated from business operations.
This is what “tax efficiency” actually looks like: classification, not concealment.
What you must do to stay compliant
This structure only works if you respect it.
That means:
Keep payroll clean
Salary must come from the foreign company—not your personal account, not the U.S. entity, not random transfers.
Track your physical presence
FEIE is evidence-based.
You need logs, travel records, or tracking tools that show you qualify.
File the boring forms
Yes, they matter:
Form 2555
Foreign corporation reporting (5471 / 8865 as applicable)
Proper payroll documentation
Skipping paperwork is how good structures fall apart.
Maintain real corporate separation
Separate bank accounts.
Separate books.
Separate decision-making.
If everything blurs together, tax authorities will blur it too—and not in your favor.
A simple example in real numbers
Let’s say Emma is a U.S. citizen running an online agency abroad.
Annual revenue: $150,000
She forms a foreign operating company
A U.S. C-Corp holds ownership
Emma pays herself:
~$130,000 in salary (under FEIE)
That salary is excluded from U.S. income tax
The remaining profit:
Flows to the U.S. C-Corp
Is paid out as qualified dividends
Taxed separately at lower rates
Result:
Clean structure
Predictable tax outcome
No accidental self-employment tax
Nothing hidden. Nothing improvised.
When this strategy may not make sense
This isn’t universal.
It may be overkill if:
You earn well below the FEIE threshold
Income is inconsistent or seasonal
Your business model doesn’t support payroll
Local country rules override employment treatment
Some countries still impose local social taxes even if the company is foreign. That always needs to be checked.
This is a framework, not a copy-paste solution.
The real takeaway
Paying yourself from a foreign company isn’t about avoiding taxes.
It’s about avoiding mistakes.
Most tax disasters don’t come from aggressive planning. They come from:
Mixing personal and business money
Misclassifying income
Assuming “no one will notice”
A clean structure gives you:
Predictability
Optionality
And the ability to scale without fear
If you’re earning globally, living abroad, and planning beyond next year, this isn’t something to wing.