5 Tax-Related Tips for Expats Living Abroad

    Adam wake

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    Are you an expat living abroad but have an intention of returning to your native country later? Besides individuals living abroad, many companies also send employees to a foreign land for necessary business processes. Expats are subjected to expatriate taxation that is demanded by their native country. Read on to know some tax-related tips for expats living abroad.


    Definition of an expat 


    An expat is someone who is residing in a foreign country but will eventually return to their native land. Expats can reside in some other country for employment or entrepreneurship purposes. Some ex-pats are those who are looking to lead their lives after retirement in a foreign country. The ex-pats are subjected to tax liabilities even if they have renounced their citizenship. They will have to pay taxes on income earned on foreign land as they are ex-pats and not foreigners.

    5 tax-related tips for ex-pats

    If you are an expat, you should remember these 5 tax-related tips:

    Taxes can differ according to state/country

    Many countries collect taxes from their legal residents even if they are living outside the country. However, the tax rates can differ significantly for expats in different countries. For example, seven states in the USA, including Texas and Washington, do not collect personal taxes. As an expat, it may also subject you to taxes in the foreign land where you are temporarily residing. While looking to earn/reside in a foreign country, expats should choose a tax-friendly location. You can compare the tax rates of different countries/states before shifting there as an expat.

    Contact a CA/advisory firm

    Filing expatriate tax returns can be a hassle if you cannot understand financial statements. You also need to complete the documentation process for expatriate taxation. It can get even more complicated if you are an organization sending ex-pats to a foreign land for business purposes.

    You can partner with an advisory firm that offers expatriate tax services. Many CA firms also have taxation experts that can help you with expatriate taxation. There is no need to waste funds on the training and recruitment of in-house taxation experts. You can simply outsource your expatriate taxation processes to an advisory firm and can slash costs.

    Consider foreign exchange rates before filing tax returns

    As an expat, you will have to pay taxes for income generated from a foreign land. The income generated in a foreign country will be converted into the currency of your native country while filing tax returns. The foreign exchange rates are subject to change and can affect expatriate taxes. Expats should choose their date for filing tax returns wisely. You can use the average exchange rates or look for a day when the exchange rates are better than others. A little research about foreign exchange rates can help you in decreasing expatriate taxation significantly. An advisory firm providing expatriate taxation services can help you in choosing the tax filing date wisely.

    Keep an eye on tax credits and schemes

    Tax credits are relaxations in tax amounts offered by the regulatory authorities. You need to claim those tax credits to lower the expatriate tax return amount. Various tax schemes are launched by governments of different countries to provide a tax relaxation to expats. Many times, there is a due date for claiming tax benefits, and you should keep an eye on it.

    A prime example of a tax scheme is FIFE (Foreign Earned Income Exclusion), launched by the US government. US expats can apply for FIFE to exclude some of their income from taxation. 

    Choose your tax filing status appropriately

    The expatriate tax can differ based on the filing status. For example, the taxes for a married ex-pat will be different from that of a bachelor. Many countries offer tax relaxations to ex-pats that are taking care of a dependant. You can reduce your tax return amount by choosing the filing status appropriately.

    In a nutshell

    Due to the difference in taxation rates in different countries, filing an expatriate tax return can get complex. A firm that offers expatriate taxation services can help you in lowering your tax return amount. Start saving on expatriate taxation now!