Things to Know About Expat Taxes

We all have heard of individuals residing in foreign countries for their work or other arrangements but not everyone has heard of the related taxes. Rather, the terms such as expat and expatriates are unknown to the majority of the taxpayers but not anymore.

Here’s a quick and perfect guide making sure you know and understand all about the expat taxes; just continue to read.

• Understanding expatriates and expat taxes
  Firstly, expatriates are the individuals who reside in other countries of the world other than their origin country. Secondly, they reside on a permanent or temporary basis due to their work or other assignments.

Now, the income that these expatriates earn becomes a taxable income for their origin country, and the tax on this income is called expat tax.

• How is expat tax calculated?

Expat tax is calculated on the basis of the parameters listed below:

• The active Income Tax Act in the country.
• The residential status of the expatriate
• PF and SSA contribution
• Deemed tax resident policy
• ESOP or the employee stock option plan
• Daily allowances
  
  

• Be careful of double taxation

Since income is categorized into different categories such as allowances, it gives rise to the situation of double taxation. Hence, people should be careful while filling their returns on taxes and ensure they are paying double taxes on the same income.

For more information, you may like to read section 9 (1)(ii), section 80 (C ), or rule 15 of the Income Tax Act of India.

• Tax treaties

Given the fact that you are residing in a foreign country, being paid for the work being done, and filing tax in the country of origin, this is not accepted as it is by other nations. And that’s how tax treaties came into the picture.

Undoubtedly, these treaties can be overwhelming with data but it is the agreement that satisfies taxation in both countries. Therefore, make sure you are aware of the tax treaties and avoid any distress.

• How can you save on expat taxes?

As a general savings rule, a portion of the income goes to the savings or the associated plans. They could be FDs in bank accounts, life insurance premiums, and investment in ELSS, repayment of a loan, or even the tuition fees of your children.

All these investments can help you save on expat taxes provided you generate a valid payment receipt for these.

• Track your travel time

For how long do you think you will be considered an expat? Is it from the day of arriving in a foreign country or from the date of joining at work? Is there any cap on the minimum number of days you need to stay in a different country to be called an expat by your origin country’s laws?

Now, you must be wondering right? It’s okay if you don’t know all of this as of now but it is in your best interest to be aware of these conditions before moving out. However, if you are already working in a different country reach out to an experienced consultant at Taina FATCA solutions and rest assured, you are covered well.