Here's an example, using the same figures as above. In this particular example, you would actually be better off by just using the foreign tax credit alone and not even claiming the FEIE. In addition, the foreign tax credit can be applied in some cases against tax on unearned income as well.
So you see that by judiciously combining the FEIE with the foreign tax credit or by applying only the foreign tax credit you can substantially reduce or even get your US tax bill down to zero. Again, this is only an approximate calculation to serve as an example of how the system works. Be aware that if you have been claiming the FEIE in previous years using Form and you decide this year to use only the foreign tax credit you cannot go back to the FEIE for the next six years unless you receive permission from the IRS.
In some cases, you can exclude qualified housing expenses from your taxable income. This exclusion can be calculated using Part VI on Form There are many other aspects to be considered when figuring your US taxes. Among these are the "Alternative Minimum Tax" AMT ; handling of unearned passive income such as interest and capital gains; the foreign housing exclusion for your lodging; earnings of a non-US spouse; business expenses; the possibility of itemizing deductions instead of applying the standard deduction; state taxes in certain US states where you formerly resided; etc.
If you need to consider any of these elements, you would be well advised to consult an international tax expert, a list of which is provided here. While SSN numbers are valid for life, ITINs for a nonresident alien spouse or dependent used on a prior year income tax return may require renewal. For more information go to www. The Internal Revenue Service is required to notify the State Department of taxpayers "certified" as owing a seriously delinquent tax debt.
For more information see here. Taxpayers are still obligated to obtain minimum essential health insurance coverage for themselves and their dependents, qualify for a health coverage exemption or make a shared responsibility payment with their federal income tax return for the months without coverage or exemption through 31 December Beginning in , there is no individual shared responsibility payment due if an individual fails to maintain minimum essential coverage; however, as an American living overseas you should be aware of the need to declare yourself not subject to the Affordable Care Act "shared responsability" provision by indicating that you benefit from "deemed covered" status from a foreign health plan and that you do not need to participate in a US plan or pay the penalty fee.
The US government does not tax wealth as such. Unfortunately, due to recent legislation, there are two different reporting requirements for foreign bank accounts. It should be filed by April 15th each year, at the same time but separate from Form with an automatic extension to October 15th if living abroad. The excluded amount will reduce your regular income tax but will not reduce your self-employment tax. Also, as a self-employed individual, you may be eligible to claim the foreign housing deduction instead of a foreign housing exclusion.
Foreign tax home: You may have a foreign tax home if your work is in a foreign country and you expect to be employed in the foreign country for an indefinite, rather than temporary, period of time.
You do not have a foreign tax home if your abode remains in the United States where you keep closer familial, economic, and personal ties unless you work in a Presidentially-declared combat zone in support of the Armed Forces of the United States. For more information, see Tax Home in a Foreign Country. Figuring the tax: If you qualify for and claim the foreign earned income exclusion, the foreign housing exclusion, or both, must figure the tax on your remaining non-excluded income using the tax rates that would have applied had you not claimed the exclusion s.
More In File. To claim these benefits, you must have foreign earned income , your tax home must be in a foreign country , and you must be one of the following: A U. Please list below. This calculation assumes a married taxpayer resident in Vietnam with two children whose 4 - year assignment begins 1 January and ends 31 December Calculation of taxable income in italics are amounts not included in taxable income.
Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. A global survey of income tax, social security tax rates and tax legislation impacting expatriate employees. All rights reserved. Request for proposal. Gain access to personalized content based on your interests by signing up today. Browse articles, set up your interests , or Learn more. You've been a member since. KPMG Personalization.
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You will not receive KPMG subscription messages until you agree to the new policy. Ignore and log out. Related content. Tax returns and compliance When are tax returns due? That is, what is the tax return due date? For employment income, the 20th of the following month for monthly tax declarations, the 30th of the first month of the following quarter for the quarterly tax declarations and …. If someone leaves Vietnam during the year, a finalization return will be due within 45 days of the departure date.
For business income, the finalization due date depends on the type of business income. For income from real property transfer and from capital assignment, at the same time as conducting the relevant procedures of transfer or assignment. For income from transfer of securities, generally withholding tax is applicable at the time of receiving the income. For income from in heritance and gifts, at the time of receiving the income. What is the tax year-end? Subsequent tax years are calendar years. What are the compliance requirements for tax returns in Vietnam?
Employment income Tax declaration and payment is carried out on a withholding basis. Income paying bodies are required to withhold tax at source and then pay to the relevant tax authority within the statutory deadlines mentioned previously. For other income, individuals are required to handle their tax declaration at the time mentioned previously.
Each payment from VND2,, to individual sale agents or individual service providers is subject to 10 percent withholding tax. In case they provide a commitment indicating they have income less than the personal and dependent relief; no withholding tax is required. Tax rates What are the current income tax rates for residents and non-residents in Vietnam?
Employment income Tax residents of Vietnam: The following unified progressive tax rates are applicable to Vietnamese and foreign nationals. Taxable income Tax rate Income from supply and distribution of goods 0. Other non-employment income Taxable income Tax rates Resident Non-resident Income from capital investment including interest from loans and dividends 5. Residence rules For the purposes of taxation, how is an individual defined as a resident of Vietnam? The foreign individual was physically present in Vietnam for days or more during a calendar year or 12 consecutive months from the initial date of arrival in Vietnam.
Having a permanent residential place in Vietnam. In the case of a Vietnamese citizen, a residential location for which permanent residence has been registered means the specific place where such citizen lives and earns their living on a regular and stable basis and not only for a term, and for which such citizen has conducted registration pursuant to the Law on Residence.
In the case of a foreigner, a residential location for which permanent residence has been registered the registered place recorded in the resident card or temporary resident card issued by the authority under the Ministry of Public Security.
Is there a de minimus number of days rule when it comes to residency start and end date? Termination of residence Are there any tax compliance requirements when leaving Vietnam? What if the assignee comes back for a trip after residency has terminated?
Communication between immigration and taxation authorities Do the immigration authorities in Vietnam provide information to the local taxation authorities regarding when a person enters or leaves Vietnam? Economic employer approach Do the taxation authorities in Vietnam adopt the economic employer approach 1 to interpreting Article 15 of the Organisation for Economic Co-operation and Development OECD treaty?
If no, are the taxation authorities in Vietnam considering the adoption of this interpretation of economic employer in the future? De minimus number of days Are there a de minimus number of days 2 before the local taxation authorities will apply the economic employer approach? There is no de minimus number of days applied in Vietnam.
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