While all US citizens must file a tax return to the IRS every year, expats in Saudi Arabia get to bypass that annual chore. Watch this short video to find out the top 7 things you need to know about expat taxes as an American in Saudi Arabia!
For Americans who chose to live in Saudi Arabia, it’s important to know the tax laws for both your host country and your home country. Fortunately, we’ve outlined the 7 things you need to know as an expat living in Saudi Arabia.
Like many Gulf nations, Saudi Arabia has no tax on business income and no taxes on investment income. Businesses are taxed only on capital gains.
Residency status in Saudi Arabia can only be obtained through a resident permit. US expats can apply for a permit at any Saudi embassy.
Since there are no taxes on income earned or on capital gains, individuals are not required to file a tax return. As a result, Saudi Arabia does not have a tax year.
In Saudi Arabia there is a social security system that covers private-sector workers and some pubic-sector workers. Those who are self-employed, working abroad or don’t fit the requirements for compulsory coverage can voluntarily contribute.
Residents of Saudi Arabia are among the lowest taxed individuals in the world. As a result, there are no capital gains taxes, no wealth, gift or inheritance taxes and no value added taxes.
If you are a US citizen or resident, you will still be required to file US taxes each year. If you have assets in foreign bank accounts, you may be required to report those as well. Specifically, anyone with 10,000 dollars or more in a foreign bank or financial institution during a calendar year will be required to file the FBAR.
Fortunately, there are a few ways you can lower or eliminate your US tax obligations. The first is the Foreign Earned Income Exclusion, which allows you to exclude a certain amount from your foreign earned income on your US expat taxes.
The second is the Foreign Tax Credit, which allows you to offset the taxes you paid in your host country with your US expat taxes dollar for dollar.
And third is the Foreign Housing Exclusion, which allows an additional exclusion from income on US expat taxes for certain amounts paid for household expenses that occur as a consequence of living abroad.
If you have any questions about filing your US expat taxes, please contact us.