Understanding Expat Taxes in the Top Destinations for Expats: Part Two

Expat Taxes in the Top Destinations for Americans Abroad

On Monday, we shared details about three top expat destinations, based on a number of factors ranging from cost of living to culture and taxes, among others. Today, we’re back with three more countries that provide the ultimate experience for Americans moving abroad. Here’s what you should know about these three places and the implications regarding expat taxes that come along with them.

1. South Korea

Many US expats call South Korea ‘home’ already, so if you’re considering a move here, you’ll be in good company! With one of the fastest-growing economies and an abundance of job opportunities for English speakers, moving here for work is a no-brainer. The situation regarding expat taxes in South Korea is pretty good for Americans as well, as you can see here:

  • You’ll be considered a Korean resident once you’ve lived there for a year.
  • Long-term residents are subject to being taxed on worldwide income. However, if you’re a short-term resident foreigner (whose total period in South Korea doesn’t exceed five out of the past ten years), you’ll only be taxed on foreign-sourced income paid in or remitted to Korea. Other non-residents are only taxed on Korean-sourced income.
  • There is a tax treaty between the US and Korea, which helps alleviate double taxation.
  • Korean taxpayers report income based on the calendar year, and tax returns are to be filed between May 1-31st each year. Long-term residents will need to pay half of their global tax by November 30th of each year.

To learn more about filing expat taxes in South Korea, check out this country guide.

2. Australia

Ah, the Land Down Under – with gorgeous beaches, great weather and a culture that believes in relaxation and enjoying life to the fullest, it’s no wonder over 1/5th of the population are non-Australians who decided they wanted to live like the Aussies. Learn more about the expat lifestyle in Australia here. With a points-based residency system, it’s an accessible location for most anyone with the right skills and education – though the cost of living can be quite high, depending on which city you land in! Here’s what you should know about your expat taxes in Australia:

  • You’re considered a resident if you live in Australia permanently. If you’ve lived and worked continually in the country for greater than six months and continue to live there, you’ll be considered a resident for tax purposes unless you can prove otherwise.
  • If you aren’t considered an Australian resident, you’ll have special tax rates, but won’t be responsible for the 2% Medicare levy that residents must pay.
  • The financial year begins July 1st and ends June 30th of the following year, and your tax return must be filed by October 31st.
  • Your employer will make required Superannuation contributions (similar to a 401k), which are tax-deductible in Australia but not on US expat taxes. This means they will be taxable as income on your expatriate tax return and you can’t exclude using the Foreign Earned Income Exclusion – but you may be able to use the Foreign Tax Credit.

Get all of the expat tax facts you need while living in Australia right here.

3. New Zealand

If you’re looking for a beautiful destination with plenty of room for adventuring, New Zealand is the place for you. The landscape here is incredible, the people are so friendly and there’s great state-sponsored health care as well. When it comes to expat taxes, you can expect a similar rate to that in the US, but there are several intricacies that you should be aware of:

  • Determining residency in New Zealand has several steps:
    • Be physically present for more than 183 days in a period of 12 months (does not have to be consecutive)
    • Have a permanent place of abode (PPOA)
    • There is a transitional residency that applies to individuals who are new to the country and others who have been absent from New Zealand (and non-resident for tax purposes) for ten years or more.
  • Taxation of worldwide income will depend on your residency status
    • Resident – Taxed on worldwide income, minus foreign tax credits to protect residents from double taxation
    • Non-resident – Taxed on New Zealand sourced income only
    • Transitional resident – Taxed on worldwide income and New Zealand personal income, unless within the 48-month exemption period
  • The New Zealand tax year begins April 1st and ends March 31st of the following year, and tax returns must be filed before July 7th.

Here’s more important expat tax information for expats living in New Zealand.

No matter where you end up, you’re sure to have the experience of a lifetime. With a little planning, you’ll ensure you’re prepared for things like cultural differences, the career landscape and of course, understanding your US Tax Return obligations.

Have More Questions about Your Expat Tax Requirements?

Our team of expat-expert CPAs and IRS Enrolled Agents are here to help, by providing the expat tax knowledge you’re looking for. Contact us today to have all of your expatriate tax questions answered.

Was this helpful?

Thank You!

More in Topic