The Middle East has offered expats work and living opportunities for decades, and in the last ten years these have increased due to rapid development in that part of the world. This has led to many US expats considering Qatar as a new country of residence. Clients considering this move contact our firm frequently with questions about the Qatar tax system, social security benefits, and ways in which they can minimize their US expat tax obligation. Another area of concern is whether or not we are able to provide tax services to American expats living in Qatar. The following explores these questions with answers provided by our expat tax experts.
Guide to Filing – US Expat Tax Tips for Americans Living in Qatar
Does Your Firm Provide US Expat Tax Services to Americans Living in Qatar?
Our firm is equipped with the expertise needed to provide expat tax services to Americans living in Qatar.
Are American expats Living in Qatar Required to File US Expatriate Tax Returns?
While living in Qatar, US expats are required to tile taxes as usual with the Internal Revenue Service (IRS) every year. The return should include all earned income including any made from foreign employment, whether it has been taxed by the government of Qatar or not. US expats may have the opportunity to reduce their tax obligation by using certain tax credits and deductions from money earned in Qatar.
How Can Americans Living in Qatar Minimize US Expat Taxes and Avoid Double Taxation?
US expats have a few provisions to explore that could help in avoiding be taxed twice on earned income from another nation. These include:
• Foreign Earned Income Exclusion (FEIE)
• Foreign Housing Exclusion or Deduction
• Foreign Tax Credit
An expat in Qatar may be able to use FEIE to decrease the amount of the taxable income that was earned in Qatar by excluding the first $101,300 in the 2016 tax year and $100,800 for the 2015 tax year. An American expat must qualify for the exclusion by meeting either the physical presence test or the bona fide resident test. In order for the physical presence test requirement to be met, the expat must spend at least 330 days out of a 365 day period in the foreign country and have a foreign earned income. Long term expats can qualify for the bona fide residence test if they have been living overseas for at least a year and have no immediate plans to move back to the United States.
The foreign income exclusion can assist with certain housing expenses such as rent or utilities, but only for US expats who also qualify for FEIE.
For US expats living in Qatar the foreign tax credit will not apply. This is used for the tax imposed by a foreign country on foreign earned income, yet in Qatar there are no personal income taxes imposed.
Who is Considered a Resident of Qatar for Tax Purposes?
An individual is considered to be a resident of Qatar if they meet any of the following conditions:
• They own a permanent home in Qatar
• They are physically present in Qatar for at least 183 days during the calendar year
• Their center of vital interest is in Qatar
Is Foreign Income Subject to Taxation in Qatar?
Qatar imposes no income tax on its residents, including that which is earned outside of the country. Qatar is considered a tax-free country for expats.
What are Personal Income Tax Rates in Qatar?
Unless an expat is operating a business in Qatar they will not be taxed on any of their personal income. This means they are under no obligation to file a tax return with Qatar’s Public Revenues and Taxes Department (PRTD).
Individuals who form business partnerships will be taxed on profits at the corporate rate.
Businesses in Qatar are required to pay a flat rate of 10% of their profits earned from their activities or capital gains.
When are Tax Returns Due in Qatar?
As in the United States, the tax year in Qatar begins on the 1st of January and ends on the 31st of December, but employed expats will not need to file a tax return. For expats who earn a business derived income, they have four months after the end of the tax year to file their return. There are no extensions offered for filing a business tax return.
What is the Tax Year-End for Taxpayers Living in Qatar?
The tax year in Qatar ends on December 31st, just as in the United States.
Are Investment Income and Capital Gains Taxed in Qatar?
Qatar does not obligate residents to pay estate or gift taxes. Qatar does have inheritance and estate tax treaties with France and India.
What are the Requirements for Inbound Investors in Qatar?
Any entity that has a Qatar tax registration card or a permanent establishment in Qatar must file a corporate tax return along with Qatar based audited financial statements unless they have been deemed exempt such as a wholly GCC owned company. The tax return must include all gross income earned from activities in Qatar and gross income that was derived from contracts, either in whole or part, carried out in Qatar.
What is the Social Security System in Qatar?
There is no social security set up in Qatar. The nation’s high gross domestic product and small population allow for a minimal financial obligation on its residents for any social service. American expats will be eligible to receive medical assistance, but any other type of social service will be limited.
Is There a Social Security Agreement or Tax Treaty Between the USA and Qatar?
The United States and Qatar have each entered into tax treaties with other nations, but not with each other. Since there is no social security system in Qatar, there is no need for any agreement. As there is also no income tax imposed, double taxation will not be an issue unless the expat is operating a business in Qatar. They should however keep in mind that there is a chance that more money will be due for the US income taxes since no tax was paid to the government of Qatar.
Are there Other Taxes Assessed on Expats Living in Qatar?
Taxes in Qatar are limited in comparison to other countries. There is no personal income tax, nor capital gains regime. This eliminates all gift, estate and wealth taxes that are found in other countries. No value added tax (VAT) has been put into place either, although authorities have begun considering it for the future.
What are FBAR and FATCA Requirements for Americans living in Qatar?
Under the rules imposed by the Foreign Bank Accounts Report (FBAR) all US citizens are required by law to report their foreign held balances in bank accounts and other financial institutions. This rule applies no regardless of what country they reside in. US expats must file FinCEN form 114 if their foreign bank balance is in excess of $10,000. If the expat fails to file this form before the 30th of June, they will be subject to large fines. They should also note that there are no extensions offered when filing this form.
The Foreign Account Tax Compliance Act (FACTA) was enacted by the US government as a means towards uncovering expats who are avoiding their yearly tax obligation. Under this law, American expats are required to report any a bank account balance in excess of $200,000 at the end of the year, or $300,000 during any point of the year. Married expats will have a higher threshold to meet before being required to report. Those expats that do qualify must file a completed Form 8938 along with their US tax return.
Do You Have Additional Questions About Filing US Expat Taxes?
Americans who plan on living in Qatar should become well acquainted with the key tax issues of both nations. They should also note the important dates for filing US expat taxes and special forms. If additional help is needed, our expat tax experts are fully prepared to assist with any number of tax situations and circumstances.
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