IL Postcard

Remember the Tax Man

Date: 02/29/2004

International Living Postcards--your daily escape

Monday, March 1, 2004

Dear Reader,

If you reside overseas, full- or part-time, you have two tax burdens--one in the country where you've taken up residence…and one back in the good ol' US of A. Remember, an American never loses his responsibility to Uncle Sam.

As a result, you need two advisers on this subject--one in the U.S., experienced helping Americans abroad file their U.S. taxes and fulfill their U.S. tax obligations (with an eye to minimizing this burden as much as possible)…and a second in the country you've adopted.

What will your tax burden be in your new homeland? This is one of the most important issues to consider--and you should research the answer (critically) before you make the leap. No, you don't want to organize your life according to income and investment tax rates…but you sure don't want to decide to move somewhere without investigating the tax consequences either. Why not reduce your overall effective rate of tax if you can? (And you can.)

While you're shopping for a place to live, invest, retire, or start a business, you're thinking about the climate and the cost of living…the health care and the infrastructure…the history and the culture…the architecture and the food. I'd strongly recommend you also think about the country's tax legislation as it relates to foreign residents. More than anything, you want to avoid owing tax on the same income in two countries. (Many countries have double-taxation agreements with the U.S. that prevent this…but not all.)

This is a tricky issue, impossible to address effectively generally. Much depends on your personal situation. Nevertheless, we offer subscribers to the print edition of International Living this month a guide to the taxes you will be liable for as a resident or even, in some cases, as an investor in 14 of our favorite world havens.

Where will you pay no property tax? At what rate will your rental income be taxed? What percentage of your investment profits will be shaved off for capital gains tax? What is the sales tax (be it known as VAT, IVA, or GST)? Will you pay income tax on all income…income earned in the country…or income remitted to the country? Which countries have double-taxation agreements in place with the U.S.? For answers to all these questions and many others…see the March 2004 issue of International Living (details below).

Kathleen Peddicord
Publisher, International Living

P.S. Here's a bonus answer: As an American residing abroad, you can arrange to have your Social Security payment delivered to you anywhere…even direct deposited into many banks around the world on your behalf. When you do, federal withholding in the States will be taken out at a rate of 30% of 85% of your benefit amount--unless the country where you're residing has a double-taxation agreement with the U.S….or provides for a lower rate of tax.