Aya A. Takriti, Enrolled Agent
Tax Manager | US Tax Specialist in U.A.E
✔ IRS qualified Enrolled Agent (EA)
✔ Degree in International Accounting
✔ Registered US Tax Agent in U.A.E
✔ US Tax Compliance
✔ Filing an FBAR
✔ Reporting FATCA
✔ Renouncing US Citizenship
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I have joined Expat US Tax as a Tax Manager in our Dubai office.
I hold a degree in International Accounting and I am fluent in Arabic and English. I have completed my internship in Financial Services with KPMG in Germany.
I focus to provide great customer service and I have passion for helping Arab-American dual nationals understand complexities of the US tax system.
Understanding the Foreign Bank Account Report
The Foreign Bank Account Report (FBAR) is a filing requirement for US citizens or residents who hold a bank account outside the United States. A “foreign bank account” refers to any account held outside of the US, and if the highest balance of one or more accounts exceeds a total of $10,000 in a calendar year, then the account holder is required to file an FBAR form.
It is a common misconception that banks will file the FBAR on behalf of their customers. However, FBAR filing is a personal responsibility and must be met by the account holder. While banks may request information from their clients, such as a social security number or proof of citizenship, this does not exempt the account holder from meeting IRS filing requirements.
The FBAR forms are usually due by April 15, with an automatic extension until October 15. It is important to note that the FBAR is only a reporting requirement and does not involve paying taxes on the highest balance. However, any income generated by a foreign bank account would be expected to be reported on the US tax return and taxed accordingly.
Joint accounts with spouses or other family members are also subject to the FBAR reporting requirement if the US person has the authority or is a joint owner of the account. Similarly, if a US person has signature authority over a foreign bank account, such as when given authority over a company’s financial accounts, the account must be reported on the FBAR.
Therefore, if a US person has signature authority or control over a foreign bank account, they are required to report it on their FBAR form,
Need consultation about FBAR? Book here: https://www.expatustax.com/consultation/
Do I need to file a tax return if residing in UAE?
When it comes to the world of expat tax, it can often feel like a tricky maze, regardless of where on the globe you find yourself. A good number of US citizens and permanent residents find themselves scratching their heads over tax obligations with the Internal Revenue Service (IRS). It’s not uncommon to find people unaware that they are required to file, especially when their earnings come from outside the United States.
So, the question is, who’s on the hook to file a tax return with the IRS?
If you hold a US citizenship or a green card, you’re subject to tax on your income worldwide, even if you’ve set up shop outside the US. Take this scenario, for instance: you’re a US citizen or green card holder residing in the United Arab Emirates (UAE) and you’re making money there. You still have to report that income to the IRS.
Even if you’re pulling in a salary from the UAE and racking up interest income back home in the US, you’re still obliged to report both the UAE salary and the US interest income. The specifics of your tax return filing requirements and obligations hinge largely on your filing status and the income thresholds set by the IRS. Bottom line, getting a handle on these key details is a must to make sure you’re in line with tax laws and sidestep any penalties.
For single folks, the income threshold stands at $12,950, while for married couples filing jointly, the figure goes over $25,000. Here’s the surprise: a married US citizen or green card holder who chooses to file under a separate tax status only faces a threshold of $5.
Need help for filing US tax returns? Get a quote here:
The inception of the Foreign Account Tax Compliance Act (FATCA) in 2010 brought significant changes for American citizens residing overseas who were previously uninformed about their FBAR (Report of Foreign Bank and Financial Accounts) obligations, or under the impression that the IRS would not discover the contents of their foreign accounts.
FATCA has two primary provisions with profound implications for expatriates:
With the enactment of FATCA, foreign banks and investment institutions are now mandated to disclose account information for U.S. citizens to the U.S. Treasury. This enables the IRS to verify the information against what is provided on FBARs or identify instances where an FBAR should have been submitted, but wasn’t.
FATCA introduced another filing obligation for U.S. citizens holding foreign financial assets – the IRS Form 8938. This stipulation requires Americans living abroad to file IRS Form 8938 as part of their federal tax return if the cumulative value of their foreign financial assets exceeds $200,000 at any point during the fiscal year.
It is crucial to note that if you meet the account thresholds for both the FBAR and Form 8938, you are obliged to submit both forms. Navigating these complex financial reporting obligations is crucial to remain in good standing with the IRS.
Need help with FATCA Reporting? Book your consultation here:
Individual Taxpayer Identification Number (ITIN)
The Individual Taxpayer Identification Number (ITIN) is a unique identifier issued by the Internal Revenue Service (IRS) in the United States. It is assigned to individuals who need a U.S. taxpayer identification number but are ineligible for a Social Security Number (SSN).
ITINs are required by various groups, including non-resident aliens filing U.S. tax returns, U.S. resident aliens filing tax returns, dependents or spouses of U.S. citizens or resident aliens, non-resident alien students or researchers filing tax returns, and individuals with federal tax obligations but without an SSN.
- ITINs are issued by the IRS to individuals who do not have a Social Security Number (SSN) and need a taxpayer identification number for U.S. federal tax purposes.
- ITINs have expiration dates, and individuals are responsible for renewing their ITINs before they expire.
- To renew an ITIN, individuals must complete a new Form W-7 and provide required identification documents.
- Renewal applications can be submitted by mail, through an IRS-authorized Certified Acceptance Agent, or at an IRS Taxpayer Assistance Center.
- ITINs can be used to file tax returns, but ITIN holders may have limitations on certain tax benefits.
Claiming dependents using an ITIN is possible, but the dependents must also have an ITIN, SSN, or Adoption Taxpayer Identification Number (ATIN). Various criteria must be met, including the relationship, age, residency, support, and other factors outlined by the IRS.
We are an official acceptance agent for processing ITINs.
Request your ITIN here:
UAE Corporate Tax Rate
Understanding corporate tax can be a bit of a hurdle, no matter where you’re at. This direct tax, also known as corporate income tax or business profit tax, gets applied on the profits and net income of corporations and other business entities.
- The UAE will introduce a federal corporate tax system on June 1, 2023.
- The tax rate will be 9%.
- Taxable income up to AED 375,000 will be taxed at 0%.
- Large multinationals with consolidated global revenue exceeding EUR 750 million will face different tax rates based on specific criteria.
The new tax system is designed to be simple and efficient, and to reduce the compliance burden on businesses. The UAE Tax Authorities have said that they will provide guidance and support to businesses to help them comply with the new rules.
Here are some of the key benefits of the new UAE corporate tax system:
- Low tax rate: The 9% tax rate is the lowest in the GCC region. This will make the UAE a more attractive destination for businesses.
- Simple and efficient: The new tax system is designed to be simple and efficient. This will reduce the compliance burden on businesses.
- Globally competitive: The new tax system is aligned with international tax standards. This will help to ensure that the UAE remains a competitive global business hub.
The Federal Tax Authority (FTA) shoulders the responsibility of administering, collecting, and enforcing the corporate tax. For businesses operating in free zones, while they’ll be subject to corporate tax, they can continue to enjoy current corporate tax incentives provided they meet all regulatory requirements.
Foreign entities and individuals are subject to corporate tax only if they engage in regular or ongoing trade or business in the UAE. Moreover, foreign investors’ returns from dividends, capital gains, interest, royalties, and other investments are typically exempt from corporate tax in the UAE.
Need consultation about Federal corporate tax system? Book here: https://www.expatustax.com/consultation/
Difference between Foreign Tax Credit vs. Foreign Earned Income Exclusion
When it comes to US citizens living abroad, there are two deductions that can help minimize their tax liability: Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credits (FTC). The FEIE is an annual exclusion that allows a maximum income exclusion of approximately $120,000 for the 2023 tax year, provided that the individual has been living outside the United Arab Emirates (UAE) for 330 days in a 12-month period, established residency in a foreign country, and has foreign-earned income. If an individual’s foreign-earned income exceeds the exclusion amount, they may also claim a housing deduction based on what they pay for rent and utilities, which can vary depending on where in the UAE they live.
On the other hand, the FTC applies when a US citizen establishes residency in a foreign country and is subject to taxation on their worldwide income by that country. This can result in double taxation, which can be avoided by claiming the income tax paid in the foreign country as a credit on their US tax return. Unlike the FEIE, the unused FTC can be carried forward for up to 10 years, making it a better option for those who pay income tax in their country of residence.
Filing for Foreign tax credit or claiming Foreign Earned Income Exclusion? Request a quote here: https://www.expatustax.com/request-a-quote/
Owning a Foreign Corporation
From a US tax perspective, owning shares in a foreign corporation can have different filing requirements for US citizens or green card holders (US persons) compared to owning shares in a domestic corporation. However, the specific tax obligations for US shareholders of a foreign corporation depend on the ownership stake in that corporation.
For instance, if a US person owns 25% of a foreign corporation, while non-US individuals own the remaining 75%, the US person is required to file Form 5471 with the IRS. This form includes information about the foreign corporation, such as its address, shares, and their value.
However, filing requirements become more complex if a US person owns more than 50% of the foreign corporation or if the majority of shareholders own more than 50% of the corporation. In this scenario, the entity is considered a controlled foreign corporation, which means that the US shareholders would be taxed on the net income of the entity.
If a US person owns more than 60% of the shares in a foreign corporation, then the US person’s shareholding percentage of the corporation’s retained earnings is taxable, even if they do not withdraw the money from the foreign corporation.
The tax filing process can become complicated depending on the ownership stake in the company.
Need help with Form 5471? We can help! Book your free consultation here: https://www.expatustax.com/consultation/
Why partner with a specialist Expat accountant?
Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. Expat US Tax provides dedicated accountants who help expats optimize their tax situation by navigating complex tax regulations and optimize your tax situation.