US Expat Taxes for Americans Living in Botswana – What You Need to Know
It has been estimated that there are several thousand Americans living in Botswana.
Living in Botswana is an incredible experience for a number of reasons, including the friendly locals, the quality of life, political and economic stability, and the spectacular landscapes. As an American expatriate living in Botswana though, what exactly do you need to know regarding filing US expat (and Botswanan) taxes?
All US citizens and green card holders who earn a minimum of around $10,000 (or just $400 for self-employed individuals) anywhere in the world are required to file a US federal tax return and pay taxes to the IRS, regardless of where in the world they live or their income is generated.
The good news is if you are paying income tax in Botswana, there are various exclusions and exemptions available to prevent you paying tax on the same income to the IRS too.
US taxes – what you need to know
If you earn over US$10,000 (or just $400 of self-employment income), wherever the income originates in the world you have to file IRS form 1040.
While any US taxes due are still due by April 15th, expats get an automatic filing extension until June 15th, which can be extended further on request until October 15th.
If you have overseas assets worth over US$200,000 per person, excluding your home if it is owned in your own name, you also have to file form 8938 to declare them.
If you had a total of at least US$10,000 in one or more foreign bank and/or investment accounts at any time during the tax year, you also have to file FinCEN form 114, otherwise known as a Foreign Bank Account Report or FBAR.
If you pay income tax in Botswana, there are several exemptions that allow you to pay less or no US income tax on the same income to the IRS.
“The Botswana tax system operates on a territorial basis, and income is taxable in Botswana if the source is within Botswana. Income for services performed outside Botswana is deemed to be from a Botswana source if the services are incidental to employment in Botswana.”
The main exemptions are the Foreign Earned Income Exclusion, which lets you exclude the first around US$100,000 of foreign earned income from US tax if you can prove that you are a Botswana resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Botswana. These exemptions can be combined if necessary. Remember though that even if you don’t owe any tax to the IRS, if your income is over US$10,000 (or $400 if you’re self-employed) you still have to file a federal return.
The US and Botswana governments share taxpayer info, and Botswanan banks pass on US account holders’ account info to the IRS, so it’s not worth not filing or omitting anything on your return. The penalties for incorrect or incomplete filing for expats are steep to say the least.
If you’re a US citizen, green card holder, or US/Botswana dual citizen, and you have been living in Botswana but you didn’t know you had to file a US tax return, don’t worry: there’s a program called the IRS Streamlined Procedure that allows you to catch up on your filing without paying any penalties. Don’t delay though, in case the IRS comes to you first.
Botswanan taxes – what you need to know
Botswanan residents are taxed solely on income sourced in Botswana or from work done in Botswana, on a progressive scale from 0% to 25%. Non-residents pay taxes at the same rates but don’t get a tax-free allowance.
Foreigners living in Botswana are considered resident for tax purposes if they spend at least 183 days in the tax year in Botswana, or if their permanent home is in Botswana.
The Botswana tax year runs from July 1st to June 30th. Botswanan tax returns are due by September 30th. The Botswana tax authority is called the Botswana Unified Revenue Service.
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Botswana that you contact a US expat tax specialist.