US Expat Taxes for Americans Living in Egypt – What You Need to Know
It has been estimated that there are several thousand Americans living in Egypt.
Living in Egypt is an incredible experience for a number of reasons, including the friendly locals, the quality of life, the climate, and the history and culture. As an American expatriate living in Egypt though, what exactly do you need to know regarding filing US expat (and Egyptian) 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 Egypt, 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 Egypt, there are several exemptions that allow you to pay less or no US income tax on the same income to the IRS.
“Individual income tax is imposed on the total net income of the resident individuals for income earned in Egypt, as well as the income earned outside Egypt for resident individuals whose centre of commercial, industrial, or professional activities is in Egypt”
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 Egyptian resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Egypt. 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 Egyptian governments share taxpayer info, and Egyptian 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/Egyptian dual citizen, and you have been living in Egypt 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.
Egyptian taxes – what you need to know
Egyptian residents are taxed on their worldwide income on a progressive scale from 0 to 25%.
Foreigners are considered a resident for tax purposes if they have a home in Egypt, if they spend 183 days in a year in Egypt, or if they are employed by an Egyptian firm (even if they don’t meet the other conditions).
The Egyptian tax year is the same as the US, which is to say the calendar year. Tax returns are due by March 31st, however if your only income is from employment by an Egyptian employer, your employer is responsible for filing your return. The Egyptian tax authority is called the Ministry of Finance.
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Egypt that you contact a US expat tax specialist.