US Expat Taxes for Americans Living in Laos – What You Need to Know
It has been estimated that there are several thousandAmericans living in Laos.
Living in Laos is an incredible experience for a number of reasons, including the friendly locals, the quality of life, the natural environment, and the culture and cuisine. As an American expatriate living in Laos though, what exactly do you need to know regarding filing US expat (and Laotian) 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.
It has been estimated that there are several thousand Americans living in Laos. Living in Laos is an incredible experience for a number of reasons, including the friendly locals, the quality of life, the natural environment, and the culture and cuisine. As an American expatriate living in Laos though, what exactly do you need to know regarding filing US expat (and Laotian) taxes?
The good news is if you are paying income tax in Laos, 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 the expatriate signed an employment contract before issuance of the Presidential Ordinance No.001 (1 March 2011) and the employment contract is an indefinite-term employment contract, the expatriate is entitled to enjoy a PIT rate of 10% until the concession agreement expires.” – PwC
If you pay income tax in Laos, there are several exemptions that allow you to pay less or no US income tax on the same income to the IRS. The main one is 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 Laotian resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Laos. 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 Laotian governments share taxpayer info, and Laotian 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/Laotian dual citizen, and you have been living in Laos 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.
Laotian taxes – what you need to know
Laotian residents and non-residents are solely taxed on their income sourced in Laos, on a scale from 0% to 25%, although some expats who signed employment contracts in Laos before 3/1/11 are taxed at a flat rate of 10% for the duration of their contract.
There is no legal definition of residency for tax purposes in Laos, so expats are advised to seek reputable local advice if in doubt as to their Laotian tax obligations.
The Laotian tax year is the same as the American, which is to say the calendar year. If your only source of Laotian income is from employment in Laos, your income will be taxed at source and you won’t have to file a tax return. Otherwise, tax returns are due by March 31. The Laotian tax authority is called the Laos Tax Department.
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Laos that you contact a US expat tax specialist.