US Expat Taxes for Americans Living in Lebanon – What You Need to Know
It has been estimated that there are 25,000 Americans living in Lebanon.
Living in Lebanon is an amazing experience for a variety of reasons, including the culture, the night life, and the beaches, landscapes, and cuisine. As an American expatriate living in Lebanon though, what exactly do you need to know regarding filing US expat (and Lebanese) 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 Lebanon, 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.
“Salaries of foreign staff are normally subject to all contributions, except those for the end-of-service indemnity fund. However, foreign employees do not receive the family allowance benefits nor do they benefit from the medical reimbursements.”
If you pay income tax in Lebanon, there are several exemptions that allow you to pay less or no US income tax on the same income to the IRS. 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 Lebanese resident (or you spend at least 330 days outside the US each year), and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Lebanon. 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 Lebanese governments share taxpayer info, and Lebanese 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/Lebanese dual citizen, and you have been living in Lebanon 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.
Lebanese taxes – what you need to know
Lebanon is a relatively low tax country. Residents are taxed on their worldwide income on a scale from 2% to 25%. There is also a 2% medical cover tax. VAT is 10%, and there is a 10% capital gains tax. There is no wealth tax, but there are built property and inheritance and gift taxes.
Foreigners are considered to be Lebanese residents for tax purposes if they have a place of business in Lebanon, or a house in Lebanon, or if they’re in Lebanon for at least 183 days in any 12 month period.
The Lebanese tax year is the same as the American, and tax returns are due by April 1st. The Lebanese 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 Lebanon that you contact a US expat tax specialist.