US Expat Taxes for Americans Living in Sierra Leone – What You Need to Know
It has been estimated that there are several thousand Americans living in Sierra Leone.
Living in Sierra Leone is an incredible experience for a number of reasons, including the friendly locals, the natural environment and wildlife, and the interesting expat community. As an American expatriate living in Sierra Leone though, what exactly do you need to know regarding filing US expat (and Sierra Leonean) 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 Sierra Leone, 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.
“The Sierra Leone tax system is a self- assessing system where taxes levied would depend upon the declared expected turnover and chargeable business income of taxpayers.” – The Sierra Leone National Revenue Authority
If you pay income tax in Sierra Leone, 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 Sierra Leonean resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Sierra Leone. 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 Sierra Leonean governments share taxpayer info, and Sierra Leonean 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/Sierra Leonean dual citizen, and you have been living in Sierra Leone 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.
Sierra Leonean taxes – what you need to know
Sierra Leonean residents are taxed on their worldwide income on a scale of 0% to 35%. Non-residents are only taxed on Sierra Leone sourced income. Income tax rates vary depending on the type of income (e.g. salary, dividends, rents), as well as on whether the individual is a resident or non-resident.
Foreigners living in Sierra Leone are considered a resident for tax purposes if they have an abode in Sierra Leone and enter the country at all during the year, or if they spend over 182 days in Sierra Leone in a calendar year.
The Sierra Leonean tax year is the same as in the US, which is to say the calendar year. Income tax returns are due by April 30th. The Sierra Leonean tax authority is called the National Revenue Authority.
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Sierra Leone that you contact a US expat tax specialist.