US Expat Taxes for Americans Living in Tunisia – What You Need to Know
It has been estimated that there are several thousand Americans living in Tunisia.
Living in Tunisia is an incredible experience for a number of reasons, including the friendly locals, the beaches and climate, the quality of life, and culture and history. As an American expatriate living in Tunisia though, what exactly do you need to know regarding filing US expat (and Tunisian) 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 Tunisia, 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.
“Non-resident individuals (people staying in Tunisia less than 6 months) are taxable at a flat tax rate of 20%” – KPMG
If you pay income tax in Tunisia, there are several exemptions that allow you to pay less or no US income tax on the same income to the IRS. The main exclusions 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 Tunisian resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Tunisia. 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 Tunisian governments share taxpayer info, and Tunisian 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/Tunisian dual citizen, and you have been living in Tunisia 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.
Tunisian taxes – what you need to know
Tunisian residents are taxed on their worldwide income on a scale from 0% to 35%. Foreigners working in Tunisia in certain industries or for less than six months however are taxed at a flat rate of 20%. Non-residents are solely taxed on income sourced in Tunisia.
Foreigners living in Tunisia are considered a resident for tax purposes if their permanent or principle home is in Tunisia, or if they spend at least 183 days in Tunisia in a tax year.
The Tunisian tax year is the same as in the US, which is to say the calendar year. Tunisian tax returns are due by different dates depending on the type of income, from February 25th for foreign sourced non-salary income to December 5th for salaries. The Tunisian tax authority is called the Ministère des Finances Tunisien.
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Tunisia that you contact a US expat tax specialist.