US Expat Taxes for Americans Living in Uganda – What You Need to Know
It has been estimated that there are several thousand Americans living in Uganda.
Living in Uganda is an incredible experience for a number of reasons, including the friendly and hospitable locals, the sense of adventure, and the incredible natural beauty. As an American expatriate living in Uganda though, what exactly do you need to know regarding filing US expat (and Ugandan) 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 Uganda, 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.
“All taxpayers are obligated to file a return within six months of the end of the year of income. Where an individual is in business, one is expected to file the return accompanied by a statement of income and expenditure and a statement of assets and liabilities.”
If you pay income tax in Uganda, 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 Ugandan resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Uganda. 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 Ugandan governments share taxpayer info, and Ugandan 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/Ugandan dual citizen, and you have been living in Uganda 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.
Ugandan taxes – what you need to know
Ugandan residents are taxed on their worldwide income on a scale from 0% to 40%. Non-residents are solely taxed on income sourced in Uganda.
Foreigners living in Uganda are considered a resident for tax purposes if their permanent home is in Uganda, or if they spend over 183 days in Uganda in a 365 day period, or if they spend an average of at least 122 days a year in Uganda in the tax year and the preceding two tax years.
The Ugandan tax year is the same as in the US, which is to say the calendar year. If your only source of income is from employment in Uganda, your income will be taxed at source and you won’t have to file a tax return. Otherwise, tax returns are due by June 30th. The Ugandan tax authority is called the Uganda Revenue Authority.
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Uganda that you contact a US expat tax specialist.