US Expat Tax In Macau – Practical Info You Need To Know
Expat Living In Macau
Macau is a great place to live and work and has much to offer to American’s living overseas. It’s a city of contrasts where you will see casinos that will rival those in Las Vegas, but also cobbled streets amongst this busy nightlife scene.
Located close to Hong Kong, Macau also has its roots in colonial rule. However, until 1999 Macau was a Portuguese colony. Its influence can still be seen and felt throughout the city. Currently, Macau is a Special Administrative Region of China and has its own government, police force, currency and passport.
Guide To US Expat Tax In Macau
The Tax Samaritan country guide to US expat tax in Macau is intended to provide a general review of the tax environment of Macau and how that will impact your U.S. expatriate tax return as a U.S. Expat In Macau.
As a U.S. taxpayer, all worldwide income is subject to taxation and reporting and for most expatriates you are required to file a U.S. tax return on an annual basis due on April 15 each year (June 15 if you are residing overseas on the April 15 deadline). The tax treatment for different classes of income can vary greatly from Macau and the U.S. For example, certain benefits may be tax free or excluded from taxable income in the Macau, but in the U.S. these benefits are likely to be non-qualified benefits that are subject to being included as taxable income in U.S. As such, there are a number of considerations related to US expat tax in Macau and this brief article will address a few of those considerations.
Macau Expat Income Taxes
Who Is Liable For Income Taxes In Macau
In Macau, individuals are subject to tax on income sourced in or from Macau. Macau observes a territorial basis of taxation. Consequently, the concept of tax residency has no significance in determining tax liability, except in limited circumstances.
Professional tax is imposed on employment and self-employment income arising in Macau. Complementary tax is imposed on business income arising in Macau.
Tax Year In Macau And Tax Filing And Payment Rules
The tax year in Macau is the calendar year.
Expat Tax Withholding In Macau
Employers in Macau must withhold professional tax at the rates set forth by Macau from salaries paid to employees. In addition, employers must withhold professional tax at a rate of at least 5% from amounts paid to non-residents without work permits.
What You Need To Know About Living And Working In Macau For Your U.S. Expat Tax Return
When dealing with US expat tax in Macau, there a number of preferential expat tax treatments that may benefit your U.S. expatriate tax return. In fact, for many U.S. expats it will reduce your U.S. taxes to zero.
Some of these preferential tax treatments or benefits for US expat tax in Macau include the:
- If you are a U.S. citizen or a resident alien of the United States and you live in Macau, US expat tax in Macau is based on your worldwide income and as such must file a U.S. return for all the years that you are residing in Macau. However, as a U.S. expat you may qualify to reduce your U.S. taxable income up to an amount of your foreign earnings that is adjusted annually for inflation ($99,200 for 2014). In addition, you can exclude or deduct certain foreign housing amounts. This is known as the Foreign Earned Income Exclusion and foreign housing exclusion.
- When it comes to US expat tax in Macau, most US expatriates worry about “double taxation” – paying taxes to two different countries – the U.S. and Macau. A U.S. taxpayer working overseas in Macau may be able to reduce U.S. taxable income and “double taxation” by claiming the Foreign Tax Credit on Form 1116. Should any foreign income not be fully offset by the foreign earned income exclusion, housing exclusion or housing deduction, the foreign tax credit paid or accrued may be used as a deduction or credit on the U.S. tax return. Taxpayers can elect to either deduct the taxes as an itemized deduction on Schedule A or claim a credit against tax. In most cases, it is to your advantage to take foreign income taxes as a tax credit.
A common but dangerous mistake is the assumption that if there are zero taxes owed with these tax benefits that a return for US expat tax in Macau does not need to be filed. That is not true. If you are working overseas, it is likely that you meet the filing requirements to file a tax return and must do so. It is important to note that the preferential tax treatments, such as the foreign earned income exclusion and foreign tax credit are not applicable to the outcome of your tax liability until they are claimed on a filed tax return.
When faced with US expat tax in Macau there are many tax items to consider, but the above are by far the most common preferential tax benefits. With top-notch experienced and knowledgeable expat tax preparation from Tax Samaritan, you can be assured that you are paying the minimal amount of U.S. taxes that you are legally obligated for.
Macau Foreign Bank Account Reporting – The FBAR (FinCen Form 114)
Another important tax deadline that frequently applies to US expat tax in Macau is in regards to the disclosure of foreign assets on the FBAR (Foreign Bank Account Report – Form 114 – formerly known as TD F 90-22.1).
The FBAR filing deadline is June 30th (or the preceding business day if June 30th falls on a weekend). Unfortunately, requesting an extension on your individual return does not extend the FBAR due date – there is no extension available for the FBAR deadline. Any reports filed after this date are considered a delinquent FBAR. In addition, the FBAR is different than many other tax forms in that it must be received by the deadline date (and not postmarked by the deadline date).
The FBAR must be filed with the Treasury Department (it is not filed with your federal income tax return) whenever you meet the FBAR filing requirements, which in a nutshell is whenever a U.S. person has a financial interest in, or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust or other type of foreign financial account (including an insurance policy with a cash value such as a whole life insurance policy) maintained with a financial institution, with an aggregate value of over $10,000 at any time during the calendar year based on the highest value of each foreign account during the tax year.
If you have bank accounts at Industrial and Commercial Bank of China, Tai Fung Bank Limited, BCM Bank, Banco Nacional Ultramarino or at another bank in Macau or any other foreign country, you may meet the filing requirement to disclosure your foreign accounts on the FBAR. Please don’t hesitate to contact Tax Samaritan to learn more about your filing requirements.
U.S. – Macau Social Security Totalization Agreement
Employers must contribute monthly to a government social secu- rity fund in the amounts of MOP 30 for every resident worker and MOP 200 for every nonresident worker. Resident workers must each contribute MOP 15 per month. No ceiling applies to the amount of wages subject to social security contributions.
The United States has entered into agreements, called Totalization Agreements, with several nations for the purpose of avoiding double taxation of income with respect to social security taxes. These agreements must be taken into account when determining whether any alien is subject to the U.S. Social Security/Medicare tax, or whether any U.S. citizen or resident alien is subject to the social security taxes of a foreign country. As of this time, Macau has not entered into a Totalization Agreement with the United States thus there is opportunity to avoid double taxation of social security income for US expat tax in Macau.
U.S.- Macau Tax Treaty And Tax Relief For US Expat Tax In Macau
The U.S. does not currently have a separate tax treaty with Macau, nor does the U.S.-China Income Tax Treaty apply to Macau.
Our goal at Tax Samaritan is to provide the best counsel, advocacy and personal service for our US expat tax in Macau. We are not only tax preparation and representation experts, but strive to become valued business partners to American expatriates in Macau. Tax Samaritan is committed to understanding our client’s unique needs; every tax situation is different and requires a personal approach in providing realistic and effective solutions.
Click the button below to request a Tax Preparation Quote today to get started with the preparation of your return for US expat tax in Macau or to request a free 30-minute tax consultation.
Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on US expat tax in Macau and throughout the world. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid.
When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts) that is experienced and knowledgeable about US expat tax in Macau. If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in expat tax preparation, like Tax Samaritan (most tax professionals have limited to no experience with the unique tax issues of expat taxpayers).
Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals and experienced with US expat tax in Macau. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional US expat tax in Macau advice based on your individual needs.
All About Randall Brody
Randall is the Founder of Tax Samaritan, a boutique firm specializing in the preparation of taxes and the resolution of tax problems for Americans living abroad, as well as the other unique tax issues that apply to taxpayers. Here, they help taxpayers save money on their tax returns.