Kuwait is one of the most liberal countries in Western Asia. Kuwait has been through a lot of war turmoil but it has rebuilt its infrastructure. The country has the world’s fifth largest oil reserves and petroleum products and the highest human development index in the Arab world. Moreover, Kuwait is considered a major non-Nato ally of the United States. Many American expats Kuwait reside in Ḩawallī and the number of expats is increasing due to the growing economy. There are a lot of green card holders that must be aware of green card tax requirements. The country does not levy personal income taxes or social security taxes on individuals. However, US expatriates still have to file US expatriate tax returns if they meet US filing requirements.
We get a lot of questions from American expats who have a job offer or family in Kuwait. Are Americans expats Kuwait subject to any taxes in Kuwait? Are American expats Kuwait still required to file US expatriate tax return, although, they don’t have any income from Kuwait? Do you offer expatriate tax services to expats Kuwait?
Expatriate Tax Rules and Returns for Expats Kuwait
Many Americans working in Kuwait must remember that the USA is one of the few countries in the world that taxes its citizens on their worldwide income whether they live in Texas or Kuwait. Consequently, American expatriates including US citizens and green card holders are required to file US expatriate tax returns and report their worldwide income.
However, to avoid the double taxation, expats Kuwait must utilize three provisions under IRC section 911.
- Foreign income exclusion. American expats Kuwait can exclude up to $101,300 in a tax year 2016 if they meet one of the tests like the bona fide residence test or physical presence test.
- Foreign housing exclusion. US expatriates can deduct certain foreign housing expenses like rent, utilities etc that they incurred in Kuwait.
- Foreign tax credit. Since American expats in Kuwait are not subject to any personal income tax, they cannot utilize a foreign tax credit on US expatriate tax returns.
American expats Kuwait may be required to file the FBAR and report their foreign financial assets like bank accounts etc. The form TD F90-22.1 must be filed by June 30. The FBAR does not have an extension.
Tax system in Kuwait – FAQ
I am an American expat in Kuwait. What should I know about income taxes in Kuwait when I file US expatriate tax returns?
Kuwait doesn’t have personal income taxes. Moreover, the country does not levy social security taxes either. The presence of company’s representative in Kuwait can trigger the taxable presence of the company that will be subject to corporate income taxes.
Are there any additional taxes levied on expats Kuwait?
- Health care levy. American expats in Kuwait are required to pay a health care levy (KWD50) or possess a local health insurance.
- Airport departure tax. There is an airport departure tax in the amount of KWD3 that is included in the ticket price.
- Custom Duty. Kuwait levies a custom duty in the amount of 5% of assessed value on the imported material. The duty is assessed at the point of entry by one of the countries in the Gulf Cooperation Council (Saudi Arabia, Oman, Kuwait, Qatar, United Arab Emirates and Bahrain).
Does Kuwait have a double-taxation agreement and social security agreement with the USA?
The country does not have either an income tax treaty or totalization agreement (social security agreement) with the USA.
These are some of the basic overseas tax issues that American expats in Kuwait should consider before moving to this country or starting a business.
American expats Kuwait with additional questions about US expatriate tax filing, FBAR, FATCA and other overseas tax issues should seek help of an expatriate tax CPA that specializes in international tax issues. International tax experts at Artio Partners will be pleased to assist with various expat tax topics.