It might be news for people who seldom outside US that you have to pay taxes back home even if you are working outside of US. Americans also move to other countries with the same reason. This issue of tax implementation even on expats is a major issue if they want to keep intact their US citizenship. However there are means to minimize the impact of these tax charges.
“Don’t look at my FEI (Foreign Earned Income)”
If an American moves to some other country to make a living then he or she can get exemption on tax charges against an income of up to 100,800 USD. To avail this loop hole in the system you must have spent 330 days for 12 consecutive months. Putting it in a nutshell it means that a person making 75000 USD abroad has to pay no taxes, however will have to file the returns and claim exclusion.
Let’s Pay Foreign Tax; Later
If you are paying taxes in the foreign country and paying taxes in the US as well then you are paying double taxes. In this case the US tax code has a term to take foreign tax credit. Under this section a formula is available to calculate the payable taxes i.e. lower tax rates minus the higher tax rates, and the resultant highest of the two applicable taxes and distribute is equally between the two countries.
An expat can also benefit from another facility available in paying the Value added tax (VAT) commonly known in US as Sales Tax. As is the nature of sales tax that it increases at every stage of sales, hence eventually giving a serious financial hit. An expatriate intending to go back to the parent country can also apply for the exemption of these VATs or refund, It is also to be noted that refund are only available on purchases of large volume and monetary values.