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Tax Advice (UK->Dubai->USA)

Tax Advice (UK->Dubai->USA)

Old Aug 15th 2012, 2:52 am
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Default Tax Advice (UK->Dubai->USA)

Looking for some information on my tax situation if anyone is 'In the know' as I've been moving around a bit for the last year. Basically, since last April I've done the following:

  • April 2011 to September 2011 -> Worked in the UK (Paid in the UK)
  • September 2011 to February 2012 -> Worked in Dubai, UAE (Paid in the UK)
  • February 2012 - September 2012 -> Working in the USA (Paid in the UK)
  • September 2012 onwards -> Working in the USA for minimum of 2 years (Paid in USA)

Whilst I've been moving I've still been paid into my UK bank account and have paid my UK taxes.

What I really want to know is if it'll be possible for me to claim back the tax I paid during my time in Dubai seeing as I now have confirmation I'll be out of the UK for 2+ years from the point at which I first left? It was always my intention to become 'non-resident' for tax purposes, but until a few weeks ago I didn't have 100% confirmation this would be the case.

Hopefully fairly clear what I'm trying to work out. Any help would be much appreciated.
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Old Aug 15th 2012, 3:43 am
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Default Re: Tax Advice (UK->Dubai->USA)

Originally Posted by donsrno1 View Post
Looking for some information on my tax situation if anyone is 'In the know' as I've been moving around a bit for the last year. Basically, since last April I've done the following:

  • April 2011 to September 2011 -> Worked in the UK (Paid in the UK)
  • September 2011 to February 2012 -> Worked in Dubai, UAE (Paid in the UK)
  • February 2012 - September 2012 -> Working in the USA (Paid in the UK)
  • September 2012 onwards -> Working in the USA for minimum of 2 years (Paid in USA)

Whilst I've been moving I've still been paid into my UK bank account and have paid my UK taxes.

What I really want to know is if it'll be possible for me to claim back the tax I paid during my time in Dubai seeing as I now have confirmation I'll be out of the UK for 2+ years from the point at which I first left? It was always my intention to become 'non-resident' for tax purposes, but until a few weeks ago I didn't have 100% confirmation this would be the case.

Hopefully fairly clear what I'm trying to work out. Any help would be much appreciated.
Did you pay taxes to the IRS from Feb 2012 to Sept 2012? If not, you have a bigger problem than a tax refund from the UK. Since that is still this year, it is solvable if you didn't pay taxes to the IRS but is going to probably be complicated getting refunds from the UK for taxes paid on income while working in the US.

Last edited by Michael; Aug 15th 2012 at 3:47 am.
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Old Aug 15th 2012, 3:52 am
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Default Re: Tax Advice (UK->Dubai->USA)

I can't comment on Dubai laws, but for the US if you are working in the US it makes no difference where you are 'paid' with a few minor exceptions (like journalist visas). If you are here full-time physically working you will owe taxes in the US from that time. You will also need the proper visa to be working here from Feb 2012->onward.

This can cause problems as the people paying you in the UK are probably not performing the necessary withholdings and unemployment / social security contributions in the USA on your behalf. That means you will get socked with them via the Self-Employment tax (even if technically you are working for someone else).

Is the person paying you Feb-Sept the same as paying you Sept 2012 onwards, or are they different employers?
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Old Aug 15th 2012, 6:41 am
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Default Re: Tax Advice (UK->Dubai->USA)

You are probably better off consulting a tax professional in the UK regarding the subtleties of UK taxation for non residents and the Dubai tax issues.

If, by the end of the year, you will have been physically present in the US for more than 6 months during 2012 (and it sounds as if you might already have passed that point) then you will meet the IRS "substantial presence" test and will be regarded as a "resident alien" for tax purposes, which means and you will have to file US tax returns reporting your entire worldwide income for 2012. Any UK taxes paid can be offset against whatever your US tax liability turns out to be.
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Old Aug 18th 2012, 12:27 am
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Default Re: Tax Advice (UK->Dubai->USA)

Originally Posted by penguinsix View Post
...but for the US if you are working in the US it makes no difference where you are 'paid' with a few minor exceptions (like journalist visas). If you are here full-time physically working you will owe taxes in the US from that time.
Interesting. Hubby's just filed his 2011 US tax return as a non-resident; it included a period from mid-Oct to end Nov when we'd moved over, he was working for the US office but still being paid via the Swiss office (same multinational company) as his SSN hadn't come through yet. The Swiss authorities were paid tax at source during these 6 or 7 weeks.

After quite some time and quite a few cross-border conversations involving the Swiss and US offices of our Big 4 accounting firm and the relevant tax authorities, it was concluded that we could leave it that that tax was paid to the Swiss govt, and that the tax return would take a Treaty position to explain it to the US govt.

Let's hope they're right! Otherwise we'll be penalised for late filing; as it stands, the IRS owes us for 2011.
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Old Aug 18th 2012, 1:57 am
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Default Re: Tax Advice (UK->Dubai->USA)

Originally Posted by kodokan View Post
Interesting. Hubby's just filed his 2011 US tax return as a non-resident; it included a period from mid-Oct to end Nov when we'd moved over, he was working for the US office but still being paid via the Swiss office (same multinational company) as his SSN hadn't come through yet. The Swiss authorities were paid tax at source during these 6 or 7 weeks.

After quite some time and quite a few cross-border conversations involving the Swiss and US offices of our Big 4 accounting firm and the relevant tax authorities, it was concluded that we could leave it that that tax was paid to the Swiss govt, and that the tax return would take a Treaty position to explain it to the US govt.

Let's hope they're right! Otherwise we'll be penalised for late filing; as it stands, the IRS owes us for 2011.
Normally the resident country gets first dibs on taxes and tax treaties allow for tax credits for the other country. Normally the IRS just accepts tax returns as if they are accurate but then may audit the return 2-3 years later (some are kicked out when the computer suspects irregularities and other times they are hand audited) and since you are the taxpayer, you are the one that is normally held responsible.

As far as a SSN, that is not needed since most payroll software can handle that. A fake number is used and when the real number is received, the company just sends the money to the IRS,

Last edited by Michael; Aug 18th 2012 at 2:00 am.
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Old Aug 18th 2012, 4:22 am
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Default Re: Tax Advice (UK->Dubai->USA)

Originally Posted by Michael View Post
Normally the resident country gets first dibs on taxes and tax treaties allow for tax credits for the other country.
Perhaps it was because he was non-resident for tax, then (didn't spend enough days to meet Substantial Presence). As he was not US tax resident for 2011, as far as the IRS is concerned he fell under Switzerland for his residency for the full year, and Switzerland therefore gets the first dibs. It would probably be a different story for people who move part way through the year but are filing as US tax resident.
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Old Aug 18th 2012, 4:45 am
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Default Re: Tax Advice (UK->Dubai->USA)

Originally Posted by kodokan View Post
Perhaps it was because he was non-resident for tax, then (didn't spend enough days to meet Substantial Presence). As he was not US tax resident for 2011, as far as the IRS is concerned he fell under Switzerland for his residency for the full year, and Switzerland therefore gets the first dibs. It would probably be a different story for people who move part way through the year but are filing as US tax resident.
Substantial Presence only defines whether tax is filed as a non resident alien or resident. US tax law is pretty clear about paying taxes where if you work in the US, you normally pay taxes unless the visits are for meetings, exhibitions, or such where the person is not on a work visa but on a vwp or B1/B2 visa.

Probably nothing will come of it since the time was short and the IRS has more important things to do than try to determine if a taxpayer was in compliance since the IRS probably didn't receive any documentation indicating that he worked in the US during that time. It is highly unlikely that the IRS will go through POE entry records to try to catch someone that may owe a small amount of money.

I once worked for a Japanese company that seemed to bend the rules quite often and nothing ever happened.
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