Foreign Tax Liabilities
Personal and Corporate Taxes
Understanding Personal Tax Liabilities
If you are spending a significant amount of time working in another country besides the U.S., you may be considered a tax resident in that country. Most countries consider you a tax resident after 183 days; some countries consider you a tax resident after as few as 90 days. Other countries may only consider you a tax resident if your permanent home is there (i.e., you are domiciled there). If you determine that another country considers you a tax resident, we recommend that you review any tax treaties the U.S. has with that country as well as determine whether they levy taxes on worldwide income or income earned in their country only. You can learn about income tax laws for a particular country in this personal tax guide.
If you are a U.S. citizen or resident alien working in another country, you will also have to consider the impact on your U.S. taxes. ASU cannot provide personal tax advice. We recommend that you consult a U.S. tax advisor prior to and throughout your time abroad. You can also review the IRS's guidance for U.S. taxpayers living abroad.
Understanding Corporate Tax Liabilities
If you are creating a permanent establishment with your activities, you may be subjecting ASU to various taxes that your project will be responsible for paying. Although ASU is a tax-exempt organization in the U.S., this designation may not be recognized by non-U.S. governments.
You can learn about tax rates for a particular country in this corporate tax guide. However, if you are creating a permanent establishment, a formal evaluation may be needed.
Avoiding Double Taxation
The U.S. has tax treaties with many countries that are designed to prevent individuals and organizations from paying taxes in both the U.S. and another country (double taxation). This is the best place to start to understand tax liabilities abroad.
For more information on taxes related to visiting scholars and students, see International Visitors.
Understanding VAT, GST and Sales Tax
If you purchase goods or services abroad, your purchase may be subject to one of the following consumption taxes: Value Added Tax (VAT), Goods and Services Tax (GST), or sales tax. Tax rates vary by country, state/province, and type of good or service and generally range from 5-25%.
You can learn about tax rates for a particular country in this VAT, GST and sales tax guide. However, a formal evaluation by country, state/province, and type of good or service is often needed. If you are budgeting for a large purchase or many purchases over the life of a project and need help planning for taxes, contact Global Operations.
VAT Exemptions and Refunds
In many countries, sponsored projects are eligible for VAT exemptions and/or refunds. For instance, most USAID-funded awards are eligible for VAT exemptions and/or refunds as USAID has agreements in place with the cooperating country. It is important to work with your AO/AOR and the local USAID Mission early in your award on the applicable VAT process. Processes vary by country and could include providing a special type of invoice from the vendor for exemption approval, like in Morocco, or applying for a VAT exemption certificate, like in Malawi.
Applying for VAT exemptions and refunds can be complicated, time-consuming and lengthy (up to a year). Weigh how much you will save/recover against the administrative burden. You may decide to only pursue VAT exemptions and refunds for significant purchases and/or longer projects where the savings will be more significant. In some cases, like USAID, your project sponsor may require you to apply for an exemption or refund if it is available. Otherwise, these costs are unallowable and will be the responsibility of the academic unit.