Foreign Tax Liabilities
Personal and Corporate Taxes
Understanding Personal Tax Liabilities
If you are spending a significant amount of time working in a foreign country, 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 a foreign 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 (see sections A, D and E).
If you are a U.S. citizen or resident alien working in a foreign 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 foreign 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 a foreign country (double taxation). This is the best place to start to understand tax liabilities abroad.
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 and need help planning for taxes, contact Global Operations.
VAT Exemptions and Refunds
In many countries, nonprofits can apply for VAT exemptions. If you pay VAT, you may be able to recover some of these funds. Just as you can file an income tax return to get a refund for overpaid income taxes, many countries allow you to file a VAT return to get refunded for overpaid VAT.
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, your project sponsor may require you to apply for an exemption or refund.