As the Navigator is on Shore-leave, today's post is courtesy of Vernon K. Jacobs from the Offshore Press
QUESTION: I work in the Middle East and I am paid by the joint venture from the Middle east. The joint venture is half American and half Oman. Do I have to pay taxes?
REPLY: You did not ask whether you were referring to taxes in Oman or in the U.S. However, if you were not a U.S. citizen or permanent resident, you would not have any reason to ask the question.
According to a quick Google search, Oman does not impose a personal income tax. If it did, it is very likely that all of your income would be subject to tax by Oman.
Since you are apparently a U.S. citizen (or permanent resident), the U.S. tax law says you are subject to U.S. taxes on your world wide income, regardless of where you live or where you work.
However, if you meet certain residence tests outside the U.S., you might be eligible for the "foreign earned income exclusion". That section of the tax law (IRC 911) provides for an exclusion from U.S. taxes for up to $84,200 (for 2006). There are two residency tests to qualify for this exclusion. One is that you must live and work outside the U.S. for at least 330 days out of 12 consecutive months. The other test is that you must have made a permanent change in your residence to a foreign country.
There have been some attempts by some members of Congress to repeal this tax break for U.S. persons working abroad, but repeal will meet strong opposition from U.S. corporations who need U.S. workers to work outside the U.S. The repeal is also oppossed by the American Institute of CPAs. (http://tax.aicpa.org/Resources/International/Legislation/)
Some basic information about the foreign earned income exclusion is available at http://www.offshorepress.com/vkjcpa/offshore-employment.htm
Vern
The comments in this memorandum are not intended to constitute an opinion regarding any specific tax issues because additional tax issues may exist that could affect the tax treatment of the tax issues addressed in this memo. This memorandum does not consider or reach a conclusion with respect to those additional issues and was not written and cannot be used for the purpose of avoiding penalties under code section 6662(d). For further details see
http://www.offshorepress.com/vkjcpa/disclosurerules.htm
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