What U.S. Expats Living in Trinidad & Tobago Should Know about Taxes

Trinidad & Tobago consists of two islands in the Southern Caribbean. The islands are economically prosperous. Trinidad and Tobago is known for its Carnival, and is the birthplace of steelpan, limbo, and the music styles of calypso, soca and chutney.

If you are planning to become a U.S. expat in Trinidad & Tobago, or have been one for a while, it’s important to know the tax laws of the country and the potential impact on your U.S. tax return. Expat taxes can get complicated. Fortunately, the key points are outlined below.

Photo by: Teresa Frost

How Living in Trinidad & Tobago Impacts US Taxes

As a U.S. citizen or permanent resident (Greencard), you are required to file U.S. taxes wherever you are in the world. Plus, if you have assets in foreign financial accounts (e.g., foreign banks), there are informational reports you may be required to file. For example, U.S. Expats Living in Trinidad & Tobago with $10,000 or more in foreign banks must file the FBAR (now known as FinCen 114).

Fortunately, the U.S. government provides various forms of tax relief that can lower or eliminate U.S. tax obligations

• The Foreign Earned Income Exclusion – It allows you to exclude a certain amount of income earned outside the U.S.
• The Foreign Housing Exclusion/Deduction – This one relates to additional income that can be excluded for household-related expenses tied to living abroad.
• The Foreign Tax Credit – It allows you to offset foreign taxes paid against U.S. tax obligations.

In most cases, the foreign earned income exclusion is preferable to the foreign tax credit if you live in a country with a lower tax rate than the U.S. (assuming your income is not above the applicable threshold). However, it’s a good idea to speak with an expat tax specialist to discuss the best application of these tax reliefs.

Taxation in Trinidad & Tobago

Let’s start by understanding who is required to pay taxes in Trinidad & Tobago. Residents are taxed on worldwide income, while non-residents on Trinidad & Tobago-source income only. Foreigners who are present more than 6 months during a tax year are considered residents for tax purposes.

The applicable income tax rates are:

• Employment Income: Flat rate of 25%
• Taxation on Interests (residents): Interests received from resident company are tax exempt
• Taxation on Interests (non-residents): 15% final tax withholding
• Taxation on Dividends (residents): Dividends received from resident company are tax exempt
• Taxation on Dividends (non-residents): 10% final tax withholding
• Taxation on Capital Gains: Long-term capital gains are tax exempt

Note that Trinidad & Tobago and the U.S. do not have a social security tax agreement in-place. This means that certain U.S. expats will be required to pay into both social security programs.

FATCA and Trinidad & Tobago

The U.S. government is increasingly interested in knowing about the foreign assets held by its citizens and residents. As a result, it has been busy inking deals with other countries whereby foreign financial institutions (FFIs) will be required to:

• Identify accounts of U.S. persons;
• Report certain information to the IRS regarding those accounts;
• Withhold a 30% tax on certain payments to non-participating FFIs and account holders unwilling to provide the required information

As of the publication of this article, roughly 80 countries have either signed intergovernmental agreements with the United States or are in discussions. Trinidad & Tobago is in active discussions with the U.S. to establish a FATCA agreement.

If you have any questions regarding your U.S. expat taxes, contact us today. We are here to help.