The US government has passed a tax law which will increase the tax expat workers from the US will pay. The law will affect tax retroactively and HR departments will need to increase tax withholdings for their expats or risk being fined for not paying enough estimated tax.

8 June 2006

AMSTERDAM - The US government has passed a tax law which will increase the tax expat workers from the US will pay. The law will affect tax retroactively and HR departments will need to increase tax withholdings for their expats or risk being fined for not paying enough estimated tax.

President Bush approved the Tax Increase Prevention and Reconciliation Act of 2005 on 17 May 17. According to the Society of Human Resource Management, "touted as a USD 70 billion tax-cut bill, a last-minute amendment increases—retroactively to 1 January—the tax burden of thousands of multinational corporation employees who are on foreign assignments.

Expats who will suffer the most are the middle classes, those workers who "earn comfortable, but not lavish, livings and semi- retired workers earning some foreign income while drawing US Social Security, pensions and other income from US sources," reports the International Herald Tribune.

A large proportion of these assignees will now find themselves in higher US brackets, along with employees and independent professionals in no-tax and low-tax areas like much of the Middle East, some Caribbean nations and Hong Kong.

[Copyright Expatica 2006]