Itibis Question - related to U.S. taxes.

[juansantamaria]

My wife and I have four children and pay quite a lot in ITIBIS taxes every year here in the Dominican Republic. We don't exclude our income for tax purposes in the States and was wondering if their was a way to total ITIBIS taxes on our receipts so as to take the foreign tax credit on our U.S. return?

[rubio_higuey]

You are quite confused... ITBIS is basically a VAT tax... has nothing to do with the income tax. We ALL pay lots of ITBIS... everytime we shop, buy anything, we ALL pay ITBIS

[juansantamaria]

Originally Posted by rubio_higuey

You are quite confused... ITBIS is basically a VAT tax... has nothing to do with the income tax. We ALL pay lots of ITBIS... everytime we shop, buy anything, we ALL pay ITBIS

Guess you can't take the Foreign Tax Credit for a VAT tax?

[rubio_higuey]

Of course you can't! Same as you cannot take tax credit for fuel tax or tobacco tax or real estate tax? Or do you take credit for a state sales tax in the USA? No!!

Tax credits are from income taxes only! And.... there must be a treaty on double taxation in place between signatory countries in order for you to be able to take the tax credit.

[juansantamaria]

Originally Posted by rubio_higuey

Of course you can't! Same as you cannot take tax credit for fuel tax or tobacco tax or real estate tax? Or do you take credit for a state sales tax in the USA? No!!

Tax credits are from income taxes only! And.... there must be a treaty on double taxation in place between signatory countries in order for you to be able to take the tax credit.

Thanks Rubio - Your right - Just seems these ITIBIS taxes are excessive.

[GringoCArlos]

Here is the link to the IRS information section for US citizens living in the DR, or outside of the US, for their tax returns:

Publication 54 (2007), Tax Guide for U.S. Citizens and Resident Aliens Abroad

The DR charges ITBIS in place of trying to collect income taxes from everyone. The income tax levels are set at a starting level that the majority of people do not pay any income taxes, but are instead contributing something through the collection of ITBIS. If you are paying income taxes in the DR, they may be deductible against your US tax liabilities. That''s a good question for your US tax attorney.

[laureleastman]

Hi there!

If your income is "foreign earned" - for example here in the DR - and you are living in DR then you may have a tax exemption on part of your income (like 80,000 that you earn in the DR and don't have to pay taxes on).

I finally changed my accountant in the states to someone who is specialized in this and I would like to recommend them to the DR1.com community...

Tax services for Americans living abroad - US expatriate taxation - Expatriate CPA

I visited their office in Los Angeles, met with the owner, they make a great impression and have fantastic experience. And their fees are really reasonable.

Best of luck

Laurel

[juansantamaria]

Originally Posted by laureleastman

Hi there!

If your income is "foreign earned" - for example here in the DR - and you are living in DR then you may have a tax exemption on part of your income (like 80,000 that you earn in the DR and don't have to pay taxes on).

I finally changed my accountant in the states to someone who is specialized in this and I would like to recommend them to the DR1.com community...

Tax services for Americans living abroad - US expatriate taxation - Expatriate CPA

I visited their office in Los Angeles, met with the owner, they make a great impression and have fantastic experience. And their fees are really reasonable.

Best of luck

Laurel

Thank you for this information - very helpful - really great site - definitely at the top of my list for consideration this coming year.