US TAX GUIDE IN THE UAE

What is the End-of-Service benefit?

The End-of-Service benefit in the UAE is a lump sum payment received when your employment ends. This payment is taxable on your US tax return but cannot be fully excluded under the foreign-earned income exclusion for the tax year you receive it.

Why can’t the End-of-Service benefit be fully excluded?

This benefit covers work from previous years, not just the current tax year. A calculation allocates the benefit across your employment period to determine the taxable portion for the current year.

How should I plan for my End-of-Service benefit?

It’s best to consult a tax professional before receiving your End-of-Service benefit to maximize tax benefits and ensure compliance with US tax laws.

What should I remember about the End-of-Service benefit?

  • Taxable Income: Report this on your US tax return.
  • Exclusion Limitations: This benefit covers your entire employment period, affecting its tax treatment.
  • Consult Before Payment: Speak with a tax advisor before processing the payment.

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