Level 3

Tax burden on Provident Fund

Forum|Forum|6 years ago
March 4, 2020
1 reply
19 views

My client lived and worked in Dubai with Emirates Airline, he became a resident in 2018 and moved to the US February 2019. Upon resignation with Emirates he had to withdraw his Provident Fund.( which is like a savings that the company put into and the employee, however you are not entitled to it unless you stay 7 years with the company). His that money consider income and is it taxed?

This topic has been closed for replies.

itonewbie

Level 15

The UAE has an unfunded mandatory end-of-service gratuity. It is payable upon termination of an employment. That would be taxed as compensation in the year it was paid but you need to sourced it over the period of employment to reflect how the entitlement is computed.

If you are talking about provident fund or pension, there is not a mandatory scheme yet although the government has been toying with that idea for years. I am not personally aware of any major company offering that to expats on a voluntary basis. If your client also did participate in a voluntary company-sponsored provident fund/pension scheme, please let us know as that would be a different kettle of fish.

---------------------------------------------------------------------------------Still an AllStar

D

Dak2019Author

Level 3

Where would I put it on the tax form ? what do you mean by source it over the period of employment to reflect how the entitlement is computed?

itonewbie

Level 15

Where you make the input would depend on the tax product you use.

On the tax return, it'd go on F.2555. However, you must source the income over the employment period because only the portion allocable to the current year would be excludable, the portion allocable to the immediate preceding year may be excluded to the extent there's any excess exclusion limit from that prior year, and nothing related to the earlier year can be excluded at all.

---------------------------------------------------------------------------------Still an AllStar

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