July 26, 1995
But his savviest career move ever was a fairly miserable, seven-year stint in Saudi Arabia, he says.
David Glickman worked in Argentina for a year. Financially, the situation was "fabulous, says the 29-year-old telephone industry executive.
The main reason, both men say: Taxes. U.S. tax breaks for expatriates, coupled with low income-tax rates in some foreign countries, can permit Americans working overseas to reap a bonanza.
Thanks to America's white-collar recession and the increasing internationalization of business, more and more Americans are living and working abroad. The State Department estimates that upward of 2.5 million Americans are currently living overseas, compared with less than 2 million five years ago and less than 800,000 nonmilitary expatriates in 1966.
While living abroad can prove an emotional hardship, many Americans find it immensely rewarding, financially. Companies often provide expatriates with housing allowances, hardship pay, additional vacation time and other financial perks. Meanwhile, the U.S. government often kicks in the most generous benefit of all tax breaks that can save some citizens tens of thousands of dollars annually.
"I purchased three houses, paid all my debts, traveled around the world, gave Mom some money and bought an Alpha Romeo Spider, says Borise, who now teaches in Palm Springs, Calif. "I tell all my students, when you graduate, try to get a job overseas. Everybody deserves a chance to make a lot of money at one time in their life.
Companies provide financial benefits for overseas work for a simple reason. It's hard to persuade people to leave friends and family behind to work in an unknown land. And living conditions in some countries are not exactly luxurious.
Employers typically pay premium wages that are 10 percent to 20 percent higher than what they pay to domestic workers. In addition, they may provide free housing, transportation and extra paid vacation time, says Edward Watson, partner in the International Executive Tax practice at KPMG Peat Marwick in Los Angeles.
The tax rewards of overseas work are a little harder to explain.
That's because you get these breaks only when you work in certain countries. And, even then, they may be taken away through complicated company compensation strategies called "tax equalization.
The way the tax situation works is this: If you work and live overseas for 11 months out of 12, U.S. taxes generally are not taken out of your wages. Assuming you maintain your U.S. citizenship, you need to file a U.S. tax return. But the tax code allows American citizens who live abroad to exclude up to $70,000 of their foreign-source wages from income. For most people, that means they won't owe any U.S. tax.
In addition, those who earn more than $70,000 annually can take advantage of "foreign tax credits, which give you write-offs for foreign taxes you may be paying.
Expatriates are subject to taxes in the countries where they reside, however. And, in some cases, the tax rates are far worse overseas, adds Keith Dolabson, a tax manager at Arthur Andersen & Co. In most of Europe including England, Austria, Belgium, Finland, France, Germany, Italy, The Netherlands, Spain and Sweden income tax rates exceed those in the United States.
But those who work in the Middle East and many less-developed countries can cash in. Income taxes in these countries are low or nonexistent. In dollars and cents, earning $50,000 in Saudi Arabia, where there are no income taxes, is roughly equivalent to taking home $80,000 for someone who pays 28 percent of his or her income in U.S. taxes.
Syndicated columnist Kathy Kristof appears regularly in The Detroit News Business section. Distributed by the Los Angeles Times Syndicate.
Copyright 1995, The Detroit News