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Aramco "Tax Balancing" Question

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Marco

From: United States
12/7/2002 15:00 EST

I'm not quite sure I get this. The book says your check is reduced by a "Hypothetical" tax, and later it says that you are reimbursed a "Theoretical" tax. Both appear to be calculated approximately the same way.
It was my understanding from a peer that all wages were tax free, and that this was the incentive for going. Can anyone explain what I will actually come away with. For calculation ease, consider a 100K annual base. I'd like to see the adders like expat allow, and c&s allow, then the subtracters like .........well, taxes is all I know of.
Further, I've heard that US tax law allows 70K in a foreign country to be tax free. Does this enter into the calculation ?
thx,

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mrs3463

From: Saudi Arabia
12/24/2002 00:51 EST

tax is deducted since you still have to file your taxes, even if you are living outside u.s... yes the overseas allowance is around $70,000. we are also charged a small amount of rent here at aramco. therefore housing is not considered part of your package. aramco has the best tax preparers. i don't know their email but here is the phone number: 011-966-3-875-6801. they will file your taxes for you at no charge to you. this is one aramco benefit. among many others.
i don't know how to explain the hypo-tax... but it is for your benefit. i love living in saudi, in aramco as do most of my neighbors. it is a great community!

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demand

From: United States
12/24/2002 01:25 EST

You are being compensated on the "balance sheet" approach. For the tax component, the company calculates a "hypothetical tax" on your base salary with certain other deductions. They make-up the rules for the hypo-tax and this has no direct correlation to the IRS. The rules are you pay them the hypo-tax and they agree to pay all additional taxes.

The theoretical tax is their effort to uphold their end of the agreement. It is a payment to you based on company income and taking advantage of the exclusions available. It is paid in the form of withholding and is adjusted after you file your return in the subsequent year. The exclusion has increased to $80,000 in 2002.

To complete your example you simply need to subtract the hypothetical tax from your calculation.

I hope this answers your questions. If not, you are welcome to call me "toll-free" in the USA at (888) 297-6001 or via email at ted@ustaxhelp.com.
Theodore Kleinman, CPA
www.ustaxhelp.com
(former Aramco employee)

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195556

From: United States
4/3/2003 07:37 EST

Hi there, read your last post from 12/02.My husband (US medical doctor) and I (Austrian, registered nurse)might be offered a position at Aramco, working in their hospital.My questions are: we have 2 dogs, were assured by recruiter that we could take them with us as long as we join the Dhahran Kennel Club, we also would get use of house w/garden in the compounds. How large are those compounds? Can I walk my dogs there, on leash, without all the abaya gear? We were in the military, I imagine the compounds like fancier military bases, am I correct? Also, as a white, outspoken female, could I work as a nurse with arab men? I was a charge nurse at a Los Angeles Trauma Hospital, big responsibilities,I do not take cr... from anyone, how could I live in this society without getting into trouble. I am aware of not driving, not drinking, not wearing western garb. Any info is welcome, also are you male or female? Thanks, Elisabeth

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nualum

From: Germany
4/10/2003 09:15 EST

It has been about thirteen years since my wife and I lived and worked for Aramco, so things will have changed, but I can answer some of the questions raised.

While the tax balancing issue is a bit mysterious and seems counter-intuitive, the real point is that you will come out ahead on your taxes. For one thing, many benefits are taxable such as home leave transportation. If you have kids, the transportation benefit can be many thousands of dollars. If any of those kids is/are in high school, Aramco pays for them to go to a prep school abroad, and that hefty tuition is also taxable. All these add-ons to your pay will quickly move you well beyond the foreign exemption. Aramco pays the taxes on the excess plus the taxes on the taxes (since this compensation for the taxes is also taxable income). Another way that Aramco was generous in my day, and probably still is, was that in its calculations, it assumed that my deductions would have been 10% of my gross--much more than most people can dredge up in deductions.

As for the physician/nurse family, the Aramco compound with the hospital is huge--many miles square with plenty of area for walking a dog, exercising onesself. Comparing its facilities with a typical military base is a qualitative comparison--with the military base being a trailer camp and an Aramco compound being a lavish gated community. Most of the housing, for example, cost hundreds of thousands of dollars per unit. It is very, very comfortable. Sports facilities are hard to beat including exercise rooms with the finest equipment, golf courses (without grass, of course), swimming pools, beaches, even a "yacht" club for our sail boats.

In our day, women did not wear an abaya on the compounds, and I am confident that this is still true. In local communities, Aramco women wore long skirts and blouses which covered the arms. My wife and college-aged daughter never felt this was difficult. My daughter actually liked the abaya. She could throw it on when she wanted to go into the local towns wearing shorts or anything at all underneath it. She ended up wearing it as her graduation gown at university since, while it looked like a graduation gown, it was better made. Women were also able to drive on the compounds, though that privilege was periodically threatened.

It is hard to predict whether you would be too outspoken to work in the hospital. The Aramco hospital is JCHA accredited, so it is a professional environment with well-qualified professional staff. Working in any other culture always requires diplomacy and sensitivity and being confrontational is unwise in many cultures, including Arabia. On the other hand, if you have been in the military, you know you had to exercise diplomacy and even a certain amount of self-censorship in dealing with some people (and their spouses) in your chain of command.

What is more likely is that you will soon come to like the life, the job, and the people you work with--in which case you are likely to want to be both professional and diplomatic, not wanting to cause unintentional offense.

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