Thousands of Canadian residents hit by #Trump #tax get temporary reprieve as battle begins for permanent fix https://t.co/j379IO5RPm #cdnpoli #IRS #TaxReform
— Elizabeth Thompson (@LizT1) June 13, 2018
The above tweet references CBC reporter Elizabeth Thompson’s latest article on the U.S. “transition tax”. While reporting on the delay (referenced at the Isaac Brock Society here), Ms. Thompson’s article offers the tantalising possibility that the “delay” may be linked to a desire for a legislative fix.
Her article at CBC includes:
Brian Masse, an NDP MP who sits on the Canada-United States Interparliamentary Group, said U.S. lawmakers were very much aware of the tax reform’s unintended consequences when MPs and senators met with them in Washington last month.
Masse said he was told legislation to fix the problem could be introduced in the coming weeks.
“There seemed to be a genuine understanding and appreciation that these are victims.”
By the way, the comments to the article are (as usual) not off to a good start. (In fact they are indescribably ignorant.) It appears that the average Canadian:
1. Hates corporations; and
2. Hates U.S. citizens (even when they are also Canadian)
But, when you have (1) “U.S. citizens” (2) owing Canadian “corporations” these people lose any semblance of rationality. (You can actually see their abilities to reason and process information implode in real time.)
It would be helpful to add some comments (calling all Brockers) that would provide some balance and education. Seems like a number of commenters don’t believe that “dual” citizens (usually they call them “duel” citizens) are actually Canadians.
There are a couple of really good comments from one “Karen Alpert” (a familiar name) which includes:
Technically, yes. It applies to any US citizen who owned a foreign corporation when the tax reform bill was signed last December. Anyone who renounces after that point would be liable for the tax. However, I suspect that a number of affected Canadian citizens will decline to comply with this tax and will hide behind the tax treaty provision that states that Canada will not help the IRS collect in Canada on tax liabilities that arose when the taxpayer was a Canadian citizen,
Ms. Alpert is absolutely correct – the issue of the “Canadian citizenship” defence to collection was recently explored at the Isaac Brock Society here.
____________________________________________
Elizabeth Thompson’s article about the “transition tax” have been featured on Brock as follows:
and
I know I sound like a broken record but I sure hope that the possible “legislative fix” will include language that will open the door for the complete abandonment of US extra-territorial taxation on the sole basis of citizenship. This would be a GREAT time – a PERFECT time – to bring this whole matter to an end.
I concur with Muzzled, however, the timing for the Donald to help any version of a Canadian is unfortunate. Hopefully the US legislators are able to convince him that they are trying to help out US citizens who happen to also have “other” citizenship.
As usual, excellent opinion and comprehensive links to all relevant material, USCA!
Precisely my same observation, that there’s a lot of anti-American, anti-corporation sentiment out there. Trump’s comments against PM Trudeau will certainly make that worse. As for responding to the “pack of jackals” (as another commenter called them in the CBC comment section) – I can’t bring myself to even read their comments, as their ignorance-based disdain is in all likelihood directed at me personally. Do they even read the article?
The commenters on the CBC article seem to think that dual citizens own Canadian corporations as a tax dodge – like the corporation hasn’t been paying tax in Canada! The lack of understanding is unbelievable.
The transition tax appears to be a tax credit dodge by the US.
Brock has been a great help for me over the years just reading the many comments and articles. Having been stomped and too many tire tracks on my back from American and EU Politicians I have thrown in the towel.
ALL but one local financial account had been closed to me.
The transition tax was the final straw but I threw in the towel because of the abuse of the politicians in my own country who created this entire mess by signing on.
Effectively I have done a reverse emigration after a dozen years which will benefit the USA and not my home country.
Looked at a map and bought a condo in a nice US Location that can easily be reached by air and cheaply.
Turned my self employed business into a USA Corporation.
Moved banking and most financial accounts to the USA which I could now do with a real and proper address owning a condo. I also now have a US Will with Powers of Attorney. So my estate will be probated in the USA with no inheritance tax in Europe…….I do not care.
There it is America First my own country said they did not want me and called me an American so I will do what an American is expected to do…………
I will still live much of the year in Europe but America will get the tax and not the place I used to call home.
All in all I had a bunch of vulture fees to pay but I should have a positive return in a few years even after the fees.
So yes……I have moved offshore to America….lock, stock and barrel.
The vulture told me that I am not alone with the reverse emigration…folks just no longer care.
Its either renounce or reverse emigration to the USA.
Besides I am positive my American financial providers will provide no information to my home country!! The USA will get taxes they did not expect and the EU is left holding the bag….
Perhaps, but “introduced” doesn’t give much reason to expect enactment, and no reason at all to expect enactment and implementation before the extended due date for the 2017 return.
If a fix was really on the way, logically the guidance on the payment delay should have delayed also the reporting of the liability.
@EU/US Friend – I’m sure you’re not alone in moving back to the US. It wasn’t my chosen solution, but I understand the motivations.
@Plaxy : “If a fix was really on the way, logically the guidance on the payment delay should have delayed also the reporting of the liability.” — except that the IRS can only administer the law as it currently stands. They have no authority to assume that legislation that hasn’t even been introduced will eventually be passed and signed. Delaying payment until 2019 is probably the best they could do under the circumstances. In fact, I’m surprised they did even that much. (not complaining, just surprised)
Karen – “I’m surprised they did even that much.”
Yes. Me too.
Though I myself am congenitally sceptical, especially about politicians’ promises, I do hope that the optimistic interpretation will prove correct.
Precisely. Some of commenters don’t seem to have the brain power to figure out why Treasury is delaying collection of the tax – that it should not apply to Canadian residents. Treasury passing on collecting what it’s due? Not likely (or maybe it’s a diabolical plan to collect payment with interest later?).
Or to make it possible for the victims to get the numbers together and commit to payment. Once that’s done the IRS can go to court if need be.
@plaxy
The punitive possibilities are endless.
@EU/US Friend
That’s a very moving comment. It’s easy to feel betrayed by both your native and adopted country. I almost feel stateless at this point.
I would consider doing the same, but am too close to retirement.
The way Trump treated your PM as well as the other members of the summit, should give Canada plenty reasons to cancel the IGa. The same applies to the EU, Japan and China.
“It appears that the average Canadian:
1. Hates corporations; and
2. Hates U.S. citizens (even when they are also Canadian)”
I don’t think those comments are from Canadians. Even though the average Canadian hates U.S. citizens because the average Canadian doesn’t know how to distinguish U.S. citizens from the U.S. government, I don’t think they’re the ones making these comments. I think the trolls are American homelanders.
The average U.S. citizen:
1. Hates corporations (except for those owned by Trump and his relatives); and
2. Hates U.S. citizens who live outside the U.S. (including Canada at times when it’s inconvenient to treat Canada as the 51st state).
Unfortunately, Liz appears trying to stir up a few beehives and by so doing obfuscates injustices involved.
* Picture of Trump
*Focus on companies while mentioning big $$ when small companies should have had lots more focus.
* Did not mention about the flawed tax treaty, and Canadian law FATCA IGA helping the IRS out in violation of the tax treaty, all impacting 1 million Canadians.
However, very nice of her to highlight these two extra taxes out of tax reform.
I generally like to use these comment sections as an opportunity to:
*Grow the community of the informed, outraged, and activated.
That is why I have two comments with a call to action to visit The Isaac Brock Society.
My content keeps getting disabled.
There is a comment by John Richardson with 12 likes working its way up the most liked list. Please uptick.
BB – “The punitive possibilities are endless.”
I wasn’t thinking about punitive possibilities, really. The fact that small foreign corporations are caught up in this mess seems to be more due to the crazy Subpart F legislation. It looks like the rules have changed again and again, as US corporations kept finding ways to get round it, and the US kept trying to block up the holes, till in the end, a USC foreign-business owner would have had to be not just a tax expert but a soothsayer to have found their way through the maze and ended up today with the “right” designation to escape this dreadful Frankentax. And as Karen says, now that it’s law the IRS has to apply it – even though the IRS, unlike the Congresspersons who voted this into being – are well aware that they can’t compel foreign corporation-
owners to report and include the fictional income, and can’t prevent foreign corporation-owners from choosing instead to stop filing and renounce.
Of course, those who call themselves tax experts should have been better able to see the future risks for USC corporation owners, but evidently they didn’t, because not only did they advise their clients that this was a nifty way to defer US tax, they used it themselves, and are now in the same boat – only without the option to stop filing and renounce.
Example here, from before the transition tax, of CPA outlining the pros and cons of the different strategies – including the following:
https://skodaminotti.com/blog/international-tax-entity-classification-basics/amp/
Understandably, it presumably didn’t occur to the CPA, and certainly wouldn’t have occurred to the CPA’s clients, that the US would decide to pretend that the money had been distributed and repatriated, and then back-tax the pretend income retroactively for 30-odd years.
All of it aimed not at small foreign businesses but at Apple&Co. But do the politicians care that small foreign businesses are caught up in it? I doubt it, personally.
EU/US Friend: Your situation reminds me of what the late Roger Conklin went through when he had to “repatriate” his life and business from Brazil back in the 1970s due to the adverse effects of US regulations enacted at the time. Just as in this instance, the existence of CBT was the reason the regulations had any power. History has repeated itself yet again.
I am so sad and angry at what you have had to endure, not just at the hands of the US but at the hands of the country you lived in that didn’t have the guts to stand up and take action against a fundamental wrong. I would like to reference your comment here in a future communication with the United Nations as our protracted wait for that body to hear our Human Rights Complaint continues.
MuzzledNoMore a little more details
Sold my home in the EU luckily no gain and now rent a place in the EU. The writing was on the wall that I was going to have an existing mortgage problem.
With my new US Corporation I receive a salary and have a 401K with one of the large US Providers and have US Mutual Funds. I actually can plan for retirement and invest!! I am a consultant and have no business assets so for me it works.
My EU Clients easily make direct payments through my name brand US major bank that has provided what is in effect a European account number so it works like a charm. Opening was simples and they clearly understood that this reverse banking path was far FATCA better!! We joked about it in the office of the bank in the USA.
Lost my European credit card involuntarily but voluntarily gave up what was a so limited transaction account.
I now use my US branded credit union debit card from that certain credit union from ACA affiliate as it is a chip and pin. Carry a reasonable amount of cash. There is a transaction cost receiving payment in euro which is converted to dollars and then I reconvert to euros at ATM or the shop. But the conversion costs seem to average out in the end.
I HIGHLY suspect the local tax authority will be less than pleased when this shakes out but I DO NOT CARE!!!!!
To be honest all my money is in the safest off shore location where privacy is assured.
It was so nice to be able to open financial accounts again without looking over the shoulder.
The conciliation? It has been a pleasure to reverse screw my EU Country. They threw me under the bus, I threw them under the bus. I do not flipping care if they come back to me and say you should be paying tax in the EU. Vulture fees were high but payback on tax savings as US tax is cheaper is around three years in my case and then its profit. At that point the tax savings cover the cost of running my US “home.”
The priceless part is that the USA will protect everything I have done as part of the tribute I am now paying them.
Do not get me wrong for awhile it did cross my mind that I should be paying for roads where I live, schools where I live, local healthcare where I live and on and on.
Europe in one voice said Yankee go Home………I took my euros and ran.
The USA told the whole world that you and your money needed to get back to the plantation, but I suspect few if any governments understood that at the time of signing the IGA.
I understand your bitterness, it’s justified.
The fact that the EU is slowly waking up to this is likely no consolation at all.
Am I the only one who sees a problem with this? Boris Becker also tried to tell the german authorities that he actually lived in Switzerland all the while he spent most of his time in Munich. The tax authorities got him. So spending most of ones time in Europe while paying taxes elsewhere might not pan out.
@Polly
You ask:
If his circumstances would mean that he is still a “tax resident” of his country in Europe then he would continue to be subject to taxation in both countries, unless …
There is a a “tax treaty tie breaker” provision that he could use to make him a “tax resident” of ONLY the United States.
For example, here is a sample from the Canada U.S. tax treaty:
https://www.fin.gc.ca/treaties-conventions/usa_-eng.asp
If his country has a similar treaty provision, then he may (as a U.S. citizen) be able to use the treaty to sever “tax residency” from the non-U.S. country.
Seriously, one really must ask the question:
Why should a U.S. citizen be required to pay taxes to any country except the USA? Shouldn’t “Membership have it privileges?”