Category Archives: Issues regarding US persons abroad

Prologue

Weapons of mass disruption: America is deploying a new economic arsenal to assert its power https://t.co/0EoEv8Z86W via @TheEconomist pic.twitter.com/uEcRaPVska

— U.S. Citizen Abroad (@USCitizenAbroad) August 4, 2019

Most sanctions are announced and publicly threaten the sovereignty of other countries

A European perspective: Thanks to Timothy Smyth for finding this discussion of U.S. sanctions from the perspective of some Europeans:

This podcast discusses the problem of US sanctions on Europe and the role played by the US dollar, etc. – assumes that Europe and USA are moving apart. "Meeting the Challenge of Secondary Sanctions | European Council on Foreign Relations" https://t.co/YN5k4V5a5M via @ecfr

— U.S. Citizen Abroad (@USCitizenAbroad) August 4, 2019

A U.S. perspective: A discussion of the role of U.S. sanctions from the perspective of some Americans (Jack Lew was the Treasury Secretary in the Obama administration):

The USA is constantly at war. Currently the USA is imposing tariffs, sanctions and tax policies on the world. Is USA @citizenshiptax a sanction on other countries? "The Use and Misuse of Economic Statecraft "https://t.co/78XDDDj8U2 via @ForeignAffairs

— U.S. Citizen Abroad (@USCitizenAbroad) August 4, 2019

Do sanctions work? In any case there are limitations to U.S. sanctions as China is proving and will continue to prove:

There are limitations to U.S. power. China and other places are prepared to say, ‘No, we’re not going to follow the U.S. lead.’” @RichardMNephew https://t.co/Tm5TRqp3S1

— Mark Fitzpatrick (@MarkTFitz) August 4, 2019

Some sanctions are not publicized. They are U.S.laws that attack the sovereignty of other nations

About FATCA: is the use of FATCA to claim ownership of and impose U.S. worldwide taxation on the residents of other countries the ultimate sanction?

July 22, 2019 Canadian Federal Court Justice MacTavish puts the judicial seal of "good housekeeping" on the right of the USA to claim Canadian residents as U.S. tax property https://t.co/8AdmjboTuk

— U.S. Citizen Abroad (@USCitizenAbroad) August 4, 2019

Question:

In general the FATCA IGAs are for the purpose of forcing the world to locate individuals and entities that are “U.S. persons” (meaning U.S. property). But, the United States and the United States alone defines who is a “U.S. person”. Once defined as a “U.S. person”, the United States will impose U.S. taxation on those (defined as U.S. persons) who are citizen/residents of other countries. Is this the equivalent of a sanction? If so, how does the “citizenship taxation” sanction compare to other sanctions?

The @USAccidental group in France losea first round – but they will fight on: "« Américains accidentels » : déboutée en France, l'association va saisir l'Europe" https://t.co/9f2BgHxyyI via @cbanque

— U.S. Citizen Abroad (@USCitizenAbroad) July 20, 2019

The above tweet references an article in French describing the decision in France in which the Court declined to provide relief to Accidental Americans AKA citizen/residents of France. Implicit in the court’s decision is the notion that those “Born In The USA” (as Bruce would sing) are property of the United States. What follows is an attempt to translate the article (using Google Translate).

The Council of State rejected Friday the appeal initiated by the Association of “accidental Americans”, gathering French born on the American soil, opposed to the application in France of a tax regulation American of which they consider themselves victims: Fatca.
Learn more at https://www.cbanque.com/actu/75081/americains-accidentels-deboutee-en-france-association-va-saisir-europe#vJCYvsOX2rjp0YbU.99

Adopted by Washington in 2010, and applied in France since 2014, the Foreign Account Tax Compliance Act (Fatca) allows the US tax authorities to ask foreign banks for information on their customers considered as “American people”. This application was challenged by accidental Americans, these French having a dual nationality because of their birth on the American soil, and today faced with administrative hassles and banking problems.

No defect of execution

In its decision, consulted by AFP, the highest French administrative court found unfounded the request of accidental Americans, considering that the regulatory acts taken for the implementation of this agreement were not without a legal basis. The Conseil d’Etat thus followed the conclusions of the public rapporteur, who had estimated at a hearing in early July that the Fatca did not present a “proven” lack of performance but at most “technical difficulties of implementation.

“Such an assessment is, however, directly contradicted by various parliamentary reports, as well as by the Court of Auditors,” which lamented in 2017 that the United States had sent “no information” to the French tax authorities, the Association reacted. accidental Americans. The association “deeply regrets that its legal critics have not been heard by the Council of State and deplores an opportunity of resistance failed in the extraterritoriality of US law,” she added in a statement.

In addition to the lack of reciprocity in the implementation of the agreement, the lawyer accidental Americans, Me Patrice Spinosi, had invoked to challenge the application of FATCA “the lack of guarantees on the protection of personal data.” A point also contested by the Council of State, for whom “the information collected and transferred as part of the disputed treatment can be used only for tax purposes” and are otherwise “strictly limited and proportionate”.

Complaint to the European Commission

In its statement, the Association of Accidental Americans announced that it would “seize the European Commission of a complaint for breach of EU law,” regretting that the Council of State refused to question the Court of the European Union to decide this question.

Since the coming into force of the Fatca, some “accidental Americans” have been claimed several thousand euros in taxes by the United States without having ever worked in this country. Others saw their bank account closed, their bank fearing US sanctions. Still others are exposed to lawsuits because they can not submit their US tax identification number, which they do not have.

Complaint to the European Commission

In its statement, the Association of Accidental Americans announced that it would “seize the European Commission of a complaint for breach of EU law,” regretting that the Council of State refused to question the Court of the European Union to decide this question.

From Canada:

Just-obtained Directive from the Federal Court:

“Written directions received from the Court: The Honourable Madam Justice Mactavish dated 19-JUL-2019 directing that “The parties are advised as follows: 1. barring any currently unknown contingencies, the Court’s decision will be issued Monday, July 22, 2019, at approximately 2:00 pm EST…”

From France via Bloomberg:

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From @TaxConnections: Demonstrating the penalties awarded to those #Americansabroad who attempt the Sisyphean task of membership in the U.S. Tax, Form and Penalty Club. The greater the effort, the greater the penalties! https://t.co/lyga00Yscd

— U.S. Citizen Abroad (@USCitizenAbroad) July 7, 2019

Introduction

For those wondering what is meant by the “Sisyphean task” …

In the ancient world …

In Greek mythology Sisyphus or Sisyphos (/ˈsɪsɪfəs/; Ancient Greek: Σίσυφος Sísuphos) was the king of Ephyra (now known as Corinth). He was punished for his self-aggrandizing craftiness and deceitfulness by being forced to roll an immense boulder up a hill only for it to roll down when it nears the top, repeating this action for eternity. Through the classical influence on modern culture, tasks that are both laborious and futile are therefore described as Sisyphean (/ˌsɪsɪˈfiːən/).

In the modern world …

In the modern world “Americans abroad” are U.S. citizens who had the temerity to leave the Homeland and make a life somewhere else. They are punished for their self-aggrandizing craftiness and deceitfulness by being forced to file tax and information returns, only to find that when they think they have complied, they are assessed penalty after penalty. They are forced to repeat this year after year until their death or expatriation.

I urge you to read the post referenced in the above tweet. It appears to describe a situation that is unremarkable – Americans abroad who have some kind of tax deferred vehicle, which is assumed (probably incorrectly) to be a foreign trust (and all the compliance horror associated with it).

This raises the question for Americans abroad:

Is it riskier to attempt compliance with the U.S. tax system or not attempt compliance? What other lessons are there?

If you have been assessed penalties in relation to International Information returns, could you please comment.

Following 2016 DC Court of Appeals ruling, IRS agrees that #Americansabroad in France were wrongly denied the right to use certain French taxes as Sec. 901 Foreign Tax Credits to offset U.S. taxes https://t.co/0mz6o81REz pic.twitter.com/2YPNF8xZQE

— U.S. Citizen Abroad (@USCitizenAbroad) June 18, 2019

The background to the case referenced in the above tweet is described here. The “bottom line” result was reported on at the New York Times and Bloomberg.

It its simplest terms the controversy was over whether certain French taxes should be interpreted to be income taxes (in which case they could be used as Foreign Tax Credits) or Social Security taxes (in which case the taxes could not be credited against U.S. income taxes). At a minimum, the case assumes that NOT ALL foreign taxes can be used as tax credits to offset U.S income taxes.

(Beyond that, the DC court of appeal decision provides guidance with respect to (1) Who decides how foreign taxes are to be treated under a tax treaty (hint not ONLY the IRS) and (2) what kind of evidence is relevant in determining the question (hint U.S. dictionaries are not to be used).)

There are many people in the world, who think that all of the foreign taxes paid by Americans abroad can be used as credits against U.S. tax owing.

As part of a “conversation” with the “Powers To Be” in DC, I think it’s important to demonstrate that there are many foreign taxes that are simply not “creditable” against U.S. taxes.

Could you please provide examples from your country of residence? What are specific examples of “taxes” paid in your country of residence that are not eligible to be used as “foreign tax credits” under Section 901 of the Internal Revenue Code.

Advocacy to change the U.S. rules of “citizenship-based taxation” is going strong. For example, last week there was a delegation in Washington, DC. Americans Citizens abroad is active and working hard. Republicans Overseas through the efforts of Solomon Yue has been a leader. Democrats Abroad is starting to rise to the occasion.

Legislative change will require a “conversation” with the “powers to be” in DC. It is difficult for those who have not experienced the difficulties of complying with the U.S. tax code (as a “taxpayer abroad”), to understand the problem.

One of the responses frequently heard is:

“What’s the problem”. You can exempt about $100,000 USD per year under the Foreign Earned Income Exclusion.

Although true, as you know, the exclusion applies to “earned income” only. There are many sources of income that are (1) not earned income and (2) are not taxable in your country of residence and (3) are taxable in the USA.

In order to assist those who will be part of “the conversation” in DC, I would like to ask that you provide examples of how/why a U.S. citizen living in another country with income well below the $100,000 Foreign Earned Income Exclusion can end of paying tax to the United States.

I think that a number of focused examples could be very important. These examples could include things like phantom capital gains and U.S. taxation “kicking in” at a lower level of income than in your country of residence. Of course it would be great to be able to document and wide and diverse range of examples.

When if you comment, if you could provide reasonable detail and specify where you live. Also, if you have any knowledge of how a tax treaty might affect U.S. tax (recognising that tax treaties mostly do not assist individuals) it would be helpful.

Thanks in advance!

Further to my post about commenting in general entitled Announcement March 31st, some specific points on repetitious commenting:

Going back and forth on a point doesn’t advance discussions and, after enough rejoinders, other readers tend to tune it out.  Repetitious comments made by a person or persons in a short period of time can be particularly problematic when a person replies, saying basically the same thing again, to every comment made in reply to their initial comment.

Such comments provide only redundant information and redundant thoughts/ideas while making a thread difficult to read efficiently.  Some people suddenly learn of a problem with their real or alleged US citizenship and are in distress and need information f-a-s-t.  As well, exchange of thoughts and ideas is hampered by repetitious and circular discussion.  Please bear this in mind when commenting.

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Karen Alpert (Australia), John Richardson (Canada), Larry Stern (Israel) and Leonard Tuber (Israel) will discuss “territorial vs. citizenship-based taxation, their many advantages and disadvantages, and the myriad of challenges and questions posed by the US’s use of this type of tax system,” Monday 3 June 12:00 BST (11:00 UTC / 07:00 EDT).

You can submit questions at the TaxLinked site.  For more information and/or to submit a question, click here.

A debate/discussion on Citizenship And Worldwide Taxation: Is It Morally Justified Or Unjustified? between John Richardson and Edward Zelinsky will take place Friday May 17, 2019,  14:00 EDT (18:00 UTC), hosted by TaxConnections, live on YouTube.   It will run for an hour-and-a-half.  

CBT is morally unjustified:  John Richardson (Lawyer, Citizenship Solutions, Toronto, Canada)

CBT is morally justified: Edward Zelinsky (Law Professor, Cardozo School of Law, New York, USA)

Click here for full information, to see the questions which have been submitted, to pre-register, and/or to submit questions   (P.S.: Note at the bottom of this page videos of people who we know.)

The United States Imposes A Separate And Much More Punitive Tax On U.S. Citizens Who Are Residents Of Other Countries, John Richardson, TaxConnections.

 TaxConnections and CitizenshipSolutions Posts by John Richardson, Laura Snyder and Edward Zelinski written after this event was announced: Continue reading →