Introduction …
This post is largely motivated by two recent Facebook discussions.
First discussion:
A recent discussion in the American Expatriates group explored the question of whether a U.S. citizen who was a “tax resident” of another country could use a “tax treaty tie breaker” to avoid U.S. taxation. The discussion began with:
Good Morning, does anyone know something about Tax treaty tiebreakers, Would that be a possible solution for Americans Abroad, Dual Citizens, Accidental Americans ?
Tax treaty tiebreakers are rules that are used to assign a person’s tax residency to one country when an individual is a tax resident of both countries. In the context of U.S. tax treaties, treaty tie breaker rules are used when an individual is both:
1. A U.S. person for tax purposes (U.S. citizen or U.S. resident); and
2. A tax resident of another country.
It is very common to use tax treaties to assign tax residency to a country when an individual is a tax resident of more than one country
Questions:
1. Does this mean that without the “savings clause” that that U.S. citizens living permanently in Canada would no longer be (in a practical sense) subject to “citizenship-based taxation”?
2. If the answer is that: the “savings clause” (by not allowing a “tax treaty tiebreaker”) is responsible for “citizenship-based taxation” in Canada – then is Canada by agreeing to the “savings clause” responsible for imposing U.S. “citizenship-based taxation” in Canada?
Second discussion:
A second discussion raised the question of whether Canadian residents could sue the Government of Canada for entering into a treaty which would subject them to U.S. worldwide taxation. (Although the ADCS FATCA lawsuit argues that the amendments to Canada’s Income Tax Act violate the Charter, one wonders whether one could argue that the IGA itself violates the Charter.)
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Here is the Memorandum of Argument of our Plaintiffs (Gwen and Kazia) for our FATCA IGA legislation lawsuit that was submitted on October 3, 2018 to Canada’s Federal Court. [Note that text is limited to 30 pages.]
The Memorandum can be found HERE.
The gist of our argument (page 12) is that the FATCA IGA legislation is inapplicable to Provincially regulated institutions and violates Sections 7, 8, and 15 of Canada’s Charter of Rights.
Some Excerpts:
— “The Impugned Provisions trench upon the core of the provincial power over property and civil rights because they constitute the regulation of a particular industry – the financial industry – and the regulation of this particular industry is an exercise of the provinces’ core powers over property and civil rights.40″
—”…although some US Persons in Canada have obligations under US law to report their Accountholder Information to the IRS, they generally do not have an obligation to report this information to Canada.”
…“Canada admits that it does not know how many account records have been shared with the IRS which are associated with individuals who are not US Persons.49…”
—”That the Impugned Provisions authorize warrantless searches without any notice or means of judicial review of any kind is undisputed and fatal to their reasonableness.”
—“But Canada has admitted that it does not oversee – meaningfully or at all – the conduct of Canadian FIs in determining whose Accountholder Information will be reported to both Canada and the United States.”
—“…it is impossible for Canada to establish that its own use for domestic tax compliance purposes of Accountholder Information obtained pursuant to the Impugned Provisions (to which it admits63) is reasonable because Canada’s use of that information is unrelated to the objective underlying the Impugned Provisions.”
— “The plaintiffs and other reasonable hypothetical individuals have a reasonable expectation of privacy in their Accountholder Information. Canadian courts have observed that personal financial information prima facie attracts a reasonable expectation of privacy, and that individuals can reasonably expect their financial institutions to keep their information confidential.
—“Canada cannot justify the s. 8 infringement under s. 1 of the Charter because it cannot demonstrate that the Impugned Provisions minimally impair s. 8.”
—“Most importantly, the Impugned Provisions undermine the Group’s access to a basic aspect of full membership in Canadian society by denying them the protection of Canadian sovereignty by exposing them to the extraterritorial enforcement of another state’s taxation and tax compliance regime.”
NEXT STEPS:
— Canada responds to our Memorandum of Argument by November 21, 2018.
— We reply to Canada by December 7, 2018.
— Trial is held in Vancouver beginning January 28, 2019
cross posted from Citizenship Solutions
Circa 2015:
US Passport application links Citizenship (State Dept) to Taxation (Treasury) to enforce "Taxation based Citizenship" https://t.co/UIINgzbpF2 via @ExpatriationLaw
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 2, 2018
The logical progression continues …
I just got off the phone with someone who has just received a letter from the IRS stating that:
1. He had a “seriously delinquent” tax debt; and
2. That notice of the “seriously delinquent” tax debt was being forwarded to the State Department.
(In 2016 I did a presentation on this topic just a few months after the law came into force. You may view the presentation here.)
It is clear that the letters from the IRS have started to go out. The purpose of this post is to explain in simple terms what this means for Americans abroad.
To put it simply:
1. If you have received the notice and you do NOT have a current U.S. passport then:
The State Department cannot issue you a passport.
2. If you have received the notice and you DO have a current U.S. passport then:
The State Department may revoke your passport but is not required to revoke your passport. Continue reading
Last week the CEO of Republicans Overseas and a Canadian legal expert spoke to me about tax cuts and post-Brexit opportunities with the US.
Give it a watch here: https://t.co/zk5fi2CJkt
— Steven Edginton (@StevenEdginton) September 25, 2018
reprinted with permission of the author Helen Burggraf
American Expat Financial News Service
Photos by Steven Edginton, Politics UK
steven.edginton@hotmail.com
September 24, 2018
updated 1:02 PM CEST, Sep 27
Legislation that its proponents say would significantly improve the lot of American expatriates, many of whom have been left reeling by the Trump tax reforms introduced at the end of last year, will be introduced in Congress before the end of the month.
This was the message delivered to a London audience of around 80 mainly expatriate Americans last week by Republican Overseas global chief executive Solomon Yue, (pictured above, far left, and below), and again a few days later to an also mainly expat audience in Paris.
Today Yue is due to bring his message to expats in Frankfurt, with similar events scheduled for Berlin and Rome over the next few days.
Yue’s appearances were his latest on a global whistle-stop tour of key foreign business centers around the world that aims to rally support among – and ideally as well, the active involvement of – American citizens living abroad for legislative changes in the way their country currently taxes them, in the run-up to the midterm elections in November.
Continue reading
UPDATE SATURDAY September 15, 2018
(click on the picture for a clearer image)
A Letter from Monte Silver
Americans against the Repatriation/GILTI taxes – within striking distance of winning and you can help! And what to do with the October 15 filing deadline?
On August 1, 2018, the Treasury issued proposed regulations that interpret the Repatriation tax law – a 250 page very complicated document. I discovered that in issuing the document, Treasury seriously violated numerous Federal laws and procedures. This gives us tremendous leverage in negotiating for an exemption from the Repatriation & GILTI laws. It is not unreasonable to expect that this battle may be won by December 15, 2018. As you many have an October 15, 2018 filing deadline, I attach a relevant portion of an IRS publication stating that you may be able to extend the filing date until December 15, 2018. I suggest that you discuss this with your US CPA specialist to see if this applies to you.
Continue reading
