Liberty and justice for all United States persons abroad

The Isaac Brock Society

Tag Archives: extra-territorial taxation

What is Tax Residency? – Episode 1 with John Richardson & Olivier Wagner

Posted on by Posted in Issues regarding US persons abroad 95 Comments


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The issue of tax residence has gained so much attention since the “crackdown” on non-resident US Persons began in 2009. It is commonly understood that you pay taxes to the country/state/city-town that you reside in. (For an interesting comparison of differences between countries please see this incredible list compiled by the OECD). It simply does not occur to anyone that they would be required to pay taxes to a foreign government.

However, the United States claims jurisdiction due to citizenship. One does not even have to have touched foot in the U.S., according to U.S. law. Of course, due to the viciousness of the U.S. “FBAR Fundraiser” many people began to resist whether of anger or fear.

Not much has changed* , in spite of all the factors that have contributed to this debacle (and debacle it is, what could one expect when a country tries to take what is someone else’s, based on an idea of fake residence?).

For a detailed discussion concerning the determination of tax residence and related factors, please see here.

In this interview, John Richardson speaks with Olivier Wagner about tax residency and how a seemingly simple concept has become so terribly important in the 21st century.

It’s Happening Again – Enough is Enough is Enough

Posted on by Posted in Issues regarding US persons abroad, Law & Morality 103 Comments

 

 
NB: STAY TUNED – a 7-part video on the Transition Tax, with
John Richardson & Karen Alpert are available here .
 

NB: For anyone with time to spare/the interest/needing specifics to make the point regarding the “intention” of the law, here are some of the relevant House/Senate hearings and/or documents:

Oct 3, 2017 Full Committee Hearing -Senate Finance

Nov 6 – 9, 2017 H W & M Markup
Nov 13, 2017 Open Executive Session to Consider an Original Bill Entitled the Tax Cuts and Jobs Act Sessions also continued Nov 14, 15, 16 with videos at the page)
Supporting Document Markup – Senate Finance Committee

*******

Another day, another set of articles and comments where the #TransitionTax & #GILTI are being stuffed down the throats of expatriates who have their own small corporations. The proliferation of articles on this issue, all proclaiming the U.S. can now inflict a deeper cut into the retirement savings of non-residents, is infuriating. The first two articles at least expressed the idea that these provisions do not might affect non-resident U.S. taxpayers.

Max Reed , posted on November 3, 2017:

As part of this transition, the new rules impose a one-time 12% tax on income that was deferred in a foreign corporation. Although perhaps unintentional, since US citizens will not benefit from a territorial model, the new rules impose a 12% tax on any cash that has been deferred since 1986.

Kevyn Nightengale, posted on November 10, 2017 (I have not included the updated comments because this is what we saw at that time):

This provision was not designed to catch individuals (I think), and certainly not Americans abroad – they are collateral damage. it’s incredibly unfair.

When I saw the House version, I expected that individuals would be exempted after a sober second (or third) thought. Or at least individuals living abroad would be exempted. But seeing a parallel provision in the Senate version makes me expect the worst.

Seems fairly obvious that the biggest clue that the #TransitionTax IS NOT meant to apply to small CFC’s is that they are not “transitioned” from a worldwide system to a territorial one. This is so basic it is hard to believe nobody just calls these people out on this. How many tax professionals watched all of the House/Senate hearings? Many of us did, all hoping to hear that the move to territorial would include individuals; or at least some mention of us. There simply was nothing to suggest that this tax applied to anyone except large multi-national corporations.This provides the context in which the law was conceived. It should be considered just as thoroughly as the plain reading that professionals claim catches expats in the net. Just exactly who is really making the law here?
Continue reading →

Taxation of #AmericansAbroad in the 21st Century: “Country of birth” Taxation vs. “Country of Residence” Taxation- Part V (Final)

Posted on by Posted in Citizenship Issues 91 Comments

cross-posted from citizenshipsolutions

by John Richardson

Update January 2018: This post has been updated with some new links and discussion

Part I is here.

Part II is here.

Part III is here.

Part IV is here.

*******

Taxation of #AmericansAbroad in the 21st Century: “Country of birth” Taxation vs. “Country of Residence” Taxation- Part V (Final)

What the U.S. calls citizenship-based taxation is actually a U.S. claim that it has the right to impose “worldwide taxation” on the residents and citizens of other countries.
Continue reading →

Taxation of #AmericansAbroad in the 21st Century: “Country of birth” Taxation vs. “Country of Residence” Taxation- Part II

Posted on by Posted in Citizenship Issues, Issues regarding US persons abroad 23 Comments

 

cross-posted from citizenshipsolutions

by John Richardson

Update January 2018: This post has been updated with some new links and discussion.

Part I is here.

*****

We are witnessing what McGill law professor Allison Christians once referred to as the “Story of The Century“. To borrow from Professor Christian’s post:

The US is right now imposing enormous penalties and unleashing general chaos on people living in other countries with US citizenship, both by newly enforcing long-ignored rules and by layering on top of these rules a new and more draconian layer of enforcement. The chaos comes in the form of fear-inducing, devilishly complicated and duplicative paperwork, and penalties, most of all penalties, and it is being piled on to millions of people around the world, many of whom, like Cruz, are very possibly only beginning to understanding that citizenship status is mostly conferred upon rather than chosen by individuals.

Ted Cruz should consider himself very lucky. The Canadian citizenship he claims he didn’t realize he had, doesn’t carry any punishment IN CANADA for his failure to recognize it. Moreover renouncing Canadian citizenship, if he really intends to follow through on that promise, will be relatively simple, cheap, and painless other than any damage (if any) to his US political career. (Interestingly Australian Green Party Senator Larissa Waters was forced to resign because she was born in Canada and still (although she was unaware of it) held Canadian citizenship.

Not so if Mr. Cruz he had lived his life in Canada with his current apparent dual status. US citizens abroad now understand that discovering ties to the US means discovering a world of obligations and consequences flowing from citizenship that one was expected to know and obey. Ignorance of the law being no excuse, the punishments range from the merely ridiculous–many times any tax that would have ever been due–to the infuriating: life savings wiped out and many future tax savings sponsored by your home government, such as in education or health savings plans, treated as offshore trusts and therefore confiscated by the US. Moreover there is no ready escape hatch for the newly discovered and unwanted US citizenship: five years of full tax reporting compliance must be documented, appointments must be made with officials, fees must be remitted, interviews must be conducted, and in some cases exit taxes must be paid. If some in Congress get their way, renunciation could even mean life-time banishment from the US someday soon.

In the grand scheme of things Ted Cruz’s citizenship is a non-story. But for what it illustrates about citizenship-based taxation, it could be the story of the century.

The Debate – Taxation Based On The “immutable Characteristic of Place of Birth”
Continue reading →

Taxation of #AmericansAbroad in the 21st Century: “Country of birth” Taxation vs. “Country of Residence” Taxation- Part I

Posted on by Posted in Citizenship Issues 28 Comments

 

cross-posted from citizenshipsolutions by John Richardson

Update January 2018: This post has been updated with some new links and discussion.

Prologue – The “Story Of The Century

Since July 1, 2014, the United States via threats threats of the FATCA Sanction, has begun a “world wide hunt” for people born in the United States
(or are otherwise deemed to be “U.S. tax subjects”). A compilation of my posts describing the mechanics, effects and costs of FATCA and the FATCA IGAs is available in “The Little Red FATCA Book“. FATCA has spawned litigation against both the U.S. and Canadian Governments. A discussion of the “Alliance For The Defense Of Canadian Sovereignty” FATCA lawsuit against the Government of Canada is available here. Some thoughts on the “U.S. FATCA Legal Action” lawsuit against the U.S. Government are here. Both lawsuits have been vigorously defended by the respective Governments. The U.S. lawsuit may have reached the end of its viability (lack of standing and various procedural issues). The Canadian lawsuit continues.

With respect to those “Born In The USA”, the U.S. legal “claim of tax jurisdiction” is two-fold:

1. Those born in the United States (unless they have relinquished U.S. citizenship” for both tax and nationality purposes) are U.S. citizens.

2. Citizens of the United States are subject to the provisions of the Internal Revenue Code regardless of where they live in the world. The Internal Revenue Code (“IRC”) includes but is not limited to the obligation to pay taxes according to U.S. tax rules. The “IRC” also includes a wide range of “penalty laden reporting requirements“. The “IRC” also strongly discourages (through penalties and sanctions) participation in non-U.S. pension plans, non-U.S. investments (including non-U.S. mutual funds), the use of “non-U.S. business corporations” and (incredibly) non-U.S. spouses. (Even the divorce of a U.S. citizen and non-citizen is likely to be significantly more expensive.) As a result, the “extra-territorial application of the “IRC”) has the effect of exercising U.S. “control” over the lives of it’s citizens who do NOT live in the United States. Therefore, it is clear that the “extra-territorial” application of the “IRC” both (1) imposes the full force of the “IRC” on the resident/citizens of other countries and (2) has the effect of imposing the U.S. cultural values mandated in the “IRC” on those other countries. One can identify a list of the “10 Commandments” which are imposed on Americans abroad in an FBAR and FATCA world.

(Note that with the exception of U.S. citizens and “permanent residents”, as per Internal Revenue Code Sec. 7701(b), an actual physical connection to the United States is required to establish U.S. tax residency.)

As the article referenced in the above tweet makes clear, many people “claimed” by the United States as “tax residents”have never had any connection to the United States except that they were born there. The article includes:

Awad Al-Zahrani, whose son has US citizenship, said he would give it up.

“My son got the passport since he was born there while I was studying in the country back in 2000. At the time, the Saudi embassy had told me that it would not be a problem for him to hold two passports. Now that we have to pay taxes, though, we’ll be giving the US passport up.”

Abdulrahman Al-Habib, head of journalism studies at KAU, argues that Saudis who were born in the US should be exempt from paying taxes.

“We should establish a unified center to help Saudis clear their former tax registers,” he said.

US Consul-General Todd Holmstorm,however, confirmed that US citizens should pay income tax and called on their international counterparts to help them eliminate tax evasion.

“The tax law is designed to combat evasion through increasing transparency in the financials of US taxpayers,” he said.

Mr. Holmstorm’s bio indicates that his career has had a Canadian connection in Ottawa, Canada. His comments in the above article imply that he believes that those (1) born in the U.S. who (2) do not live in the U.S. and (3) do not pay taxes to the U.S. are guilty of “tax evasion”. Strong language indeed. Yet, these are his words which clearly reflect the attitude and policy of the U.S. Government.

 
 

Wisdom of “Three Monkeys” explain why: Although there is little support for “citizenship-based taxation” repeal is difficult

Posted on by Posted in Issues regarding US persons abroad 10 Comments

cross-posted from citizenshipsolutions
by John Richardson

 
 
 
 
 
 
 
 
Wisdom of “Three Monkeys” explain why: Although there is little support for “citizenship-based taxation” repeal is difficult

 
 
 
 
 
 
 
 
 
 
 
 
 

The uniquely American practice of “imposing direct taxation on the citizen/residents of other nations” (“citizenship-based taxation”) has NO identifiable group of supporters (with the exception of a few academics who have never experienced it and do not understand it).

The Uniquely American practice of imposing direct taxation on the citizen/residents of other nations has large numbers of opponents (every person and/or entity affected by it). In addition to the submissions of Jackie Bugnion, “American Citizens Abroad“,
“Democrats Abroad“, Bernard Schneider there is significant opposition found in the submissions of a large number of individuals. It is highly probable that the submissions come from those who are attempting compliance with the U.S. tax system.

The “imposition of direct taxation” on the “citizen/residents of other nations” evolved from “citizenship-based taxation”. “Citizenship-based taxation” was originally conceived as a “punishment” for those who attempted to leave the United States and avoid the Civil War. I repeat, it’s origins are rooted in PUNISHMENT and PENALTY and not as sound tax policy.

In 1924, the U.S. Supreme Court in Cook v. Tait upheld the U.S. practice of “citizenship-based taxation”. This means only that (assuming the validity of the decision almost 100 years later), the U.S. has the right to impose “punishment and penalty” (Justice McKenna actually said that “government by its very nature benefits its citizens”) in the form of “citizenship-based taxation”. This does NOT mean it’s a good idea to do so. Cook v. Tait should be considered in terms of (1) the evolution of citizenship and (2) the evolution of taxation.
Continue reading →

Rep. Mark Meadows & Sen. Rand Paul – Important Letter to White House/Treasury Urging Action to Nullify FATCA

Posted on by Posted in Issues regarding US persons abroad 167 Comments

Senator Rand Paul and Congressman Mark Meadows sent a letter this week to US Treasury Secretary Mnuchin and Director of White House Management and Budget Office Mulvaney.

Letter of Senator Paul and Congressman Mnuchin to Secretary of The Treasury and the Director of White House Management and Budget Office

Co-Leader of the Campaign to Repeal FATCA, Nigel Green, comments that:

“Mark Meadows and Rand Paul Letter to White House and Treasury Urging Executive Action to Nullify FATCA Is a ‘Landmark Moment’ and that “The Foreign Account Tax Compliance Act “has only rolled on because of legally unauthorized ‘intergovernmental agreements,’” so cancelling them would “doom this terrible, toxic law.”

The full text of Mr. Green’s commentary are at PressWire and at ValueWalk.

The Little Red #FATCA Book – Review, Identify & Report on U.S. Persons How #FATCA affects the non-US World

Posted on by Posted in Issues regarding US persons abroad 22 Comments

reposted from the citizenshipsolutions blog

As many of you know, the long-awaited #FATCA hearing will take place three weeks from today. This is exciting and followed by the news that Congressman Mark Meadows will reintroduce his repeal FATCA legislation. Closely matching is the effort of Nigel Green & Jim Jatras. The recent letter, endorsed by major think tanks, etc is here . We still await the hoped-for tax reform. The fate of those who have not yet chosen whether to become compliant and/or renounce hangs in the balance. Regardless of the outcome(s), our direction will become much clearer in the next little while.
Continue reading →

Reminder: Solving US Citizenship Problems Toronto Sat. Jan 28

Posted on by Posted in Issues regarding US persons abroad Leave a comment


 
WHEN: 4:00 – 6:00 pm
WHERE: 100 St. Joseph St. Carr Hall, Room 405 Toronto ON M5S 2C4 MAP
ADMISSION:PLEASE REGISTER IN ADVANCE by email to nobledreamer16 at gmail dot com and kindly include your phone number
COST: $20 payable in cash at the door
WHO: John Richardson, B.A., LL.B., J.D. (Of the bars of Ontario, New York and Massachusetts), Toronto citizenship lawyer and Co-chair of the Alliance for the Defence of Canadian Sovereignty and the Alliance for the Defeat of Citizenship Taxation. citizenshipsolutions.ca

Information presented is NOT intended or offered as legal or accounting advice specific to your situation.

Solving U.S. Citizenship Problems-with special guest Andrew Grossman Montréal Monday December 5, 2016

Posted on by Posted in Issues regarding US persons abroad, Tax Treaties 25 Comments

A very special meeting for “U.S. Born People” or those who are otherwise “U.S. Persons” !(Naturalized U.S. citizens or Green Card holders)

Joining John Richardson will be Andrew Grossman

Discussing the “hot topic” of U.S. citizenship (including its liabilities in a FATCA and FBAR world)

In addition to focusing on the problems faced by those who agree they are U.S. citizens (to be a citizen or not to be a citizen …), this seminar will include consideration of …

     

  • Why the US cannot automatically restore your citizenship without your consent

    •  

  • The advantages of not making use of benefits of U.S. citizenship

    •  

  • Why the U.S. cannot force those born abroad to accept U.S. citizenship

    •  

  • Dominant Nationality & FATCA

    •  

  • About the revenue rule: How is it affected by the Canada U.S. Tax Treaty? Is the Revenue Rule on the way out?

    •  

  • Can the IRS place a lien on my assets even though I live in Canada?

The idea for this meeting grew out of Andy’s participation on a post at the Isaac Brock Society (Andy05).

“If anyone wants to follow up on issues I have raised, I will be in Montréal Dec. 1-3 & 5-6 and in Stanstead QC Dec. 3-5 and would be glad to meet for coffee and exchange views. I do not seek and scarcely ever accept clients but like to exchange views as an academic lawyer with a view to nationality law, cross-border tax and conflict of laws. French or English ok.”
Continue reading →