US expats given hope of lower tax bills
Republicans edge towards eliminating need to pay levies overseas and at home
published in the Financial Times
by Demetri Sevastopulo and Barney Jopson in Washington
You can read the article by answering a simple question that appears when the page loads. I cannot post the entire article due to copyright restrictions.
Here are some excerpts:
Millions of US citizens working overseas could see their tax bills lowered by an overhaul of the tax system as Republicans edge towards eliminating a requirement for American expatriates to pay taxes both overseas and in the US.
Kevin Brady, the Republican head of the House ways and means committee, which is drafting a tax reform bill, said lawmakers were considering the measure, which has been the focus of lobbying by Republicans Overseas, a group of party donors around the world.
“It is under consideration. They have made the case,” Mr Brady said in response to a question from the Financial Times at a Christian Science Monitor breakfast. “Lawmakers representing that area of the tax code have made that case.”
The US Chamber of Commerce, a business lobby group, has urged policymakers to consider US-only taxation for individuals, too, arguing that taxing foreign income hurts American managers at the overseas affiliates of US exporters.
Mark Mazur, who was the top tax official in Barack Obama’s Treasury department, said he supported the change, arguing that it was necessary to address the “inequity” of an expat paying tax on the same income to both the US and a foreign government.
“If you take two people, one works in London, one in New York, working for the exact same US multinational — if they make the exact same amount of money you might think they should be taxed exactly the same,” said Mr Mazur, who heads the Tax Policy Center.
Solomon Yue and Michael DeSombre are also mentioned in the article.
There are quite a few comments with JC doing Yeoman’s Duty.
@Harrison,
“JapanT if you don’t have another citizenship then I suggest you to start looking for one right away as it is better to renounce”.
I know. Sadly, that ship has already sailed.
“A W8-BEN doesn’t show IRS compliance”
Of couse not, but it is a part of US tax law that must be complied with. Noncompliance with the law requiring the signing of this form brings penalties and loss of the account.
JapanT- not so, under a Model 1 IGA. The bank can use a form of its own devising. A W8-BEN is not for US citizens, it’s for non-US-citizens. A non-GC non-US-citizen has no reason to sign a foreign tax form.
“The bank can use a form of its own devising. A W8-BEN is not for US citizens, it’s for non-US-citizens. A non-GC non-US-citizen has no reason to sign a foreign tax form.”
To fulfill whose requirements?
The last time I self-certified non-US-citizenship, I ended up crossing out most of the bank’s (non-US) form, and just wrote what I wanted to say (including “I understand that since I am tax-resident only in this country, the bank will NOT be reporting my account to (local tax agency) for forwarding to any foreign tax agency.”)
And signed it. The bank was perfectly happy.
“To fulfill whose requirements?”
Self-certification that the customer is not a US Person.
““To fulfill whose requirements?”
Self-certification that the customer is not a US Person.”
Who requires this? Why must a customer self-certify that they are not a US Person?
I’m on a pretty steep learning curve about how bill pass or die here, but from what I’m told, “conventional wisdom” tells us TTFI will be in Chairman Brady’s “markup”, otherwise he would not have mentioned it to the press.
http://thehill.com/policy/finance/357320-brady-announces-tax-bill-markup-for-november-6
“Who requires this? Why must a customer self-certify that they are not a US Person?”
1. The local government requires the bank to perform due diligence to identify accounts with US indicia, and ask the accountholder to certify their status (USP or non-USP).
2. The bank is legally obliged to ask for the information; the customer is not obliged to respond. However, if it’s a new account they’re opening, they probably do want to answer since otherwise they’ll just be rejected.
This applies under Model 1. I don’t know what’s required of banks under Model 2.
Bubblebustin – do you know what is a markup?
@plaxy
According to Wikipedia it’s, “the process by which a U.S. congressional committee or state legislative session debates, amends, and rewrites proposed legislation.”
Never heard of the term before yesterday.
@Karen
Appreciate your comments.
That said, this all assumes the only solution is via Congress. There are other options.
*****
Changes to the IRC regarding “foreign” would not affect FBAR. Would also require changes to Title 31. Not about tax at all and can easily imagine the US will still want a way to track funds. The accounts would still be foreign to the US.
I will re-enter the IGA but I recall in Canada, not furnishing a SSN to the CRA is a $100 fine. So unless that changed (cannot remember if that was an earlier version of the IGA before actual implementation), would seem to me that either the bank or the CRA is supposed to produce a SSN.
“Who requires this? Why must a customer self-certify that they are not a US Person?”
1. The local government requires the bank to perform due diligence to identify accounts with US indicia, and ask the accountholder to certify their status (USP or non-USP).
2. The bank is legally obliged to ask for the information; the customer is not obliged to respond. However, if it’s a new account they’re opening, they probably do want to answer since otherwise they’ll just be rejected.
This applies under Model 1. I don’t know what’s required of banks under Model 2.
What is the origin of 1.?
“…would seem to me that either the bank or the CRA is supposed to produce a SSN.”
The bank is supposed to obtain the TIN (be it SSN or ITIN).
JapanT- sorry, I don’t understand your question.
@ JapanT,
I see that Japan has a Model 2.https://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx
Here’s a link to the Japan-US FATCA IGA, https://www.treasury.gov/resource-center/tax-policy/treaties/Documents/FATCA-Statement-Japan-6-11-2013.pdf
and some excerpts from it regarding self-certification:
Preexisting Individual Accounts
P. 2 of Annex I (p. 15 of entire document)
Annex I (II)(B)(4)(a). “Where the Account Holder information unambiguously indicates a U.S. place of birth, the Reporting Japanese Financial Institution obtains, or has previously reviewed and maintains a record of:
(1) A self-certification that the Account Holder is neither a U.S. citizen nor a U.S. resident for tax purposes (which may be on an IRS Form W-8 or other similar agreed form); . . .”
New Individual Accounts
p. 8 of Annex I (p. 21 of entire document)
Annex I (III)(B): “With respect to New Individual Accounts not described in paragraph A of this section,* upon account opening (or within 90 days after the end of the calendar year in which the account ceases to be described in paragraph A of this section), the Reporting Japanese Financial Institution must obtain a self-certification, which may be part of the account opening documentation, . . .”
*Paragraph (A) of this section – too long to quote here – says that accounts under $50,000 are “not required to be reviewed, identified, or reported,” though I’d assume they’ll follow Paragraph (B) for all accounts.
“1. The local government requires the bank to perform due diligence to identify accounts with US indicia, and ask the accountholder to certify their status (USP or non-USP).
2. The bank is legally obliged to ask for the information; the customer is not obliged to respond. However, if it’s a new account they’re opening, they probably do want to answer since otherwise they’ll just be rejected.”
What is the origin, the source, the motive power of these legal obligations?
Local legislation implementing the IGA.
“…would seem to me that either the bank or the CRA is supposed to produce a SSN.”
The bank is supposed to obtain the TIN (be it SSN or ITIN).
Who levies the $100. fine for not complying?
In my country, there is no fine.
“*Paragraph (A) of this section – too long to quote here – says that accounts under $50,000 are “not required to be reviewed, identified, or reported,” though I’d assume they’ll follow Paragraph (B) for all accounts.”
According to the Japanese Bankers Association, all accounts regardless od balance of those listed above AND Japanese Nationals who have spent 183 days or more in the US over the previous 3 years, distributed as proscribed in the doc. I received from my local bank.
“Local legislation implementing the IGA.”
Ha! So, one day, in the very merry month of May, the local legislative body met and said, “Hey, why don’t we legislate a requirement for our local citizens requiring them to submit forms certify this or that for a foreign government?”
You’re funny.
“In my country, there is no fine.”
CRS has fines though.
“I will re-enter the IGA but I recall in Canada, not furnishing a SSN to the CRA is a $100 fine. So unless that changed (cannot remember if that was an earlier version of the IGA before actual implementation), would seem to me that either the bank or the CRA is supposed to produce a SSN.”
Fine in Canada, or was it changed or do you know?
JapanT- what is it you’re trying to get me to explain? The legislation implementing the IGA was passed in order to implement the IGA as agreed between my country and the US.