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.
@Japan T as per state dept, all children born overseas to at least one US parent automatically acquires US citizenship plus the citizenship of the country born at considering the country has a law that gives citizenship at birth to children born to foreign workers. Secondly, if that country also recognizes dual citizenship with US as some countries don’t.
plaxy
agreed.
Norman:
CRS is about tax residence not physical residence. The US defines all citizens as tax resident, so the banks ask about citizenship. Yes, they are a bit confused.
Here’s what the ATO tells Australian banks about reportable persons under CRS: https://www.ato.gov.au/General/International-tax-agreements/In-detail/International-arrangements/Automatic-exchange-of-information—guidance-material/?page=5#5_2_Reportable_persons
@plaxy
“JapanT – from what you’ve said, it sounds like it’s not foreign law but Japanese law that requires your children to be identified as children of a parent with a non-Japanese citizenship?
If so, you and they are inevitably subject to that because it’s domestic law.”
That part is true, but FATCA is NOT Japanese law. The data gathered by Japan on Japanese citizens and residents is for the Nation of Japan to use in the administration of Japanese law, not to aid the US in implementing its laws. Yet, that Japanese government data base IS being used to help the US implement its tax laws.
Neither US law nor Japanese law require Japanese banks to report anyone under the threshold, yet Japanese banks are reporting every US person who has an account regardless of their balance.
JapanT
CRS has no lower bound. And FATCA lower bounds are optional. Therefore, I suspect many banks are using just one filter for both systems and ignoring FATCA’s lower bounds.
Japan T:
But how does your bank know? It doesn’t unless you tell them. If the children have not been registered as US citizens, then you can still answer truthfully that they are not US citizens. They may be eligible for citizenship, but they aren’t citizens until they (or you) have applied for it and been approved.
Japan T: “FATCA is NOT Japanese law” — the FATCA IGA (and any implementing legislation) is Japanese law. This is what your banks must follow.
JapanT – “FATCA is NOT Japanese law.”
The Japanese implementation of the IGA presumably is, though.
Crossed with Karen.
Harrison –
“Foreign workers”? I’m not a “foreign worker”, and never have been.
Children born outside the US aren’t US citizens. Some are entitled to claim US citizenship if they choose to do so.
@Harrison
“@Japan T as per state dept, all children born overseas to at least one US parent automatically acquires US citizenship plus the citizenship of the country born at considering the country has a law that gives citizenship at birth to children born to foreign workers. Secondly, if that country also recognizes dual citizenship with US as some countries don’t.”
The first I thought was the case but I did not know the second. Japan does not allow (at least in theory) dual citizenship.
Foreign workers or dual nationals as per state dept. The children are automatically US citizens by being born to one US citizen parent based overseas even if they don’t get a US passport. There is a person who is going through a compliance nightmare right now whose mother was a US citizen and gave birth outside the US. He never had a US passport. So many countless examples of sufferings faced by ordinary people through this CBT/FATCA/FBAR law. CBT might go away ( I seriously doubt that would happen although I do pray for it to go away ) but they would never give up FATCA or FBAR. They want to access the cash cows living overseas to milk them for homeland.
“The children are automatically US citizens by being born to one US citizen parent based overseas even if they don’t get a US passport.”
They’re not entitled to US citizenship unless their USC parent meets the US-residence requirements.
As for this “foreign worker” label – a person who moves to another country is not a “foreign worker” but an immigrant.
@Japan T you are correct as I stated too if the birth country allows dual citizenship which Japan does not. I don’t know if Japan grants citizenship to people born in their country as many countries don’t give citizenship by birth to residents in their countries. Secondly like many middle eastern countries (as per Phil Hodges’s blog ) don’t give citizenship to people by birth and give their own citizenship to people born outside their country for example USA and the child gets two citizenships but they don’t tell their own country that they have a US citizenship too as their countries would cancel their citizenship if found to possess more than one citizenship. For decades rich people from Mideast would fly to USA to deliver their children to give them the gift of US citizenship. Now the same children are scrambling over to renouncing their US citizenship as penalties have scared them too.
Reading the news from all over the world from Hong Kong to Saudi Arabia to Kuwait to U.K. to Canada I found out one common problem from year 2010 when everyone was standing in lines at US embassies in HK and Switzerland to renounce and we were laughing at them. Now it has come to bite us.
JapanT- article here might be of interest to you – https://www.japantimes.co.jp/community/2016/09/14/issues/japans-dual-citizens-get-tacit-nod-keep-status-shadows/#.WfRR_0HTXYU
@ plaxy foreign workers or dual nationals or permanent residents are all the same as per state dept. Yes past residences of the parents are important too but in many cases people living overseas are now finding they are accidental Americans born to US parents. Search on Phil Hodgen’s blogs if you like to do more research on this .
https://travel.state.gov/content/travel/en/legal-considerations/us-citizenship-laws-policies/citizenship-child-born-abroad.html
@ plaxy same thing happening in Mideast and Hong Kong as you stated to JapanT but now Mideast and HK dual nationals are giving up their US passport to avoid penalties as previously going in Switzerland and other countries. I read this news in 2010 about people in long lines to renounce as they were getting aware of FATCA and its implications.
“foreign workers or dual nationals or permanent residents are all the same as per state dept.”
Maybe. Americans often refer to others disrespectfully. I should know better than to rise to it.
I’m a foreign worker. A few years ago the alien registration system was changed to a second-class residential system but mine is still temporary.
@Karen
“Japan T: “FATCA is NOT Japanese law” — the FATCA IGA (and any implementing legislation) is Japanese law. This is what your banks must follow.”
The IGAs are not law. I have not yet found any enabling legislation. The FATCA information sheet given to me by my local bank, prepared by the Japanese Bankers Association statescthat FATCA is US law. It also states “Sins FATCA affects non-U.S. financial institutions as well, the governments of Japan and U.S. have announced a Statement (*1) in order to work together, so that the implementation of FATCA can be carried out without violating Japanese domestic law.” It gives more details but only references US law and does so repeatedly. Not once does this two page document and one page declaration form cite Japanese law. It does cite the IGA, officialky titled “(*1) It is officially named as “Statement of Mutual Cooperation and Understanding between the U.S. Department of the Treasury and the Authorities of Japan to Improve International Tax Compliance and to Facilitate Implementation of FATCA”.”
As the US does not tax bank balances nor transactions (regular wages and payment of bills), this information at least has nothing to do with taxes of any sort, which is another issue.
@plaxy
“They’re not entitled to US citizenship unless their USC parent meets the US-residence requirements.”
I do.
@plaxy ditto I understand your sentiments. It seems from all aspects that US govt don’t like their cash cows living overseas where they can get away paying no taxes on their incomes like in case of married couples with almost over 200,000 $ income and no taxes. Even Canadian consulates processes all your applications late if living overseas for more than five years as they get upset that these people are not contributing to our economy and should not be provided quick services as my Canadian friends told me about their frustrating experiences with Canadian consulates when they passed five years limits.
But have to agree that the US govt is the most strict with all banks in the world scared of its impacts on their dollar transactions which is their lifeline and they all obey to its whims. They would not care to obey U.K., EU, Canadian or any other country’s law but US is an exception. USD being the reserve currency is the problem as explained to me by a bank manager as US govt can get any info from us as they want and freeze and take your accounts from us if they want. We would not provide any other country info about you but your country’s passport is a major problem. That was years before CRS hit the countries. So this information is not relevant now.
JapanT – since you meet the residence requirements, your children are entitled to US citizenship. What that means for their citizenship status in Japan depends on Japanese law. The article I linked to suggests it’s all up in the air at the moment. They may need to choose Japanese or US citizenship at some point.
JapanT – Here’s a reference to legislation implementing CRS:
https://www.nta.go.jp/sonota/kokusai/crs/pdf/02en.pdf
If you can find these Acts, you may find that these are also the laws that were amended to implement the IGA.
@plaxy
Thanks for the link to that article. It is one which I have saved long ago when it first apoeared in print. It is dated, as there now has been a person who HAS lost his Japanese citizenship for not renouncing his second citizenship. This individual was a USC who sought to free himself from FATCA and all the rest by becoming a Japanese National. However, J law requires a new JN to relinquish the former citizenship with in 2 years. He, not wanting to pay the exit tax, did not renounce/relinquish. Somehow, he got caught and lost his JN.