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.
@JapanT, it’s not Japan but IGAs are completed almost with every govt in the world with IRS and Treasury both sifting through data as reported by attorney Virginia in UAE.
https://www.angloinfo.com/blogs/global/us-tax/part-ii-foreign-data-in-chaos-at-irs/
I am an avid fan of her and follow all her blogs as she is full of information,
All foreign banks or local banks as you call them since we all live in those countries are sending their data to IRS as required by IRS.
Recently in India, all Indians had to sign the FATCA forms whether any connection to USA or not. If not signed within 90 days their accounts would be frozen up. This caused panic among Indian immigrants living overseas not connected to USA but living overseas away from India. Many of them had to call their banks in India to send them forms to countries of their residence or went back to India to sign their forms due to time constraints and scary warnings .
Knowing this is a Canadian forum the impact only on dual Canadians are
studied more but these US laws have impacted the lives of US citizens and permanent residents and the world citizens as a whole. The compliance to the bankers have caused all local banks offshore from USA now to raise up their annual charges/ minimum balances when they were none previously for decades. Meanwhile my relatives in USA enjoy no annual charges or any minimum balances even. Sad but true
Sorry to hear that. In my country it’s easy (though expensive) to renounce without complying, but it may not be so easy in all countries.
@plaxy
“JapanT – Here’s a reference to legislation implementing CRS:
From the perspective of implementation of the exchange of information based on the CRS, Act on Special Provisions of the Income Tax Act, the Corporation Tax Act and the Local Tax Act Incidental to Enforcement of Tax Treaties (“Act on Special Provisions,” hereinafter) has been amended as part of the tax reform of 2015, a system for financial institutions described in 1(1)a above (“Reporting Financial Institutions,” hereinafter) to report information described in 1(1)c above to the district director was adopted.
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.”
It still stands as Japanese enacting US law. The same is true for any such situation. Japan did not go to the US and say “Hey, why don’t we do this?” nor did the US approach Japan in the same manner. The US approached every country in the world with demand and where needed followed up with a threat. Japan and every other country adopting their laws to suit not themselves but the US is nothing other than they implementing US law.
Yes, FATCA is US law, but the IGA is not. The distinction is important because if it wasn’t legal under local law it would be difficult/impossible for banks to comply.
I agree that it’s the pits for those of us born in the US, but there it is. Now that CRS has been implemented, even FATCA repeal wouldn’t save USCs from AEOI due diligence, in countries choosing to implement CRS Wider Approach. A US change to RBT would be great, because accounts in the country of residence would cease to be treated as cross-border accounts. But those chickens are a long way from hatching.
The US threatened the banks. The banks went to their local governments begging for help. The G5 put their heads together and decided to make an offer to the US: “We’ll change local law to let banks report on US tax-resident accountholders, if you agree not to threaten them with withholding.” The US took up the offer, and the Model 1 IGA was drawn up. Model 2, with different provisions, came later.
Automatic reporting is here, and probably isn’t going to go away. Very, very unfair for USCs, I agree.
@plaxy
The situation of rules not being enforced in Japan is not unique to immigration and is a very old custom. There are many examples from everyday living here but the easiest to understand are from history.
In the early days of a unified Japan, Christianity was outlawed. Some Han (feudal domains) were energetic in wiping out Christians, others not so much. One Han to the south allowed Christians to remain as long as they did not overtly practice their faith. Whenever new proclaimations to eradicate Christians were received from Edo, the response was along the lines of, “We ain’t got none” and Christians lived in peace in that domain as long as they didn’t anmounce themselves. That is until the Han’s Daimyo got word of a punitive army sent from Edo to put things right in his Han, at which point he ordered all the Christians rounded up and executed.
A less dire situation is more recent. A few decades back the Imperial armed forces of Japan played host to service men and women of various allied nations and quartered them in weight reduction camps. One of the many rules these guests had to follow was to not bring outside food into their camps when they returned from their daily weight losing activities.
As anyone who has ever dieted can tell us, there are times when one may wish to violate this rule, and these weight watchers were no different. One obtained some food from a local and tried to sneak it in to camp hidden under a cloth in his tool bag. He was stopped and searched this time and the guard found his contraband snack, looked around and then at his terrified guest, replaced the cloth over the contraband and let it enter the camp with the guest.
Given the guards actions, the guest thought that this rule was not enforced and the next day returned to camp with contraband sitting on top of his tools in his tool bag and was shocked that this time, the same guard, upon seeing it, snatched it, roared at the guest and beat er.. exercised him severely. He and the other guests would learn that as long as some effort was made at concealing the contraband the guards would pretend to not see it. However, if it was clearly and plainly visable, the full weight of the “law” came down upon them.
Thus it is with most things in Japan. As long as your breaking the law causes the authorities no trouble, they may pretend to not see. As soon as it seems that it might cause them trouble, you get hammered.
And thus I believe it will be with US persons in Japan. As far as I know, no accounts have been frozen or closed yet. No US person has lost their job, yet. But as soon as Japanese FIs and employers get spooked over what the US may do to their incomes from the US, we’re toast.
@plaxy
“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.”
Yes, they will. And unless I am mistaken, that will require the $2,350 fee plus five years of filing tax and info returns to a foreign government after getting their US SSNs. And then STILL possibly have difficulty with banks and employers as others who have gotten their CLNs are reporting.
That’s how things stand today. Do we really think that the situation will be the same years down the road? How will they change, for the better or for worse?
@Harrison says
@JapanT, it’s not Japan but IGAs are completed almost with every govt in the world with IRS and Treasury both sifting through data as reported by attorney Virginia in UAE.
https://www.angloinfo.com/blogs/global/us-tax/part-ii-foreign-data-in-chaos-at-irs/
I am an avid fan of her and follow all her blogs as she is full of information,
All foreign banks or local banks as you call them since we all live in those countries are sending their data to IRS as required by IRS.
Recently in India, all Indians had to sign the FATCA forms whether any connection to USA or not. If not signed within 90 days their accounts would be frozen up. This caused panic among Indian immigrants living overseas not connected to USA but living overseas away from India. Many of them had to call their banks in India to send them forms to countries of their residence or went back to India to sign their forms due to time constraints and scary warnings .
Knowing this is a Canadian forum the impact only on dual Canadians are
studied more but these US laws have impacted the lives of US citizens and permanent residents and the world citizens as a whole. The compliance to the bankers have caused all local banks offshore from USA now to raise up their annual charges/ minimum balances when they were none previously for decades. Meanwhile my relatives in USA enjoy no annual charges or any minimum balances even. Sad but true
Yes, most of that I know. Which is one of the many reasons I am so frustrated. I keep trying to tell people how this is going to end up and keep getting told that this law ans/or that law does not require this and that FI to do what I say they will. And then I see much of it play out here in Japan and other countries.
I am one of few voices raising some of these these concerns here, that may be due to the names and comments I sometimes receive, and often write that I doubt my situation is unique. Yet, I am always needing to defend it, it seems.
“The US threatened the banks. The banks went to their local governments begging for help. The G5 put their heads together and decided to make an offer to the US: “We’ll change local law to let banks report on US tax-resident accountholders, if you agree not to threaten them with withholding.” The US took up the offer, and the Model 1 IGA was drawn up. Model 2, with different provisions, came later.”
True, BUT, it still is a threat to the economies of the nations whose banks were threatened. A backdoor threat at the nations, if you will.
I just chose to describe it in a shorter way.
“Do we really think that the situation will be the same years down the road? How will they change, for the better or for worse?”
My view is that as long as the US treats all US citizens as tax-resident, US citizens with accounts outside the US will likely be treated as reportable.
Renunciation does more or less solve the problems in my country. I had some conflict with one bank which tried to make me hand over my SSN, but I won that easily.
I’m very glad that I’m no longer a US Person. Good luck doing likewise for yourself and for your children, if that’s your preferred solution. It does work.
@plaxy
The comments that follow are not a challange to the comments you made on the legislation (Japanese) you sent a link for. I wish to explore it from the perspective of the Japanese Bankers Association (JBA) which issued the FATCA info sheet. They do not mention any Japanese legislation. They cite US law and US tax authorities but do not mention Japanese law or Japanese authorities other than what I quoted up thread. Whatever Japanese legislation that exists to enable FATCA, they are not taking ownership of it, instead placing it squarely on the shoulders of the US.
The last line of this information sheet reads thus, “If you have any questions regarding the application of FATCA or it tax implications, please consult with a U.S. tax specialists, such as attorneys, certified tax accountants, etc.” (Prepared in June 2014)
J gov is not taking ownership of this.
“True, BUT, it still is a threat to the economies of the nations whose banks were threatened. A backdoor threat at the nations, if you will.”
It’s a threat to countries in which the entire economy is heavily dependent on maintaining correspondent relationships with US banks. Countries like Trinidad & Tobago. That’s what FATCA and CRS are for: forcing capital to flee the tax-haven economies and seek refuge elsewhere. Like in American tax-haven states, or EU tax-haven states. And it works.
““True, BUT, it still is a threat to the economies of the nations whose banks were threatened. A backdoor threat at the nations, if you will.”
It’s a threat to countries in which the entire economy is heavily dependent on maintaining correspondent relationships with US banks. Countries like Trinidad & Tobago. That’s what FATCA and CRS are for: forcing capital to flee the tax-haven economies and seek refuge elsewhere. Like in American tax-haven states, or EU tax-haven states. And it works.”
No doubt, but worked for Canada, Japan and many other nations too.
Just saved and quickly looked over the CRS stuff you sent a link for. Just another “see I told ya so” for my non US coworkers. I tried to warn them that now that the US has started the ball rolling that every other nation is going to follow suit in one way or another. No putting the genie back, the end of privacy is rapidly approaching.
“…the Japanese Bankers Association (JBA) which issued the FATCA info sheet. They do not mention any Japanese legislation. They cite US law and US tax authorities but do not mention Japanese law or Japanese authorities other than what I quoted up thread.”
Aren’t they just explaining to customers why they’re asking the questions? Similar bank information sheets in my country also don’t cite the legal reference. It exists, nevertheless, which is why the banks can ask the questions.
@plaxy
“I’m very glad that I’m no longer a US Person. Good luck doing likewise for yourself and for your children, if that’s your preferred solution. It does work.”
I am happy for you and for all who find their way out. Non starter for me. No money. Do not meet the requirements to gain J citizenship. Just no can do.
@plaxy
“Aren’t they just explaining to customers why they’re asking the questions? Similar bank information sheets in my country also don’t cite the legal reference. It exists, nevertheless, which is why the banks can ask the questions.”
I guess they could be, but I have never seen the like. Every form I have ever had to sign, in the US or here in Japan, has cited domestic law and domestic law only, with the exception of a new form I must fill out when cashing International Postal Money Orders (from the US) and these cite US law…possibly.
In my country, the local legislation obliges (and thus allows) the banks to ask the questions. It doesn’t require the accountholder to respond. It could be different in Japan, perhaps.
According to the JBA “If you are unable to cooperate with the bank for the purposes of the FATCA due diligence, you will not be able to open a new account at that bank.”
The local legislation matters for USC accountholders simply because it makes it impossible for the accountholder to sue the bank for reporting the account information without the accountholder’s permission.
“According to the JBA “If you are unable to cooperate with the bank for the purposes of the FATCA due diligence, you will not be able to open a new account at that bank.”
Yes. That’s bank policy, not law.
“”According to the JBA “If you are unable to cooperate with the bank for the purposes of the FATCA due diligence, you will not be able to open a new account at that bank.”
Yes. That’s bank policy, not law.”
Which is why I have long said that we must look beyond the law to how FIs arecgoing to respond to it. Law or not, comply or do without banking.
Also, law or not, if a person doesn’t answer the account can be reported, and if it comes to the attention of the IRS, may lead to action.
“Also, law or not, if a person doesn’t answer the account can be reported, and if it comes to the attention of the IRS, may lead to action.”
Yep, I know.
And yet there are those who keep saying that to say so is paraniod because the law does not specify that it must happen.
“The local legislation matters for USC accountholders simply because it makes it impossible for the accountholder to sue the bank for reporting the account information without the accountholder’s permission.”
Perhaps but I think it is more to protect banks from non USC US persons. Although a gaijin has recently won against a Japanese company, we gaijin are not provided the same protections, such as they exist, under the law that JNs enjoy, nor in the past anyway, the same responsibility as JNs. It would be extremely difficult for most USCs in Japan to mount a sucessful lawsuit against a J bank for complying with FATCA.
A JN may have better luck.
“And yet there are those who keep saying that to say so is paraniod because the law does not specify that it must happen.”
The difficulty for the bank is that the IRS wants the SSN. If the customer doesn’t supply it, the bank risks failing the “FATCA-compliance” test, which would be disastrous from the bank’s point of view. But the IRS has just given them a break on the requirement to obtain the SSN, so they may now be more likely to report an account as “refractory.”
In this context, what does “refractory” mean?