UPDATE
We are looking for particular ways that U.S. tax law/citizenship law affect the citizens and residents of the various countries represented here (on Brock, Facebook etc.)
For example in Canada, the primary problems are the government-registered savings plans(primarily deemed as foreign trusts) which suffer from mis-matched timing and loss of full tax-deferral; the inability to invest in Canadian Mutual Funds due to PFICs; capital gains tax triggered by the sale of principal residence; pensions being treated as foreign trusts, etc. Is it the same in UK, France, Germany, Switzerland, Singapore, Hong Kong, Israel, Japan etc? What other unique situations occur due to the incompatibility of U.S. tax law and your country’s tax laws? What is the interplay produced by the citizenship laws of your country ? Does your country allow for dual citizenship?
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Cross-posted from citizenshipsolutions
by John Richardson
This is post is “based on” (not identical to) one of two submissions that I submitted in response to Senator Hatch’s request for submissions regarding tax reform.
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Why is the United States imposing full U.S. taxation on the Canadian incomes of Canadian citizens living in Canada?
The Internal Revenue Code mandates that ALL “individuals” , EXCEPT “non-resident aliens”, are subject to full taxation, on their WORLDWIDE income, under the Internal Revenue Code. The word “individuals” includes U.S. citizens regardless of where they live and regardless of whether they are citizens and residents of other countries where they also pay tax. This means that, by its plain terms, the United States imposes full taxation on the citizens and residents of other nations, because they are also (according to U.S. definitions) U.S. citizens. The United States is the only country in the world that has a definition of “tax residency that mandates full taxation based ONLY on citizenship.
How “U.S. citizenship” and U.S. “taxation” interact
Principle 1: The United States is one of the few countries in the world that confers citizenship based SOLELY on birth on its soil.
Principle 2: The United States is the ONLY country in the world that imposes full taxation ON THE WORLD INCOME of its citizens, REGARDLESS OF WHERE THE U.S. CITIZEN LIVES IN THE WORLD.
Bottom line: The United States is the ONLY country in the world that imposes full taxation, on WORLDWIDE income, based ONLY on the “place of birth”!
A practical example: A person whose only connection to the United States is that he was born in the United States, who lives in Canada (and may have never lived in the United States and whose only income is earned in Canada), is required to pay U.S. tax on that income.
This resident of Canada is treated AS THOUGH HE WAS A U.S. RESIDENT.
NOTE ALSO THAT THIS INDIVIDUAL IS REQUIRED TO PAY TAX TO CANADA! He is subject to “double taxation”.
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