Monthly Archives: July 2014

Even corporations are renouncing U.S. citizenship

Introduction – International business in the modern world

It’s tough to be a U.S. Corporation and compete with non-U.S. companies

This is the question posed by Robert Wood in his recent post about the rise in U.S. companies wanting to NOT have a U.S. domicile. The attempts on the part of the United States to control and tax the activities of “U.S. persons” is resulting in renunciations of U.S. citizenship. People (of the flesh and blood type) are renouncing. Corporations are merging with “foreign” companies in a way that ensures that they cease to be “U.S. persons” for tax purposes.

As you know, the United States laws subject people and companies to U.S. taxes on income earned anywhere in the world. U.S. citizens abroad live with this reality every day of the week.

In fact, U.S. citizens abroad are required to pay tax on their foreign source income at the point it is received – before it is brought back to the United States.

U.S. corporations have a better deal than U.S. citizens (of the DNA people) type. In the case of corporations:

1. Although they are subject to U.S. taxation on business activities/profits outside the U.S.;

2. They are NOT required to pay the U.S. tax until the profits are brought back to the U.S.

This is why U.S. corporations often do NOT bring their profits back (repatriate profits) to the U.S. They will be hit with a massive tax at the point of reentry. (Obviously not a good thing for America, but …) For example, in the Senator Carl Levin inquisition of Apple, Apple CEO Tim Cook made it clear that Apple had no intention of bringing it’s “offshore profits” back to the U.S.

Of course, these rules apply only to corporations that are “U.S. persons”. If a corporation is NOT a U.S. person then the corporation would pay tax only profits earned in the United States.

Mr. Wood explains the process as follows:

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@VlJeker Newsweek interview on #FATCA and #Americansabroad

Virginia La Torre Jeker is a U.S. tax  lawyer  practising in the Gulf. She has shared the text of her recent interview with Newsweek. Although I highly recommend the complete interview, the following is of particular interest.

8. NEWSWEEK: Do you think more and more people will give up their US citizenship?

 VLJ: Absolutely – I have them as clients and am seeing more and more of them each day. I understand that many Consulates and Embassies in Europe have waiting lines for those wishing to expatriate. Think about it  – let’s say you are a Saudi Arabian national and are very happy living and working in Saudi Arabia or some other tax-free Middle Eastern country.  You plan to remain in the region because this is where you grew up, your family is here and your roots are here. Perhaps you became a US citizen after studying in America over a decade or two ago. You also have ownership in the family business and plan to build it up with your siblings.  The US tax laws require you to report extensive information about that foreign-owned business  causing disharmony in your family (including for example, provision of profit and loss statements, as part of your US tax return); you may have to file information returns about the financial accounts owned by that business; you will be paying US tax on your world-wide income and many potential business partners may no longer wish to do business with you because you are an American.  Wearing those shoes, a decision to expatriate may become more understandable

 

#Americansabroad: Thoughts on the May 2/14 Toronto Conference on CBT vs. RBT – #FATCA #FBAR

The May 2, 2014 Toronto Conference on U.S. citizenship-based taxation was a great success. As the ACA Global announcement of results describes the morning and afternoon had separate themes and participants.

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