Monthly Archives: August 2016

Welcome to Citizenship Solutions – John Richardson

Welcome to Citizenship Solutions – The blog of John Richardson

I am guessing (actually I know for sure) that you arrived here because of some aspect of being a U.S. citizen living outside the United States. Maybe you are a Green Card holder. I also know how you are feeling.

“U.S. citizens” and “Green Card holders” are referred to as “U.S. Persons”. So, if you are a “U.S. Person Abroad”, well, life is pretty tough. in fact living as a “U.S. Person” outside the United States is: hard, expensive, confusing and (quite frankly) unsustainable.

Some of you are NOT in compliance with the intricate and (almost) impossible to understand web of tax and reporting requirements. Non-compliance has its share of problems.

Some of you ARE in compliance (as far as you know) with the intricate (and almost) impossible to understand web of tax and reporting requirements. Compliance also has its share of problems (stress, expense, anxiety).

Whether you are in compliance or not in compliance, you have problems. This is because:

U.S. citizenship is the one citizenship in the world that affects virtually every aspect of your life. in addition to the information on this blog, I help people with the following kinds of specific problems/questions (which include):

1. Are you a U.S. citizen at all? Have you relinquished U.S. citizenship along the way? If you have relinquished U.S. citizenship, are you a “U.S. Person” for FATCA and tax filing purposes?

2. Have you just received a “FATCA Letter” addressed to you as an INDIVIDUAL or to you as an ENTITY (corporation, trust, etc.)? How to respond. What’s a W9? What’s a W-8BEN-E anyway?

3. What about that old Green Card sitting in your drawer? What to do ….

4. Renouncing U.S. citizenship – What’s the “right way”? What’s the “wrong way”? The better question is “what’s the safest way”? What about that “back dated” relinquishment?

5. Green Card expatriation – How to exit the tax system and the U.S. immigration system.

6.  Oh My God!! The moment many of you will never forget. Yes it’s a problem. No it’s not as much of a problem as you think. Make certain that you respond and not react. If all you want to do is file U.S. taxes

7.  U.S. S. 877A “Exit Tax” consulting. If you think you can leave the “Land Of The Free” for free, you better think again. A bit about the the United States expatriation taxes. Those of you with a  non-U.S. pension should take specific note!

8. Retirement and financial planning
(including pensions) as a “U.S. Person” abroad – You will be surprised at the problems you will have living as a U.S. tax compliant American abroad. Think (or maybe you shouldn’t) “PFIC“.

9. Coming into U.S. tax complianceWhat are the various options?  Why one option over another? What about “Streamlined”? 99% of you should NEVER use “OVDP”!!!

10. Non-U.S. AKA “Foreign Corporations” – Yes, these can be a BIG problem. Caution: The U.S. CFC tax rules may attribute income to YOU that you never received!

11. Getting a divorce? Are you a U.S. citizen married to a non-citizen? – Your U.S. citizenship will play a role.

Respond, don’t react! – Do NOT make any decisions without understanding the present and FUTURE consequences of those decisions.

So, how do I know this?

First, I am a person (Toronto based lawyer actually) who was born in the United States and has lived almost all of my life outside the United States. In other words, I have lived and do live these problems.

Second, I have spent the last few years of my life assisting “U.S. Persons abroad” survive the unjust imposition of FATCA, FBAR and “CBT” (AKA U.S. “place of birth taxation”) on Americans abroad. I work with many groups of people including: “accidental Americans“, long term dual citizens who wish to retain U.S. citizenship, long term dual citizens who feel they must renounce U.S. citizenship, Green Card holders (whether they live in the United States or not) and those who have ONLY U.S. citizenship. It’s what I do.

Third,
I have been (and continue to be) actively involved in efforts to oppose FATCA in the courts and in the process of making submissions to the U.S. Treasury. If you want to learn about the Alliance For The Defense of Canadian Sovereignty lawsuit against the Government of Canada, see here.

I work with people all around the world! I have given “live presentations” about the “Problems of U.S. citizenship” all over Canada and Europe. I have given a number of “media interviews” about FATCA and the problems of U.S. citizenship. I have testified as a witness before the Canadian House of Commons Standing Committee on Finance (May 2014). I have written hundreds of articles and blog posts about FATCA, FBAR and U.S. taxation-based citizenship. I have and continue to teach courses both for Americans abroad and for professionals who counsel U.S. citizens abroad.

Anyway, the blog is free. The counselling and assistance require individual consultations. Contact me if you want me to help you solve these problems as they apply to YOUR SITUATION.

John Richardson

P.S. Here is the one of the very first posts that I wrote on for this blog. Some posts are “timeless”. “What you need to consider BEFORE consulting a lawyer or tax professional“.

 

 

 

Relinquishing US citizenship: South African Apartheid, the Accidental Taxpayer and the United States S. 877A exit tax

Introducing this “guest post”

This guest post is written by Dominic Ferszt of Cape Town, South Africa. I first became aware of Mr. Ferszt when, in October of 2014, his post: “The Accidental Tax Invasion” was published in Forbes. I have discussed various aspects of “citizenship-based taxation” with him since. I am very pleased that he has accepted my invitation to write this “guest post” for publication at Citizenship Solutions. His post exposes an aspect of “citizenship taxation” and the S. 877A U.S. expatriation tax that has not (as far as I am aware) been discussed before. Those who did NOT acquire “dual citizenship” at birth because of discriminatory laws (example British and Canadian laws saying that citizenship could be passed down from the father but not from the mother) will find this post extremely interesting and relevant.

Without further adieu …

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Apartheid and the Accidental Taxpayer

How the United States Congress has passed legislation which imposes a tax obligation in accordance with the discriminatory policies of foreign nations; and how this might offer a glimmer of hope to millions around the world who feel unjustly targeted by FATCA or the IRS.

By Dominic Ferszt, Cape Town

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Will a business trip to the United States of America trigger a “chance” encounter with Mr. #FBAR?

Prologue: Circa 1948 – George Orwell anticipates the arrival of Mr. FBAR

‘By the way, old boy,’ he said. ‘I hear that little beggar of mine let fly at you with his catapult yesterday. I gave him a good dressing-down for it. In fact I told him I’d take the catapult away if he does it again.

‘I think he was a little upset at not going to the execution,’ said Winston.

‘ Ah, well — what I mean to say, shows the right spirit, doesn’t it? Mischievous little beggars they are, both of them, but talk about keenness! All they think about is the Spies, and the war, of course. D’you know what that little girl of mine did last Saturday, when her troop was on a hike out Berkhamsted way? She got two other girls to go with her, slipped off from the hike, and spent the whole afternoon following a strange man. They kept on his tail for two hours, right through the woods, and then, when they got into Amersham, handed him over to the patrols.’

‘What did they do that for?’ said Winston, somewhat taken aback. Parsons went on triumphantly:

‘My kid made sure he was some kind of enemy agent — might have been dropped by parachute, for instance. But here’s the point, old boy. What do you think put her on to him in the first place? She spotted he was wearing a funny kind of shoes — said she’d never seen anyone wearing shoes like that before. So the chances were he was a foreigner. Pretty smart for a nipper of seven, eh?’

‘What happened to the man?’ said Winston.

‘Ah, that I couldn’t say, of course. But I wouldn’t be altogether surprised if-‘ Parsons made the motion of aiming a rifle, and clicked his tongue for the explosion.

Chapter 5 of George Orwell’s 1984

Writing in 1948, George Orwell (in his book 1984) identified the need to identify and punish all things “foreign” as being important for domestic security.

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Part 1: Tax Treaties, determining “tax residence” and new OECD Common Reporting Standard (“CRS”)

 

The above tweet references an article from Stikeman Elliot which includes:

For CRS purposes, the term “reportable person” generally refers to a natural person or entity that is resident in a reportable jurisdiction (excluding Canada and the United States) under the tax laws of that jurisdiction, or an estate of an individual who was a resident of a reportable jurisdiction under the tax laws of that jurisdiction immediately before death, other than: (i) a corporation the stock of which is regularly traded on one or more established securities markets; (ii) any corporation that is a related entity of a corporation described in clause (i); (iii) a governmental entity; (iv) an international organization; (v) a central bank; or (vi) a financial institution.  See definitional subsection ITA 270 (1).

This morning I received an email that included the following question:

My friend lives and works in country A, and has bank accounts in Country B. He is a permanent resident of Canada. Will the banks in either Country A or Country B, report his accounts to the Canada Revenue Agency? Country A (where he resides) has no income tax system. This is common in Gulf Countries. Country A has not signed on to Common Reporting Standard. Country B (a European country) has signed on to the Common Reporting Standard.

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Does Article 22 the U.S. Australia Tax Treaty require the United States to allow U.S. citizens a foreign tax credit against the 3.8% Obamacare Surtax?

Introduction

The above tweet references a post which I wrote on August 7, 2016 which discussed the (August 5, 2016) decision of the United States Court of Appeals – District of Columbia Circuits in the Esher case. In this case, Justice Millet ruled that:

That extreme reading of the Totalization Agreement rests on nothing more than the Commissioner’s own say-so. It lacks any grounding in the Agreement’s text or in any principle governing the interpretation of international agreements. The tax court’s corresponding disregard of the Totalization Agreement’s textual direction concerning the role of French law in resolving undefined terms and in determining the content of the laws enumerated in Article 2(1)(b) was error and requires reversal.

The complete decision is here:

FRENCH TAXES US COURT REVERSAL 5 AUG 2016 (1)

 

The general point is this:

When interpreting international tax treaties the United States is not permitted to consider ONLY U.S. law when interpreting the treaty. The United States (and the treaty partner country) is required to consider each country’s expectations of what the treaty meant and how it might be interpreted with respect to laws that did not exist at the time the treaty was signed.

I concluded that post with my thought that:

The court ruled that international tax treaties must be interpreted in the context of what were the expectations of the country when the treaty was signed. This may open up the possibility of reconsidering how various U.S. tax laws may affect the residents and citizens of other nations.

For example: To what extent was or is it the expectation of a country that it can be interpreted to allow the U.S. to impose punitive taxation on those who are primarily citizens of and factually residents of other nations?

Time will tell.

The 3.8% Obamacare surtax and Americans abroad …

As the articles in the above tweets demonstrate, the 3.8% Obamacare surtax (assuming it’s applicability to Americans abroad) is considered to be:

– a form of pure double taxation when applied to Americans abroad

– more likely to be paid by Americans abroad than by Homeland Americans

– a way to force Americans abroad to pay for the medical care of Homeland Americans

– a costly compliance nightmare

– an example of “Boldly Go, where no regime of citizenship taxation has ever gone before

#YouCantMakeThisUp!
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The interpretation of US Tax Treaties: Domestic law, foreign law or the intent of the treaty

On August 5, 2016 the United States Court of Appeals for the District of Columbia Circuits issued it’s decision in the Esher case.

This important case is here:

FRENCH TAXES US COURT REVERSAL 5 AUG 2016 (1)

Information about the history of the case is here which includes:

DC Circ. Chides DOJ For Snub Of US Gov’t In French Tax Row

A D.C. Circuit panel grilled the Department of Justice’s Tax Division on Tuesday for arguing a foreign tax dispute with dual U.S. and French citizens without first seeking input from the U.S. government, saying the case requires the court to interpret international treaties and examine other policy issues.

The court’s decision, authored by Justice Millet concluded with:
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