Tag Archives: territorial taxation

#Taxreform17 means that the USA should stop imposing U.S. taxation on the residents of other countries! @SpeakerRyan @RepKevinBrady @SenateJamLdr @OrrinHatch @Stevenmnuchin1

Some of you may be interested in the “short letter” that I sent by regular mail to the “powers to be” in Washington who are working on “Tax Reform”.

A “Town Hall” interview with Speaker Ryan suggests that Tax Reform is going to happen.

The interview confirms that there is pressure to move U.S. corporations to “territorial taxation”. See also the following tweet from the House Ways And Means Committee.

The question is whether individuals will also be considered. In January of 2017 Republicans Overseas proposed “territorial taxation” for individuals. This week the Republican National Committee adopted a resolution from Republicans Overseas urging that “territorial taxation” for individuals be adopted.

Both U.S. corporations and U.S. citizens are “U.S. persons”. If the United States moves to “territorial taxation” for corporations then “territorial taxation” for individuals should follow.

The United States would be will advised to stop imposing U.S. taxation on the tax paying residents of other countries.

What follows is my “short letter”. A PDF copy of the letter is here:

taxreform

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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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