Tag Archives: Where to invade next

"Savings clause" in US Tax Treaties guarantees US right of taxation on residents and citizens of other nations


Introduction …


It is commonly believed that U.S. Tax Treaties are for the purpose of preventing “double taxation”. In general, US Tax Treaties do NOT prevent double taxation with respect to Americans abroad. For Americans abroad, double taxation is mitigated (but not prevented) by through Internal Revenue Code S. 901 (foreign tax credits) and Internal Revenue Code S. 911 (Foreign Earned Income Exclusion).
U.S. Tax Treaties include a “savings clause” (found in different sections of different treaties) that:
1. Guarantee the right of the United States to impose taxation on its citizens who are residing in other nations; and
2. Guarantee the right of the United States to impose taxation on its citizens as though the treaty didn’t exist.
Note that these “U.S. citizens” may (and in many cases are) citizens of their country of residence.
Those countries that have signed FATCA IGAs have effectively agreed to assist the United States in imposing taxation on their own citizens and residents. This will allow the United States to legally transfer capital out of the signatory country to the United States Treasury (for better use).
May 2016 – Elazar Cole and the “Savings Clause” …
On May 16, 2010, the U.S. Tax Court in the decision of – Elazar M. Cole v. Commissioner of Internal Revenue, T.C. Summary Opinion 2016-22 (May 2016) – confirmed the principle that a U.S. citizen cannot (as a general principle) use the Tax Treaty to prevent U.S. taxation.
The decision is here:
Continue reading