Tag Archives: citizenship taxation

Part 1: What God Hath Wrought – The #FATCA Inquisition (Review, Identify and Report on "U.S. Persons") – "Entity Edition"

Prologue – All non-U.S. “Entities are subject to the FATCA inquisition” …


 
How the U.K. IGA affects the U.K. PTA …
The online discussion referenced in the above tweet is about a U.K. PTA account. How can FATCA, (like the recent passport revocation bill which is one of the many “Revenue Offshore Provisions” used to target Americans abroad), included to finance the costs of the 2010 HIRE Act, possibly intrude into a U.K. PTA? To be clear, a U.K. PTA is similar to a U.S. PTA. Full details on a UK PTA are here. The information (maybe U.S. Treasury doesn’t believe it) is that a U.K. PTA is a charity and is described as:

A PTA is an excellent way to bring together parents, teachers and your local community to raise money and to support the school. It provides an opportunity for everyone to work together towards a common goal. All parents, teachers and school staff can get involved even if they only have a small amount of time available. Whatever type of association you decide to form, your school will benefit from the additional funds it will raise and the increased opportunity for parents to be more involved in school life.
 

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CBT extracts capital from the economies of other nations. Example of CBT extraction in action


Everybody knows that U.S. “citizenship taxation” extracts capital from other nations and transfers it to the U.S. Treasury. The above tweet references an interesting Facebook post that demonstrates “CBT Capital Extraction” in action.
As always, the comments are interesting. The post begins with:
cbtcapitalextraction-300x284
The author, Heitor David Pinto has been an extremely prolific and effective advocate for residence based taxation. He also submitted comments to the Senate Finance Committee in April 2015.

Interview with GordonTLong.com – Citizenship based taxation, PFIC, the S. 877A Exit Tax and #Americansabroad


On May 22, 2015 I was interviewed by Gordon T. Long. There is NO way to discuss U.S. “citizenship taxation” (which is primarily “place of birth taxation”) without discussing the S. 877A Exit Tax rules. During the month of April 2015, I wrote a 14 part series on “How the S.877A rules affect Americans abroad“. The interview with Mr. Long serves as a good reminder (or if you don’t want to read the posts) on:
– what it means to be a “covered expatriate
how the U.S. S. 877A “Exit Tax” rules operate to impose punitive “taxation” on non U.S. pensions (See the actual scenarios of how the Exit Tax applies to various individuals including those with a non-U.S. pension.

– more
This topic is of extreme important to anybody with a U.S. place of birth. Those with a “U.S. place of birth” begin life as a U.S. citizen. Therefore, those born in the U.S. are in effect:

“U.S. Taxpayers by birth”.

The U.S. is using FATCA to search the U.S. for people who were “born in the USA” to bring them into the U.S. tax system. More and more people are receiving “The FATCA Letter“.

This interview with Mr. Long really should be included as part of the “Exit Tax” series.
Therefore, I have designated my interview with Mr. Long to be:
Part 15 of the Exit Tax Series.
As a reminder this series of “S. 877A Exit Tax Posts” includes:
Part 1 – April 1, 2015 – “Facts are stubborn things” – The results of the “Exit Tax
Part 2 – April 2, 2015 – “How could this possibly happen? “Exit Taxes” in a system of residence based taxation vs. Exit Taxes in a system of “citizenship (place of birth) taxation
Part 3 – April 3, 2015 – “The “Exit Tax” affects “covered expatriates” – what is a “covered expatriate“?”
Part 4 – April 4, 2015 – “You are a “covered expatriate” How is the “Exit Tax”  actually calculated
Part 5 – April 5, 2015 – “The “Exit Tax” in action – Five actual scenarios with 5 actual completed U.S. tax returns
Part 6 – April 6, 2015 – “Surely, expatriation is NOT worse than death! The two million asset test should be raised to the Estate Tax limitation – approximately five million dollars – It’s Time
Part 7 – April 7, 2015 – “Why 2015 is a good year for many Americans abroad to relinquish U.S. citizenship – It’s the exchange rate
Part 8 – April 8, 2015 – “The U.S. “Exit Tax vs. Canada’s Departure Tax – Understanding the difference between citizenship taxation and residence taxation
Part 9 – April 9, 2015 – “For #Americansabroad: US “citizenship taxation” is “death by a thousand cuts, but the S. 877A Exit Tax is “death by the guillotine”
Part 10 – April 10, 2015 – “The S. 877A Exit Tax and possible relief under the Canada U.S. Tax Treaty
Part 11 – April 11, 2015 – “S. 2801 of the Internal Revenue Code is NOT a S. 877A “Exit Tax”, but a punishment for the “sins of the father (relinquishment)
Part 12 – April 12, 2015 – “The two kinds of U.S. citizenship: Citizenship for “immigration and nationality” and citizenship for  “taxation” – Are we taxed because we are citizens or are we citizens because we are taxed?”
Part 13 – April 13, 2015 – “I relinquished U.S. citizenship many years ago. Could I still have U.S. tax citizenship?
Part 14 – April 14, 2015 – “Leaving the U.S. tax system – renounce or relinquish U.S. citizenship, What’s the difference?
Part 15 – May 22, 2015 – “Interview with GordonTLong.com – “Citizenship taxation”, the S. 877A Exit Tax, PFICs and Americans abroad
 
 

Part 10 – The S. 877A "Exit Tax" and possible treaty relief under the Canada US Tax Treaty

Introduction – The Canada U.S. Tax Treaty Does Not Always Prevent Double Taxation


When countries independently make major changes in tax law, double taxation can occur
The following comment from 5thSwiss on the Isaac Brock Society site explains why and how double taxation can be a reality. It also underscores the dangers of a U.S. citizen leaving the United States.

It’s not obvious that renunciation of citizenship will cure failure to report in the past, or forgive unpaid tax. (“a ‘disposition’ of PFIC shares can occur by redeeming them, selling them, gifting them away, or even by giving up one’s US resident status or citizenship”)
The increasingly complex, expensive and draconian US tax law as applied to “accidental” US Persons might be considered by some a “good thing”. The more draconian – disproportionate – tax laws and penalties become, the more costly it is for ordinary families living abroad to report and pay tax on concessionary funds (such as for minors and disabled dependents, and retirement and tax-sparing funds not envisaged in the relevant bilateral tax treaty) the more impossible of enforcement and outrageous in principle such unilateral and exorbitant laws are seen to be.
And the less likely it is that the country of residence of a noncompliant person deemed to be a US person will assist the USG in collecting tax, prosecuting an individual and pursuing others on the basis of “transferee liability”.
Canadians who faced double taxation of their inheritance in that decade after Canada moved to capital gains taxation of estates based on deemed sale at death vs US imposition of estate duty (there is now a credit of one against the other under a tax Protocol) will understand that individuals are cannon fodder for Governments, who when they negotiate tax treaties are mainly concerned with the interests of multinational firms as represented by lobbyists. It is no wonder that of the 6 million Americans said to be resident abroad (the State Department knows of only half of those), an increasing number, unable to pay for tax advice or preparation, for renunciation of citizenship or the incremental US tax itself, are simply remaining underground. A series of GAO reports has looked at this and found no solution. And, by and large, legislators and bureaucrats (including diplomats) don’t care.
For the time being, the Lord Mansfield Dictum protects. But the hostility towards tax evasion abroad translates into hostility to expatriates generally. That is not a good sign.

5thSwiss describes the creation of  “double taxation” after one country (in this Canada) moved from an Estate Tax to a deemed disposition of assets on death. We now have a problem of the U.S. creating a deemed disposition of assets on expatriation when Canada has no such tax. This is what happens when one country makes a major change to its tax system and the other does not. (In this case there is at a minimum a “timing mismatch” in the taxable event.)

The S. 877A “Exit Tax” and the Canada U.S. Tax Treaty
The primary purpose of this post is to explore whether the Canada U.S. Tax Treaty can be used to mitigate some or all of the effects of the “Exit Tax”. I don’t know the answer. Therefore, this post will “raise an important question”, but not “answer the important question raised”.
U.S. Tax Treaties 101 – The outline
I am also going to use this post to outline some VERY basic aspects of U.S. tax treaties.   There will  four parts to this post:
Part 1 – Tax Treaties and the U.S. Constitution
Part 2 – Tax Treaties and the “Savings Clause”
Part 3 – The S. 877A “Exit Tax” and possible treaty relief
Part 4 – The “Savings Clause” as an argument against “citizenship taxation”
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Part 4 – "You are a "covered expatriate" – How the "Exit Tax" is actually calculated"

This is Part 4 of a 9 part series on the Exit Tax.
The 9 parts are:
Part 1 – April 1, 2015 – “Facts are stubborn things” – The results of the “Exit Tax
Part 2 – April 2, 2015 – “How could this possibly happen? Understanding “Exit Taxes” in a system of residence based taxation vs. Exit Taxes in a system of “citizenship (place of birth) taxation”
Part 3 – April 3, 2015 – “The “Exit Tax” affects “covered expatriates” – what is a “covered expatriate”?”
Part 4 – April 4, 2015 – “You are a “covered expatriate” – How the “Exit Tax” is actually calculated”
Part 5 – April 5, 2015 – “The “Exit Tax” in action – Five actual scenarios with 5 actual completed U.S. tax returns.”
Part 6 – April 6, 2015 – “Surely, expatriation is NOT worse than death! The two million asset test should be raised to the Estate Tax limitation – approximately five million dollars – It’s Time”
Part 7 – April 7, 2015 – “The two kinds of U.S. citizenship: Citizenship for immigration and citizenship for tax”
Part 8 – April 8, 2015 – “I relinquished U.S. citizenship many years ago. Could I still have U.S. tax citizenship?”
Part 9 – April 9, 2015 – “Leaving the U.S. tax system – renounce or relinquish U.S. citizenship, What’s the difference?”
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Part 4 – You are a “covered expatriate”, how is the “Exit Tax” actually calculated?
howtheexittaxiscalculated
How the Exit Tax is calculated in general – what is subject to the “Exit Tax”?
Remember that a person who relinquishes U.S. citizenship does not actually sell his assets or realize income from his assets. The Exit Tax is designed to ensure that the U.S. collects tax on assets as if they were sold OR as if generated an income stream (even though there is no sale). This means that one is forced to pay a massive tax when has not realized income to pay that tax!
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Part 2 – Understanding "Exit Taxes" in a system of residence based taxation vs. Exit Taxes in a system of "citizenship (place of birth) taxation

This is Part 2 of a 9 part series on the Exit Tax.
The 9 parts are:
Part 1 – April 1, 2015 – “Facts are stubborn things” – The results of the “Exit Tax
Part 2 – April 2, 2015 – “How could this possibly happen? Understanding “Exit Taxes” in a system of residence based taxation vs. Exit Taxes in a system of “citizenship (place of birth) taxation”
Part 3 – April 3, 2015 – “The “Exit Tax” affects “covered expatriates” – what is a “covered expatriate”?”
Part 4 – April 4, 2015 – “You are a “covered expatriate” How the “Exit Tax” is actually calculated”
Part 5 – April 5, 2015 – “The “Exit Tax” in action – Five actual scenarios with 5 actual completed U.S. tax returns.”
Part 6 – April 6, 2015 – “Surely, expatriation is NOT worse than death! The two million asset test should be raised to the Estate Tax limitation – approximately five million dollars – It’s Time”
Part 7 – April 7, 2015 – “The two kinds of U.S. citizenship: Citizenship for immigration and citizenship for tax”
Part 8 – April 8, 2015 – “I relinquished U.S. citizenship many years ago. Could I still have U.S. tax citizenship?”
Part 9 – April 9, 2015 – “Leaving the U.S. tax system – renounce or relinquish U.S. citizenship, What’s the difference?”
“Exit Tax” – Understanding The Confiscatory Horror
Let’s begin with some politics …


In an interesting post Robert Wood writes:

Both Mayor Johnson and Senator Cruz are U.S. citizens. Both Mayor Johnson and Senator Cruz either have or are renouncing the citizenships of the countries where they were born. There will no tax consequences to Senator Cruz for renouncing Canadian citizenship. Mayor Johnson will probably be spared America’s draconian “Exit Tax” (assuming he was born a dual citizen) for renouncing U.S. citizenship. The “Exit Tax” (if applicable) is a very serious thing. Robert Wood notes that:
To leave America, you generally must prove 5 years of U.S. tax compliance. Plus, if you have a net worth greater than $2 million or have average annual net income tax for the 5 previous years of $157,000 or more (that’s tax, not income), you pay an exit tax. There is an exemption of approximately $680,000. Giving Up A Green Card can cost you too. Some people expatriate under the immigration rules and never file anything with the IRS, a practice that is generally unwise. But then, no one wants to get on the wrong side of the IRS.

As the following tweet suggests, Senator Cruz was very lucky that he was born in Canada (which does NOT impose a tax on renouncing Canadian citizenship) and NOT in the United States (which does impose a tax on renouncing U.S. citizenship).


Introduction – What is an “Exit Tax”?
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CBC #FATCA Interview: @SusanCBCQuebec and @AliBrunet – @ADCSovereignty lawsuit mention

FATCA awareness in the Quebec Eastern Townships

The interview and discussion – March 30, 2015

Feedback and discussion invited

This is a good opportunity to engage the people of Quebec on the issues caused by FATCA and U.S. citizenship taxation. In Standtead Quebec approximately 25% of the town residents, including the Mayor Phillippe Dutil (featured in the interview), were born in Vermont, U.S.A.

I guess there must be a few FATCA border babies in Stanstead.

CBC Quebec AM is seeking your comments. Your options are:
Phone –

1 888 691 3476
Email –

quebecam@cbc.ca

Facebook –

Updated – March 31, 2015 – Some thoughts for the residents of Stanstead, Quebec

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