This is the fifth in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by tax paying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen.
The purpose of this post is to argue that (as applied to those who do not live in the United States) the transition tax is very similar to the OVDP (“Offshore Voluntary Disclosure Programs”) which are discussed here. Some of my initial thoughts (December 2017) were captured in the post referenced in the following tweet:
The first reason (of many) why the @USTransitionTax, if applied to individual U.S. shareholders who are #Americansabroad, is analogous to #OVDP AKA the “Offshore Voluntary Disclosure Program" https://t.co/XmQRyFYS5Q via @CitizenshipTax
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) March 20, 2018
The first four posts in my “transition tax” series were:
Part 1: Responding to The Section 965 “transition tax”: “Resistance is futile” but “Compliance is impossible”
Part 2: Responding to The Section 965 “transition tax”: Is “resistance futile”? The possible use of the Canada U.S. tax treaty to defeat the “transition tax”
Part 3: Responding to the Sec. 965 “transition tax”: They hate you for (and want) your pensions!
Part 4: Responding to the Sec. 965 “transition tax”: Comparing the treatment of “Homeland Americans” to the treatment of “nonresidents”
*A review of what what the “transition tax” actually is may be found at the bottom of this post.
This post is for the purpose of the arguing that, as applied to those who live outside the United States, payment of the “transition tax” in 2018, is the financial equivalent to participation in 2011 OVDI (“Offshore Voluntary Disclosure Program”).
Is April 15, 2018 "Your last best chance to comply with the @USTransitionTax? I put the following phrase into google: "OVDI Your last best chance to come into compliance" You won't believe what/who turned up! https://t.co/fUe0YrqA0n
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) March 11, 2018
Seven Reasons Why The U.S. Transition Tax as applied to “nonresidents” is similar to the “Offshore Voluntary Disclosure Program As Applied To “Nonresidents”. In both cases there are benefits to Homeland Americans and extreme detriments to “nonresidents”. These detriments amount to a punishment for living outside the United States and becoming a “tax resident” of another country.