ADCS Press Release on the Transition Tax and GILTI: The Alliance For The Defence Of Canadian Sovereignty issued a press release on the impact of the “transition tax and GILTI” on people with tax residency in other countries. Although issued in November of 2017, it attracted a number of comments. These comments provide insight into how U.S. citizenship-based taxation damages people in other countries. Comments made in November 2017 (before the world heard about the transition tax)
The comments (from November of 2017 which is well before the Section 965 transition tax was understood) are here. Comments in September/October 2018
As described in this post, U.S. Treasury has been seeking comments about the Sec. 965 transition tax. The deadline for comments is October 9, 2018. You can read the comments here.
Comments that are particularly noteworthy are: From American Citizens Abroad – on behalf of all Americans abroad
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 9, 2018
From James Gosart an individual
To: United States Department of the Treasury
Subject: Re: Proposed Regulations under Section 965 [REG 104226-18]
The transition tax is a killer for small American owned overseas businesses.
I am a small business owner of a consulting company in Hong Kong. Around the world, I’m sure there are thousands of small American business owners like me.
I formed the company in 2011 after spending more than 25 years based in China and Asia as an expat employee of a major US corporation. During the 7 years the company has been in operation, I have helped US companies and investors with their China and Asia strategies, ultimately growing their businesses in Asia and contributing to US based employment. My company paid corporate taxes annually in Hong Kong. I have now relocated to the US and I’m in the process of shutting the business down.
The new transition tax is so burdensome and complex that there is no way I would start such a business today. Nor would I recommend it to anyone else. For the US to decide to retroactively tax retained earnings of small US owned overseas businesses is so draconian and unprecedented that it will seriously impact the survival of countless numbers of such businesses. Even if a US owned overseas business is capable of making this payment, and many will not be able to, how can any business survive when faced with a 17.5% tax that their non-US owned competitors do not have? In addition, many thousands of Americans who use lawful local corporate entities as retirement savings vehicles will see their lifelong retirement savings decimated.
The Commerce Department has long estimated that for every $1 billion of business done by American business abroad 5,000 domestic US jobs are supported. Based on my own anecdotal experience I agree with that. No doubt the transition tax will cause thousands of American owned small businesses to close, or fail to start in the first place, will cause the loss of many thousands of US based American jobs, and will damage the lives of countless numbers of Americans living abroad.
I do not believe the transition tax for small business can be made fair or workable. It must simply be dropped altogether.
________________________________________________________________________ And on the Home front …
This is Part 18 of my series of posts discussing the Section 965 U.S. Transition Tax. This has been reposted with permission from Americansabroadfortaxfairness.org. Time out from our regular programming with this special message – A Call To Action – from Attorney Monte Silver: Hi Fellow Americans:
On August 1, 2018, the Treasury/IRS issued proposed regulations that interpret the Repatriation tax law – a 250 page very complicated document. I discovered that in issuing the document, Treasury, the IRS and other Federal agencies seriously violated numerous Federal laws and procedures. This gives us tremendous leverage in negotiating for an exemption from the Repatriation & GILTI laws.
It is not unreasonable to expect that this battle may be won by December 15, 2018. What you can do to help win the battle? Easy! Treasury needs to hear your voice in a few short paragraphs (as outlined below) – by October 7, 2018.
We are within reach! Lets do it.
p.s. – as you may have an October 15, 2018 filing deadline, there is a way for you to extend the filing date until December 15, 2017. See IRS Publication 54, page 4 (can be seen at silvercolaw.com/blog). I suggest that you discuss this with your U.S. tax person. Continue reading →
Of course, that is a more difficult concept for Americans abroad. (The problem is particularly acute in Australia where it is believed that the Australian Superannuation may be subject to U.S. taxation.) Time after time, in country after country, I speak with people who avoid investing because they are Americans abroad. This is a great mistake.
It’s important for Americans abroad to heed the teaching of Sir John Templeton. They must (1) learn to invest when they have the money and (2) discipline themselves to acquire the money to invest!
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) August 6, 2018
I have been meaning to write a “follow up” post for a long time. Perhaps, the message was too simple. Perhaps it is only worth a tweet. Perhaps it’s dangerous to expand such a simple thought into multiple paragraphs, but here goes …
Canada U.S. Tax Treaty – Article XXVIA: How the 5th Protocol Enhances protection for Canadian citizens https://t.co/DMdIlHqMU7
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) May 6, 2018
Introduction – The Purpose of this post
This is an addition to “The Little Red Tax Treaty Book“. I was recently asked the following question:
I heard that the Canada U.S. Tax Treaty means that the Canada Revenue Agency will not help the United States collect a U.S. tax debt on a Canadian citizen, provided that the person was a Canadian citizen at the time the U.S. tax debt arose. But, what if the person was NOT a Canadian citizen when the U.S. tax debt arose? Will the Canada Revenue Agency help the United States collect U.S. tax debt? My answer to the question:
On September 21, 2007 Canada and the United States signed the 5th Protocol to the Canada U.S. tax treaty (first entered into in 1980). As a result of the 5th protocol, Paragraph 8 (a) of Article XXVIA now reads: Continue reading →