Expatriate Financial Planning
US Government Bond Interest is Not “Passive” PFIC Income for Foreign Banks
Background A Passive Foreign Investment Company, or PFIC, is a foreign corporation where passive income constitutes 75% or more of gross income during a year. A corporation is also considered to be a PFIC if 50% or more of corporate assets are held for production of passive income. The PFIC rules deter taxpayers from seeking … Continue reading
IRS Requirements for Foreign Account Compliance Starting in 2013
International tax compliance is a hot topic right now at the IRS. Starting in 2013, the IRS will require foreign financial institutions (FFIs) to sign information-sharing agreements to disclose foreign account information for US taxpayers. This change will occur under the authority of the Foreign Account Tax Compliance Act (FATCA). What information is the IRS … Continue reading
Tax-wise Timing of Incentive Options Taxation in a Foreign Country
Many US expatriates work for foreign companies operating under foreign tax regimes. Sometimes the interplay of US and foreign tax laws can become quite complex. One example that requires special planning is in the area of equity incentive compensation by stock options. For example, many foreign countries income tax an employee’s incentives stock options at … Continue reading
Introduction to Controlled Foreign Corporations
Introduction US persons are taxed on their worldwide income. Normally, a US person who owns shares of a foreign corporation will only recognize income when and to the extent that the foreign corporation pays dividends to the US person. Many years ago, US persons seized upon this, formed their own foreign corporation, contributed their assets … Continue reading
Taxation of Investors in Passive Foreign Investment Companies (PFICs)
Introduction US persons are taxed on their worldwide income. Normally, a US person who owns shares of a foreign corporation will only recognize income when and to the extent that the foreign corporation pays dividends to the US person. Many years ago, US persons seized upon this, formed their own foreign corporation, contributed their assets … Continue reading
Foreign Earned Income Exclusion for US Persons
Introduction US persons are taxed on their worldwide income. As a matter of public policy, when a US person has foreign-sourced income, the United States seeks to avoid the double-taxation of that income. That is, Congress does not want the US government to impose taxes on top of a foreign government’s tax. To that end, … Continue reading
Social Security Taxation for US Persons Working in a Foreign Location
For US persons who work in a foreign country for a US company or for a foreign company, there are unique rules for social security taxes. Background International social security agreements (called “totalization agreements”) have two primary purposes: 1. Eliminate dual social security taxation on earnings in circumstances where a person from one country works … Continue reading
Medicare Benefits Abroad
Does your Medicare Coverage cover you while you are living or traveling abroad? Unfortunately, the answer is most likely going to be no. Original Medicare Coverage includes all 50 states, and U.S. territories (U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands), but outside of those locations, your medical care probably will not … Continue reading
An Introduction to Currency Taxation
A basic understanding of currency exchange principles is critical for U.S. expatriates, international business people, and global investors. U.S. tax liability is determined in U.S. dollars. Because currency values change relative to one another, many tax issues arise when currencies are bought and sold. Last month, we discussed general factors affecting relative currency values and … Continue reading
Why The “Tax Holiday” For Corporations Is Bad
Some U.S.-based corporations have business operations outside the United States. Often, those non-U.S. operations are conducted by subsidiaries of the U.S. firm. Those subsidiaries are typically organized in the jurisdiction in which they operate. The income of each non-U.S. subsidiary is taxed by the jurisdiction in which it derives income. However, the income is not … Continue reading
