In a recent blog post I looked at a number of impacts that may be experienced by Canadian business owners should recent tax proposals become law. Many of these are more germane to long-term tax planning, however, one of them may have very immediate consequences. In the case where a business owner passes away or has recently passed away, the estate and executors will likely face immediate issues—and the potential for double taxation. Read more
Tag Archive for Double Taxation
The USA is almost unique in taxing U.S. citizens even when they live abroad. This means that expats who earn over $10,000 ($10,300 for 2016, to be precise, or just $400 of self-employment income) are required to file a U.S. federal tax return, regardless of where their income originates, or whether they are also paying taxes elsewhere.
While expats still have to pay any U.S. tax they may owe by April 15th, they have until June 15th to file, with a further extension available on request to October 15th. Read more
Retiring abroad is more popular than ever, thanks to perceptions of a better quality of life, more affordable health care, and a warmer climate.
Americans living abroad earning over $10,000 a year (or just $400 of self-employment income) are still required to file a U.S. tax return though, declaring their world wide income. This includes expats who have retired or settled permanently abroad. Read more
American citizens and green card holders, including people who have the right to U.S. citizenship, are required to file a federal income tax return each year declaring their worldwide income, wherever in the world they live. They may also have to pay U.S. taxes.
One of the fundamentally important tax concepts for U.S. expats to know is that the U.S. tax system has built-in mechanisms for preventing the “double taxation” of your income (i.e., tax in both your new host country and in the United States). These mechanisms provide a measure of relief for U.S. expats who remain subject to U.S. taxation, despite living and working abroad.
I wrote a post on August 7, 2016 which discussed the August 5, 2016 decision of the United States Court of Appeals – District of Columbia Circuits in the Esher case. In this case, Justice Millet ruled that:
That extreme reading of the Totalization Agreement rests on nothing more than the Commissioner’s own say-so. It lacks any grounding in the Agreement’s text or in any principle governing the interpretation of international agreements. The tax court’s corresponding disregard of the Totalization Agreement’s textual direction concerning the role of French law in resolving undefined terms and in determining the content of the laws enumerated in Article 2(1)(b) was error and requires reversal.
On July 12, the U.S. Treasury released its 2016 Model Tax Treaty. I suspect that people will interpret this in terms of how it affects their individual tax situations. This gives a huge clue with respect to information exchange and how the U.S. views “double taxation,” citizenship-based taxation, and related issues.
Have You Thought About Being Taxed In The United States And Yemen, Too? Double Trouble International Taxation
U.S. citizens and residents are taxed on their income from all sources worldwide. Worldwide taxation by the U.S. does not disarm the taxing power of other countries. Americans pursuing income outside of the U.S. are bound to encounter tax collectors asserting their own national claims. The world is awash in possibilities of double taxation. Below is a hypothetical illustrating international double taxation and its main cause: inconsistent sourcing rules in different countries imposing overlapping taxes.
A CONTRACT IN YEMEN
John is a lawyer who practices in NYC. One day, he gets a call from Ali, a client in Yemen. Ali asks John to do some research on a question and to send his findings in the form of a memorandum. John goes ahead and does the work, consisting of some research and some writing, which takes twenty hours of his time.
John’s final product is a memorandum, which he sends to Ali, along with a bill for $ 4,000 reflecting his hourly rate of $ 200. A check for $ 4,000 arrives by return mail and John gives the matter little further thought.
At the end of the year, John receives an official-looking letter from the Treasury of Yemen, adorned with a seal and crests, asking him to pay $ 2,000 in income tax to the Yemeni Treasury with respect to his $4,000 of Yemen-source income. The letter explains that the rate of Yemeni income tax on the Yemen-source income of foreigners from professional services is 50%. Read more