Tag Archive for Taxation

Part 15 – Understanding “Exit Taxes”

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Interview with – 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 Read more

Part 13 – Understanding “Exit Taxes”

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“I relinquished U.S. citizenship many years ago. Could I still have U.S. tax citizenship?”

Attn: Former U.S. Citizens: Are you STILL or have you EVER BEEN a U.S. “Tax Citizen”?


This is a long post. In fact, it is too long for the average reader. Therefore, I wish to summarize the purpose and possible (but not certain conclusion) of the post in a few simple sentences.

Here goes:

If you were born in the United States (and became a U.S. citizen at birth) who moved to Canada and naturalized as a Canadian Citizen prior to June 3, 2004:

1. Without informing the U.S. State Department or applying for a Certificate of Loss of Nationality; and Read more

Part 12 – Understanding “Exit Taxes”

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“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?”

The United States of America – One country two citizenships – Introducing the “Tax Citizen”.  Dual Citizenship – American style – All Americans are both “Citizens” and “Tax Citizens”. One Country – Two Citizenships.

First Citizenship – Citizenship for Nationality Purposes

Americans have always been proud of their U.S. citizenship. Most U.S. citizens regard their U.S. citizenship as the most valuable thing they have. Most Americans will fight for their citizenship. They will die for their citizenship. They Read more

Cook v. Tait 1924 – The Evolution of Citizenship, Taxation And “Citizenship Taxation” – Part 1

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As goes taxation, so goes society

As Charles Adams argued in his classic book, “For Good and Evil: The Impact of Taxes On The Course Of Civilization“, as go the taxing practices of a nation, so goes the nation. Given that taxes are a certainty, tax laws are a certainty, and those laws speak volumes about the “state of the nation” and the “values of the nation”. Tax laws evolve on an almost daily basis. The changes in tax laws reflect changes in societal values.

In 1924, the Supreme Court of the United States, per Justice McKenna ruled in Cook v. Tait that U.S. “citizenship taxation” was constitutional. Since that time Cook v. Tait has been cited to justify the constitutionality, although not necessarily the propriety, of “citizenship Read more

New Law On Australian “Thin Cap” Rules

A pile of Australian banknotes

The new law in brief

An important Bill affecting foreign investors into Australia was passed by the Australian Parliament, 25 September 2014, – the ‘Tax and Superannuation Laws Amendment (2014 Measures No. 4) Bill 2014’.

It affects two areas of taxation in Australia – tax deductibility of financing expenses in an international context, and the taxation of dividends in Australia received from abroad.

This note deals with the tax deductibility of financing expenses – the so-called ‘thin cap’ rules. (It does not deal with the thin cap rules applicable to financial entities and banks). Read more

Tangible Property – Section 482 and International Financial Centers

TaxConnections Picture - Money In Sand - square

Corporate structures in global enterprise find the use of conduit offshore corporate entities a requisite to accommodate the anomalies inherent in maximizing efficiencies and cost savings. Common ownership of inter-related corporate structures encounter arms length pricing scrutiny. (See TaxConnections April 24, 2014, Introduction to Section 482 and International Financial Centers.)

Arm’s length standards of Section 482 are applicable to a transfer of tangible property rights in transactions when deemed between controlled entities. When the possession, use or occupancy of tangible property that is owned or leased by one member of a group of Read more

The OECD v. Tax Havens: Part III – New Concerns

TaxConnections Picture - Earth Dollars

On July 13, the OECD issued a new paper titled, Action Plan on Base Erosion and Profit Shifting. The purpose of this paper was to outline the OECD’s new round of concerns regarding tax havens and their use in international tax planning. It is important to understand first what is behind the issuing of this new report:

Over time, the current rules have also revealed weaknesses that create opportunities for BEPS. BEPS relates chiefly to instances where the interaction of different tax rules leads to double non-taxation or less than single taxation.

One of the central purposes of the OECD’s original tax treaty was to divide taxing rights and Read more

Foreign Corporations and Subpart F Income – Part III

TaxConnections Offshore BusinessFundamental Foundation of Foreign Base Company Income and Controlled Foreign Corporations© Generally.

Foreign Base Company Income

Therefore the first type of Foreign Base Company Income, Foreign Base Company Sales Income has as its function to be utilized as a sale or trade conduit offshore corporation in an international corporate structure. Certainly the intra activity sequences have many facets and planning opportunities. Those will be discussed subsequently in a more specific discussion of offshore companies that come within the characterization as a Foreign Base Company Sales Income.

Foreign Base Company Service Income

A second category of Foreign Base Company Income whose activities are subject to Subpart F Income treatment is Foreign Base Company Service Income. This type of Subpart F Income is income derived by a foreign corporation in connection with the performance of technical, managerial, scientific, skilled, industrial, commercial or similar type services. In practicality corporate structures tend to find their utility most beneficial as an administrative or service oriented company in a favorable tax preferred Financial Center. Read more

Foreign Corporations and Subpart F Income – Part II

TaxConnections Offshore BusinessFundamental Foundation of Foreign Base Company Income and Controlled Foreign Corporations© Generally.

The essence of this corporate structure planning is to combine the concept of ownership structure that subjects a foreign corporation to a controlled status and activities of the corporate entity. The two concepts of controlled foreign corporate status and Foreign Based Company Income are intertwined in the implementation of Subpart F Income tax consequences.

The importance stems from the concept that Foreign Base Company Income and a controlled foreign corporation’s characterization subjecting it to Subpart F Income taxation are two separate considerations. One is whether a foreign corporation is a controlled foreign corporation. The second is whether the controlled foreign corporation has Foreign Based Company Income.

If a foreign corporate entity has Subpart F Income because it has Foreign Base Company Income, but it is not deemed a controlled foreign corporation by virtue of ownership, it is not subject to Subpart F Income treatment. Those are two distinct planning features. Read more