Is It Getting Harder For US Citizens To Benefit From Low Tax Regimes?
14 August, 2014
Since his inauguration in January 2009, President Obama appears to have been on a mission to claw back billions of tax dollars he claims the US is losing each year. A progressive regime of new laws and policies has been introduced to attack US individuals and corporations seeking to (legally) limit their tax obligations through the use of overseas jurisdictions.
One of the most important tools introduced by the US government, known as The Foreign Account Tax Compliance Act (FATCA), obliges other nations to share tax information directly to the IRS. Currently these rules apply to any US citizen with earnings or assets over $50,000 in the hope of ensuring they can be accurately taxed.
It seems that uptake around the world has been surprisingly aggressive with many former safe havens now actively engaging with the United States on the subject of tax. According to recent research by think-tank the Tax Justice Network (TJN) claims that Britain and her overseas territories are currently one of the most important world powers in the offshore banking and tax limitations. The UK boasts control of some of the best-known low-tax jurisdictions around the world including the British Virgin Islands, Cayman Islands, Jersey and the Isle of Man.
However for US citizens even these well-known and reliable havens have become an increasingly shaky proposition. For example the Isle of Man and both Guernsey and Jersey have signed up to FATCA recently. More will surely follow as the US continues to apply pressure to target nations who, they feel, are unfairly robbing the IRS of tax dollars.
However some authorities claim these powers are affecting overseas expats unfairly. Many US citizens working overseas maintain both their original US-based bank account but for practicality also opt to open a local bank account in their new country of residency. However even these individuals will be required to fill in the often long-winded and onerous IRS tax return forms; something which even the IRS themselves estimate could take an average of 50 hours per annum.
The penalties for completing the forms incorrectly are painful, with fines of up to $50,000 being possible depending on the situation. For US expats then it may be wise however costly to consider the use of a qualified CPA in order to complete and submit your tax documents. While paying an accountant may be more expensive than completing the paperwork it will not only save you time but also helps to mitigate any costly mistakes that coiuld otherwise be made.
Richard Adams works with Expatriate Healthcare, a global leader in international health care and travel insurance.
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