CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. Residence-Based Taxation Put Forward For Americans Abroad

Residence-Based Taxation Put Forward For Americans Abroad

by Mike Godfrey, Tax-News.com, Washington

04 May 2016


With regard to the increasing talk in the US Congress on tax reform, American Citizens Abroad (ACA) has provided the House of Representatives Ways and Means Committee with a full reform proposal for the enactment of residence-based taxation (RBT) for American expatriates.

ACA has said lawmakers should enact RBT instead of the present citizenship-based taxation (CBT) system because it would reduce compliance burdens for expatriates, eliminate double taxation and costly double reporting, and improve competitiveness.

Under the current CBT, Americans abroad remain subject to US taxation as though they were still US residents. Under RBT, US residents, whether Americans or foreigners, would be subject to US income, estate, and gift taxation, while Americans resident abroad could elect to be treated in a manner analogous to non-resident aliens and only be taxed by the United States on US-source income.

Americans abroad would still be taxed through a system of withholding taxes on passive US source income (such as dividends, interest, and royalties); capital gains and rental income taxes on US real estate; and normal income taxation on "effectively connected" income earned in a trade or business in the United States. They would also remain subject to US estate tax on assets located there, including real estate and securities.

If a departure or exit tax based on the mark-to-market valuation of unrealized capital gains at the time of departure is a condition imposed by Congress, ACA's position is that there should be a "grandfather" clause shielding overseas Americans meeting certain residency minima from the tax, together with a high asset exclusion threshold for Americans leaving the United States and measures to help holders of illiquid assets meet their exit tax obligations.

Following an analysis of Internal Revenue Service (IRS) statistics, ACA also considers that a switch from CBT to RBT would be revenue neutral. Under CBT, the IRS already "recognizes the first right of taxation of the country of residence, and, due to the crediting of foreign taxes, collects no tax from the vast majority of Americans abroad."

The National Taxpayer Advocate has previously said that "about 82 percent of all Americans abroad owe no US taxes. For most Americans abroad, the real hardship of CBT is the cost, time, and legal risks involved in compliance."

Tax revenue from Americans abroad is found to account for less than 0.2 percent of total US tax collections. Under RBT, it is noted, the United States would be able to claw back revenue, mostly through withholding taxes on financial assets and taxes on US effectively connected income.

TAGS: individuals | expatriates | capital gains tax (CGT) | inheritance tax | compliance | tax | business | tax compliance | Internal Revenue Service (IRS) | tax authority | withholding tax | United States | dividends | tax reform | exit tax | individual income tax | Tax

To see today's news, click here.

Leave a comment

Read our Posting Guidelines

very interested in issue

Nick Rahall on Monday, January 23, 2017

RBT for Americans abroad implies no CBT at all , as RBT for Americans in the U.S. is CBT! The fundamental problem of CBT is that it inextricably combines two different concepts:
1) Citizenship
2) Tax abligations

Martin Neill on Tuesday, September 20, 2016

Jow can I send you an example of the absurdity ofo the FATCA system?
I keep receiving cheques for refundunds which I caannot cash in Belgium owing to their cost of deposit. The system has cost me about 6,000€ so far., although I already pay taxes in Belgium, and yet I get cheques for sums of 1.01usd, 17.97usd, which cost the taxpayer 1,15 in stamps.
Sincerely,
Tom Morgan

Tom Morgan on Monday, August 1, 2016

 






Close

Password Reminder

Please enter your email address to receive a password reminder.

 

Log into Tax-News+
Not registered yet? Find out about our daily news alert service »

 Email: 
 Password: 

Login »

Forgotten your password?







Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »



Tax-News+ Updates

Receive FREE daily updates from Tax-News.com, straight to your inbox. Register Now!

For a tailored solution, choose to receive selected news updates for your preferred jurisdictions and topics, with our enhanced Tax-News+ subscriber service. Read more...

 

Stay Updated

Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.


To manage your mailing list preferences, please click here »