Live Interview with Solomon Yue – Tweet Your Questions, Ideas in Advance!

Update on UK Accidental Americans

uk accidental logo

Back in June we were asked to do a post on the formation of several new Accidental American groups. There seemed to be some confusion as to whether these were “real” groups or just new attempts without substance. Today, while doing something completely different, I came across the UK Accidental Americans group and want to make sure this is posted so as many in the UK as possible, will become aware of the work they are doing there.

The FaceBook Page is here. Please check out the Page and “like” it as well as inviting other friends to do the same.

The FaceBook Group is here. This is a closed group. You must ask to join and answer two questions first.

Further, this article was posted on our Media and Blog Articles Open for Comment page but I only noticed one comment. I want to make sure it is seen on a larger scale. There were also some other similar articles:

“Accidental Americans” must be protected from draconian US tax system

Labour MEPs: Time to give accidental Americans their independence from US tax authorities

And last but not least, our colleague Fabien Lehagre has once again managed to get media and government attention on the plight of French Accidentals Macron Backs Accidental Americans . Truly outstanding effort and results – great stuff Fabien!

If anyone knows anything further concerning the new Accidental American groups in Ireland Italy or Poland could you please update us with a comment or ask one of our admins to do it for you? Thanks.

Two Programs with Solomon Yue in Toronto August 12 & August 16, 2018

In addition the meeting mentioned below, we would like to have a second, more informal program for expats and their families and friends. This format would be a more intimate question and answer which will be focused on individuals subject to the CBT regime. This would take place on Sunday, August 12, from 2:00 – 4:00 pm on the U of T campus. We need a confirmed number of individuals before booking a room. If you are interested, please email nobledreamer16 at gmail dot com Cost: $20
 
AMChamCanada logoDO_NOT_DELETE_AmCham_Canada_generic_event_image
 
 
 
 
 
 
 
 

A LIGHT AT THE END OF THE TUNNEL OR ANOTHER ONCOMING TRAIN: THE POSSIBLE END OF U.S. CITIZENSHIP-BASED TAXATION

If you are an American citizen residing and doing business in Canada, you bear the pain of the heavy tax burden endured by all U.S. citizens due to the fact that the U.S. is the only major country that imposes worldwide taxation on its citizens no matter whether they live in the U.S. or in another country. In addition, the U.S. imposes significant penalty laden reporting requirements on U.S. citizens living in Canada and abroad.

Change is a possibility.

Did you know that there is a possibility that the U.S. Congress may introduce, debate and vote upon a bill that may ease this worldwide taxation burden on U.S. citizens living and working in Canada? This bill would enact ‘Territorial Taxation for Individuals (TTFI)’. It is a tax cut for 9 million overseas Americans by ending double taxation.
 
Solomon Yue headshot(1)Solomon Yue, CEO of Republicans Overseas has been involved with drafting the TTFI bill. Mr. Yue, who is currently working with AmChams throughout the world, will present publicly shareable information about the TTFI bill, and discuss its progress as it journeys through the legislative process. He will be encouraging AmCham Canada to lend its support in the global effort to encourage Congress to move forward with this legislation.
 

Elena Hanson headshot 2(1) Elena Hanson, Managing Director of Hanson Crossborder Tax Inc. and a member of Democrats Abroad. Elena will be speaking on the logistics and burden of U.S. tax filing obligations as an American in Canada.
 

John Richardson headshot(1) John Richardson, a Toronto Lawyer of Citizenship Solutions, will also be joining Elena and Solomon to speak on the lost opportunity cost of being a dual U.S.-Canadian tax filer: Canadian residents who are subject to the U.S. tax system do not have the same financial planning and other opportunities that non-U.S. citizens have..
 
 
Date: Thursday, August 16, 2018

Time: 6:15pm to 9:00pm

Place: St. Michael’s College, Alumni Hall, Room 400; 121 St. Joseph Street, Toronto (paid parking near building; nearest subway station is Museum) MAP

Cost: $20 +tax (AmCham members); $35 +tax (non-members).

Pre-registration is required. Registrations due August 13.
Register

Info: AmCham Toronto TTFI Event
 

Be on the Lookout! Bubblebustin to be on CBC The National- on the #TransitionTax

Update from BB / Bubblebustin

Those in Canada who are potentially affected by the Transition/Repatriation Tax (or not but care about Canada’s sovereignty) need to contact their government representatives and Ministers. As suggested by our MP’s office, start with:

Your Member of Parliament, and

Minister of Foreign Affairs,
chrystia.freeland@parl.gc.ca,
House of Commons
Ottawa, Ontario
K1A 0A6
Telephone: 613-992-5234
Fax: 613-996-9607

Minister of International Trade of Canada
Francois-Philippe.Champagne@parl.gc.ca
House of Commons
Ottawa, Ontario
K1A 0A6
Telephone: 613-995-4895
Fax: 613-996-6883

Minister of National Revenue
Diane.Lebouthillier@parl.gc.ca
House of Commons
Ottawa, Ontario
K1A 0A6

Minister of Finance
bill.morneau@canada.ca
The Honourable William Francis Morneau
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario K1A 0G5
House of Commons
Parliament Buildings
Ottawa, Ontario K1A 0A6
Send a message to the Minister

Daniel Lauzon was quoted in the CBCNational News segment.
Daniel Lauzon works as Dir. Communications for Finance Canada.
Daniel can be reached at 613-369-5696

Should you PM me or post here with the efforts you’ve made, I would like to take them to the reporters with the CBC covering this story in developing the government action (or inaction) side of the story. The press needs to know how Canadians are getting treated by our government and maybe the additional coverage will cause the government to take action.
 

UPDATE: Here is a direct link to the segment.

Trump’s tax reform affects Canadian residents The National
 
 
cbc the nationalThis aired on Monday, April 30. CBC News-The National Interview with Evan Dyerevan dyer

Outstanding new resource on FATCA, CBT, etc. by Andrew Grossman

A new resource on all the issues faced by expats, #AmericansAbroad, #AccidentalAmericans, #US persons, et al:

andy g
FATCA: Citizenship-Based Taxation,
Foreign Asset Reporting Requirements and
American Citizens Abroad

 
 
By Andrew Grossman

I don’t think there is anything else which is so extensive or thorough. This is brilliant research and gives reference to many, many court cases. Definitely a resource we are fortunate to have. (Brock SWAT to compliance community: “Watch out!”)

Thank you Andrew Grossman!

It is permanently located on the sidebar at Brock under the Important Information box – Introductory and Essential Material on CBT, FATCA, Citizenship Issues.

Here is the link to the Brock page.
Here
is the original.

If you want to be a Shareholder in our Canadian Business then you must Renounce U.S. Citizenship

Americans are experiencing discrimination in banking but also, as shareholders

cross-posted from citizenship solutions

    by John Richardson

The unified message from all should be that: The United States should stop imposing “worldwide taxation” on people who have “tax residency” in other countries and do NOT live in the United States! This is a message that all advocates of tax reform can support. As recently explained in a post from “ACA”, the mechanism (RBT vs TTFI) used to achieve this change is less important.

It is no secret that Congressman George Holding is working on a proposal to end the U.S. practice of imposing “worldwide taxation” on those who have “tax residency” in other countries. If successful, this would be a positive change for the United States, U.S. citizens who choose to live outside the United States and the residents of other countries. None of these should be burdened by the extra-territorial application of U.S. tax laws!

The specific content of the Holding proposal is certainly evolving. Regardless of the final content, Karen Alpert, Greg Swanson and I have proposed three core principles against which a final proposal should be measured. (We are not suggesting that these are the only principles.) These principles are found in Karen’s timely post where she discusses a “Residence Based Taxation Proposal

The three proposed principle are:

1. American citizenship should not disadvantage a citizen living outside the US relative to expatriates from other nations.

2. We believe that freedom of movement is a basic human right. We also believe that freedom of movement and international trade go hand-in-hand. Governments should never impose laws, taxation, regulations, or other limitations on their citizens that hampers the freedom of movement of those citizens.

3. US citizens currently living outside the US who have arranged their financial affairs to be compliant with current US law should not be disadvantaged. Similarly, those non-residents who were unaware that they needed to arrange their financial affairs in accordance with US law should not have their savings confiscated just because they have foreign investments that are taxed punitively by the US relative to similar domestic US investments.

The practical reality of “Being American” and living in another country

Principle 1: One practical analysis – American citizenship should not disadvantage a citizen living outside the US relative to expatriates from other nations.

It is one thing for a country to restrict certain opportunities to citizens of that country. For example, many countries restrict voting and certain employment opportunities to citizens. But, most countries do NOT discriminate among various groups of “non-citizens”. Significantly, U.S. law has created huge incentives for Americans to be discriminated against as both matters of law and matters of practice.

Some examples:

Discrimination against Americans prescribed by law – Think FATCA:

Pursuant to FATCA and the FATCA IGAs imposed on the world, many countries have changed their laws to specifically discriminate against U.S. citizens in the area of financial services generally and banking in particular. It is well known and documented (nothwithstanding Robert Stack’s “It’s a myth claim”) that U.S. citizenship is now a reason for the denial of “banking privileges”.

Discrimination against Americans because of the dangers of business involvement with Americans – In the last year I have helped several Canadians renounce U.S. citizenship so that they were free to participate in various Canadian business opportunites

The simple FATCA of the matter is that many who understand that U.S. citizens are ruled by the Internal Revenue Code, will NOT allow U.S. citizens to become shareholders of smaller businesses. It’s quite simple really:

Sorry, but we can’t have you as a shareholder in our business if you are a U.S. citizen. Therefore, if you want to participate in this business opportunity you cannot be a U.S. citizen!

Those who will NOT allow U.S. citizens to become shareholders in their companies are absolutely right to do so. By way of example, consider the new U.S. Transition Tax. The whole point of the Sec. 965 “U.S. Transition Tax” is to confiscate part of the retained earnings of NON-U.S. companies! (Yes, you read correctly!) In a general sense, the “confiscation” reflects the percentage of U.S. ownership. The greater the percentage of U.S. ownership, the greater the confiscation. The less the U.S. ownership, the less confiscation. If ZERO U.S. ownership then ZERO confiscation! Do you get it?

If you were running a small business outside the United States, would you want a situation where the citizenship of some of your shareholders, could be used as an excuse to confiscate the retained earnings of the company?

The point is a simple one.

The way that the United States imposes taxes on residents of other countries, necessitates that “informed people” limit their interaction with Americans.

Sad but true.

Because of the “Internal Revenue Code”, Americans are just not like citizens of the rest of the world. Best, to stay away from them.

Conclusion: The current “U.S. system of imposing “worldwide taxation” on those who have “tax residency” in other countries means that Americans will be discriminated against. It’s a fact. The the discrimination is caused by the Internal Revenue Code of the United States!

John Richardson

Dewees 2: Why did he participate in the 2009 #OVDP Horror Show?

cross posted from citizenship solutions

In an earlier post I explained why the Canada Revenue Agency assisted the IRS in collecting a $133,000 U.S. dollar penalty on a Canadian resident. The bottom line was that he was presumably NOT a Canadian citizen and therefore did NOT have the benefits of the tax treaty. This post is to explain where the penalty came from in the first place.

Will you walk into my parlour?’ – #Americansabroad and IRS “amnesty” offers in the 2009 #OVDP

It has been widely reported that a U.S. citizen residing in Toronto, Canada since 1971, paid a $133,000 U.S. dollar penalty for failing to file IRS forms disclosing that he was running a business through a Canadian corporation. How did this fly get caught in the spider’s web?

The Spider and the Fly is a poem by Mary Howitt (1799–1888), published in 1829. The first line of the poem is “‘Will you walk into my parlour?’ said the Spider to the Fly.” The story tells of a cunning Spider who ensnares a naïve Fly through the use of seduction and flattery. The poem is a
cautionary tale against those who use
flattery and charm to disguise their true evil intentions.

More here

August 3, 2017 Canadian FATCA IGA Legislation Federal Court Lawsuit Update: Plaintiffs have complied with Court Order; Examination of Plaintiffs to begin


The Court ordered (May 31, 2017) that Plaintiffs provide:

This is an update on our FATCA IGA legislation lawsuit in Canada Federal Court.

Additional personal, detailed documents related to their financial affairs. [Our litigators felt that this request was not relevant to the lawsuit or of tenuous relevance to the issues raised in the action, but Court disagreed.] Plaintiffs have now provided to the Defendants the financial documents and the Court has ruled that these documents will be kept confidential.; and

A list of harms that the Plaintiffs know and allege have already occurred or certainly will occur. [Description of harms that might occur will be provided in a later submission.}

The harms listed in the submission are generally those detailed by the Witnesses. I am not going to provide the names of the Witnesses associated with their particular situations, but show below a brief summary of some of their harms without names disclosed.

SELECTED HARMS:

Harm associated with sharing of account information with United States. Plaintiffs allege that financial accounts of Canadians have been shared with United States and that this constitutes a harm. However, with one exception (name of person who received confirmation of turnover from Revenue Minister listed in document) Plaintiffs have no direct knowledge whether their own account information has been turned over nor do they know names of those who have had their accounts turned over — that information is in Canada’s possession.

To the extent that these financial documents have been turned over, Plaintiffs allege that this violates their right to the security of person shrined in section 7 of Charter and the protection of Canadian sovereignty, and is a violation of section 15 of Charter.

Other Witness and Plaintiff harms (not all Witnesses or harms are listed below):

Business Person who is Canadian and U.S. citizen. Would-be Canadian partners are unwilling to have potential financial and shareholder information disclosed to U.S.

Canadian and U.S. citizen harmed by U.S. IRS PFIC costs taxing away gains. To eliminate harm she had to spend monies to renounce U.S. tax citizenship. Suffered psychological harm when filing forms with FINCEN, knowing possibility of large fines if there were ever to be an erroneous mistake. She feels as if she is guilty of a crime she has not committed until proven innocent.

Canadian and U.S. citizen on disability harmed by U.S. person-hood. On disability benefits, can’t afford to become IRS compliant or renounce U.S. tax citizenship. Not being compliant with IRS exacerbated psychological harm associated with precarious financial situation. This has created conflict within family as he is unable to speak to family member about situation without family member becoming upset.

Canadian citizen mother trying to protect incapacitated son deemed only by the U.S. to be U.S. tax citizen. She has suffered psychological harm insofar as she has had her peace of mind taken away and has difficulty carrying on with normal life because she is unsure of her son’s well-being in future after she passes away. Has resulted in breakdown of relations within family.

Pure Canadian spouse of Canadian citizen who is deemed to be a U.S. person only by the U.S. Spouse received bank letter asking citizenship question on account with U.S.-tainted wife. This places spouse at disadvantage compared to those not married to persons deemed to be U.S. citizens.

Canadian citizen and formerly person deemed to be a U.S. citizen. Business partners expressed feelings that she compromised their business by sharing financial information with U.S. To escape harm she paid the costs to renounce U.S. citizenship. Feels that Canada has treated her as second class citizen.

Canadian citizen deemed ONLY by U.S. to be U.S. citizen having entity account. As part of the roundup in Canada of all Canadian citizen “entity” account holders who have U.S. taint, she received letter from bank asking for information on citizenship…

No CLN, we freeze your account Canadian citizen – deemed by U.S. to be U.S. citizen. It is sometimes claimed that Canadian financial institutions do not freeze accounts if there is a FATCA problem. Not true. This unfortunate Canadian citizen had her account frozen because her proof of no U.S. taint was not good enough: She lacked a CLN (Certificate of Loss of Nationality) that her bank required.

Infant receives request from bank to provide information on birth place and U.S. citizenship in order to continue holding account. [Self-explanatory.]

Other: Psychological harms are mentioned including feeling betrayed by the Canadian government, stress and frustration associated with the financial harm, and harm by simply not knowing whether or when their financial account information will be shared with the United States.

—– The brave Plaintiffs and Witnesses are my heroes for standing up for Canada and its sovereignty. I thank the other Canadians who also bravely volunteered, but were not selected.

—– NEXT STEP: In oral testimony Plaintiffs will be examined by Government attorneys, beginning with Gwen at the end of this month…

The biggest cost of being a “dual Canada/U.S. tax filer” is the “lost opportunity” available to pure Canadians

Cross-posted from citizenshipsolutions

by John Richardson

The biggest cost of being a “dual Canada/U.S. tax filer” is the “lost opportunity” available to pure Canadians
 

 
The reality of being a “DUAL” Canada U.S. tax filer is that you are a “DUEL” tax filer

“It’s not the taxes they take from you. It’s that the U.S. tax system leaves you with few opportunities for financial planning”.

I was recently asked “what exactly are the issues facing “Canada U.S.
dual tax filers?” This is my attempt to condense this topic into a short answer. There are a number of “obvious issues facing U.S. citizens living in Canada.” There are a number of issues that are less obvious. Here goes …

There are (at least) five obvious issues facing “dual Canada U.S. tax filers in Canada”.

At the very least the issues include:

1. The requirement to pay taxes to both the U.S. and Canada

– Double Taxation: for example, the 3.8% Obamacare surtax on Investment Income

– U.S. taxation on things that are NOT taxed in Canada (example: sale of principal residence and investment income earned inside Canadian Controlled Private Corporations) and phantom capital gains caused only by exchange rate fluctuations

– U.S. punishment/deferral penalties (Interest on tax deferral) on Canadian mutual funds – have you ever heard of a PFIC?

In many cases, the “foreign tax credit rules” will mitigate the impact of potential double taxation. That said, it is very common for “dual filers” living in Canada to be required to pay taxes to the United States. Furthermore, double taxation (because of the “savings clause“) is generally NOT eliminated by the Canada U.S. Tax Treaty. U.S. citizens are NOT generally allowed to benefit from the treaty.

2. The reporting requirements

The United States requires its “citizens” to file detailed reports disclosing financial assets. While a “dual filer” living in Canada is required to report very little information to the Government of Canada, the USA requires a massive amount of information about Canadian assets to be reported to the IRS on an annual basis. There are severe penalties for the failure to report on these assets. You may have heard of FBAR, FATCA form 8398, Form 8621, Form 3520 and 3520A and more. Those who have a Canadian Controlled Private Corporation are required to file Form 5471 (a form that requires more disclosure about their Canadian Controlled Private corporation than is required on A CANADIAN tax return!). Note also that there are circumstances where income earned by the company is attributed to the U.S. citizen individual (and must be reported as income on the U.S. return)!

By the way, forms 8621 and Form 5471 have to be filed even if a tax return is not otherwise required!

U.S. citizens have ZERO financial privacy!

3. The direct costs of U.S. tax compliance

U.S. tax returns (including satisfying the “reporting requirements”) can easily exceed 100 pages and can cost thousands of dollars to prepare. Of course, the costs are significantly less for those who have “simple lives” and few assets. U.S. tax returns are NOT simply an extension of a Canadian tax return. Those who complete their U.S. tax returns based ONLY on their Canadian tax returns are making a mistake. U.S. tax returns need to be considered separately and must take into account items that are “taxable or reportable events” in the USA but are not reportable or taxable in Canada.

4. U.S. tax rules that directly impact the marriage between a U.S. citizen and non-citizen

With a bit of advance planning you can “work around” these areas. That said, a “non-U.S. citizen spouse” is considered to be an “alien” and an opportunity for income and assets to slip away from the U.S. tax system.
It is common for U.S. citizens living in Canada to use the “married filing separately” category which is extremely punitive. Interestingly, this is a “built in tax” on the marriage between a U.S. citizen and an “alien”.

5. The Opportunity Cost – by far the biggest cost

U.S. citizens resident, are deprived of many of the “normal” financial and retirement planning opportunities available to other Canadians. This is NOT immediately obvious. That said: it is the single biggest cost of being a “dual Canada/U.S.filer”.

Why this so – Let me explain …

Canada is a country with very high tax rates. It’s very hard to “save and get ahead” in a country with a high marginal tax rate that “kicks in” at a relatively low level of income. Canada has a brutally efficient system of tax collection. In addition to paying taxes on income that are (in general) higher than in the United States, Canada has a VAT (which is NOT recognized for purposes of the U.S. “Foreign Tax Credit” rules).
Furthermore, Canada does NOT have generous “Social Security Type”
programs. Canada Pension Plan and Old Age Security are NOT income replacements but are supplements to income. Therefore, (and financial literacy should be a required skill) it is ESSENTIAL that Canadian residents engage in intelligent, purposeful and effective retirement planning. Much of financial planning is based on the tax consequences of various transactions.

Intelligent, purposeful and effective retirement planning for Canadian residents

At the risk of oversimplification most Canadians employ some or all of the following …

Employee pension plans:

Examples include the pension plans offered by teachers, public employees, etc. Fewer and fewer Canadians have access to these kinds of plans. Fewer and fewer Canadians have access to these lucrative arrangements.

Availability to U.S. citizens in Canada: The U.S./Canada tax treaty does allow for favorable treatment of Company pension plans for U.S. citizens in Canada. The U.S. Canada tax treaty is particularly favorable in this regard. In contrast, consider the U.S.
Australia tax treaty which does NOT afford similar U.S. tax treatment to Australian pensions.

__________________________________________________________________________________

Individual Tax Deferral Opportunities in Government registered plans:

Examples include: RRSP, TFSA, RESP, etc.

Availability to U.S. citizens in Canada:

RRSP – yes
TFSA – no tax deferral and fully taxable RESP – no tax deferral and fully taxable

The income earned inside the TFSA and RESP will be taxed directly to the U.S. citizen. There may also be additional (expensive) “reporting requirements” with respect to these investments.

__________________________________________________________________________________

The Use of a Canadian Controlled Private Corporation (an opportunity that may be coming to an end FOR ALL PEOPLE with the current Liberal Government):

Availability to U.S. citizens in Canada:

  1. Clearly No. The growth of investment income inside the
    corporation is attributed to the shareholder and subjected to
    punitive taxation. This destroys the opportunity to use the
    Canadian Controlled Private Corporation as a retirement planning
    vehicle.
  2. Clearly No. The “reporting requirements”
    reflected in Form 5471 are tremendously expensive and penalty
    laden.
  3. Clearly No. U.S. citizen shareholders of
    Canadian Controlled Private Corporations are NOT entitled to the
    Canadian “lifetime” capital gains exemption on the sale of the
    shares of the CCPC.
  4. Possibly No. Canadian tax planners plan the
    payment of dividends to shareholders in a way that results in
    minimization of taxes paid at the Shareholder level. This is the
    direct result of Canada’s system of giving shareholders tax
    credits for certain taxes paid by the corporation. The dividends
    are subject to full U.S. taxation on the U.S. return.
  5. Possibly No. In theory dividends from a
    Canadian Controlled Private Corporation are possibly (depending
    on your interpretation of the Canada U.S. tax treaty) subject to
    the 3.8% Obamacare surtax.

There is no “Clearly Yes”. It’s complicated! I have seen very knowledgeable and competent advisors argue over whether U.S. citizens in Canada should make use of Canadian Controlled Private Corporations.

__________________________________________________________________________

Individual stock and investment portfolios:

Generally, this would include individual “debt” (think GICs) and “equity” (think individual stocks).

Availability to U.S. citizens in Canada:

Yes absolutely available. The dividends, interest and capital gains are subject to “normal U.S. taxation”. The U.S. tax owed will be reduced by the tax paid in Canada.

___________________________________________________________________________

Canadian Pooled stock and investment portfolios:

In general, this means “Canadian mutual funds”.

Availability to U.S. citizens in Canada:

No. Canadian Mutual funds are considered to be PFICs under U.S. law and are subject to taxation at rates that can approach 100%.

___________________________________________________________________________

Principal residence AKA The tax free sale on a principal residence (very popular in larger Canadian cities):

Availability to U.S. citizens in Canada:

Yes and No. U.S. citizens in Canada are required to pay capital gains taxes on the sale of their principal residence. (There is currently a $250,000 USD exclusion).

____________________________________________________________________________

Conclusion:

U.S. citizens in Canada are simply NOT able to take advantage of the retirement and planning opportunities available to their neighbors. The problem of the U.S. tax system for U.S living in Canada should be characterized as:

“It’s not the taxes they take from you. It’s that the U.S. tax system leaves you with few opportunities for financial planning”.

This is the primary reason why for U.S. citizens living in Canada:

All Roads Lead To Renunciation!

John Richardson

The biggest cost of being a “dual Canada/U.S. tax filer” is the “lost opportunity” available to pure Canadians

_________________________________________________________________________________________

Some additional reading:

How To Live Outside the United States in an FBAR and FATCA world – The 10 Commandments

How To Live Outside The United States In An FBAR And FATCA World

Life in The “Penalty Box”: U.S. Citizens and Green Card Holders Living Outside The United States

Part 1 – Life In The “Penalty Box” – U.S. Citizens And Green Card Holders Living Outside The US