Month: January 2017

The U.S. Saving Clause Facilitates the Expatriation Tax in 877A

 
What is evident is that our governments do not understand the effects of citizenship-based taxation. They did not believe us when we told them it was not just an issue of possibly not owing annual income tax. They did not believe us when we told them our tax-deferred accounts would be taxed. They did not listen when we told them sale of our (Canadian & others) principal residences would produce capital gains which would be taxed.

Will they listen when we tell them that “just renounce” (as if it were simple) will cause some to pay an Exit Tax that will cause a non-US pension valued as if it were paid out and taxed as regular income, in addition to capital gains on the rest of the assets? On those who have not just left the U.S. but left long ago, gaining all this as residents of the countries they live in?

This money belongs to the coutries where it was earned.

It DOES NOT belong to the United States.

We must repeat this over and over and over again until they get it:

It is abundantly clear that the United States is using it’s tax jurisdiction over U.S. citizens (a definition it can change at will) to attack the economies and sovereignty of other nations. In the event that this problem is NOT addressed, countries will no longer be able to afford the “fiscal risk” of accepting U.S. citizens as immigrants.

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This was a comment made by John Richardson made at FixTheTaxTreaty.org

It strikes me that the existence of the “savings clause” also facilitates the United States “Expatriation Tax” (AKA “Exit Tax”) which is found in Internal Revenue Code S. 877A.

The S. 877A Exit Tax includes (but is not limited to) the imposition of taxation on:

1. The “pretend capital gain” on assets that are located in Australia (for example “real property” located in Australia); and

2. Australian pensions that are located in Australia (is the Superannuation a pension?).

See the series of posts here:

Renouncing US citizenship? How the S. 877A “Exit Tax” may apply to your Canadian assets – 25 Parts

To put it simply through the S. 877A Exit Tax the United States is claiming the right to confiscate assets that are sourced in Australia and that were most likely acquired while the owner resided in Australia. Under normal rules of International taxation (as you describe in the first post of your trilogy http://fixthetaxtreaty.org/2017/01/12/explaining-the-saving-clause-i/) Australia would have the first (and presumptive) right of taxation on both of these assets. But what happens via the S. 877A Exit is that:

On the day before renouncing U.S. citizenship (while the person is still a U.S. citizen) the United States “swoops in” (steal it while we can) and claims the right to impose a preemptive tax on assets on which Australia clearly has the first right of taxation. In other words, the United States swoops in to impose taxation before Australia imposes taxation on the asset.

To put it simply:

This effect of the S. 877A Exit Tax is one of the most egregious examples of the United States “using it’s citizens” as “Trojan Horse Soldiers” to steal from the economies of other nations!

As described by one commentator:

“Although international tax law does not prohibit countries from imposing exit taxes
on their residents, there could be situations in which the levy of a tax on capital gains by a legislative fiction in one country infringes on a bilateral tax treaty.

In this respect, the Netherlands Supreme Court has ruled that the tax on a fictitious
alienation in specific circumstances can be incompatible with treaty law. If a taxable event was allocated for tax purposes to one state, the other state cannot by a later legal fiction attribute taxing rights to itself regarding a purchase or alienation that did not actually occur.”

Your post has proposed three possible solutions to the problem of the “Savings Clause”. How might each of these proposals defend Australia from the S. 877A Exit Tax? Interestingly the proposals operate differently.

1. Removal of the savings clause – (Australia does NOT agree that the USA can impose taxation on any person who it deems to be a U.S. citizen):

Th “Removal of the Savings Clause” does NOT mean the U.S. agrees that the U.S. WILL NOT unilaterally impose taxation on Australian assets. The United States might impose the taxation anyway. The precise effect of the removal of the “savings clause” would need to be considered on an “article by article” analysis of the treaty. If the savings clause were removed the individual treaty provisions would have to be strengthened to give Australia the exclusive right to impose taxation on Australian assets.

2. Citizenship tie breaker – (if included in the treaty this would mean that the U.S. would agree to NOT impose taxation on any Australian citizen resident in Australia):

This would ensure that the S. 877A Exit Tax could NOT be applied to dual U.S. Australian citizens living in Australia. It would protect the individual who is a “dual citizen”. It would NOT protect the U.S. citizen resident of Australia who was NOT an Australian citizen.

3. Tax Base Preservation Clause – (if included this would mean that the U.S. would agree to not impose taxation on any Australian asset)

This would protect both the individual (whether dual citizen or not) AND would protect the government and economy of Australia.

It is abundantly clear that the United States is using it’s tax jurisdiction over U.S. citizens (a definition it can change at will) to attack the economies and sovereignty of other nations. In the event that this problem is NOT addressed, countries will no longer be able to afford the “fiscal risk” of accepting U.S. citizens as immigrants.
Reply

The Wisdom of Countries that Welcome Diversity

Recently I received a paper from an expat in Australia-it is a submission to the Ways and Means Committee. I am very impressed with it and shortly thereafter came across this article at the NYT.

Both Canada and Australia choose to take a positive approach and encourage the immigration of those who have studied in their countries; the citizenship process is fast-tracked. The U.S. on the other hand, has an extremely difficult regime which makes the path to citizenship much more difficult. As with other policies we are aware of, the U.S. once again, shoots itself in the foot with it’s exclusionist attitude. Add to that, President Trump’s Executive Order effective today, will likely prevent some who are already studying in the U.S., the ability to return and continue with their studies. The following groups of people find themselves barred from entry into the United States:

  • suspended entry of all refugees to the United States for 120 days
  • barred Syrian refugees indefinitely
  • blocked entry into the United States for 90 days for citizens of seven predominantly Muslim countries: Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen
  • barred green card holders from those countries from re-entering the United States

It is fairly well-known in the expatriate community that USCIS has no information for new immigrants warning them of what is involved in citizenship-based taxation and the ramifications of it should they desire to return to their home countries one day, without renouncing their U.S. citizenship. The more likely “hit” they will take, are the FBAR and FATCA provisions with the emphasis on reporting foreign accounts and assets. This is particularly obscene in that many of these students will have accounts in their home countries solely for sending money back to help their families. So perhaps the students who will NOT come to/remain in the U.S. are, for the moment, more blessed than they can possibly appreciate, by not entering/remaining in the U.S.

Those who are “more in the know” or have connections that alert them, are lucky to have access to Canadian and Australian schools and citizenship. These students as well as the countries they choose, represent a reasonable and mature approach that matches the direction of the rest of the world – globalization. Given I have the permission of the author, I am reproducing this paper in its entirety.

International students studying in America and the ramifications

of the Foreign Accounts Tax Compliance Act (FATCA) on the higher education sector
Comments to the U.S. House Committee on Ways and Means
Don Maisch PhD

January 15, 2017

Dear Committee Members

I am writing to the Committee from Australia about one particular issue involving an unintended consequence of the Act, which apparently has not been considered in any cost/benefit analysis to date. My concern is that there exists the possibility of a significant adverse effect on the major income stream for the American higher education/university sector, in relation to attracting international students to continue their education in American educational institutions.

Overview

As of the Fall of 2015, total international student enrolment in both public and private educational institutions in the U.S. was 1,043,839 with the highest numbers from China and India, Saudi Arabia and South Korea, followed by Canada, Japan Taiwan and Vietnam. Previous years show an increasing number of students from these countries (and others) attending American educational institutions.1

According to a 2015 report by the U.S. Department of Commerce, the increasing numbers of international students attending U.S. educational institutions has had a significant impact on the American economy, adding more than $30.5 billion to the economy. The report found that 72 percent of all international students are funded from sources outside of the U.S., coming from personal and family sources as well as assistance from their home country governments or universities. 2
Besides being an important funding source for higher education institutions, many students, after graduation would like to gain employment in America, a fact not lost on the previous Obama Administration which wanted science/tech international students to be able to put their skills to use in America, not overseas. Obama stated at the time: “In a global marketplace we need all the talent we can attract…We don’t want the next Intel or the next Google to be created in China or India. We want those companies and jobs to take root here”.3 How the incoming Trump Administration views this remains to be seen. In an article written in Forbes (June 2015) by Evangeline Chan, an immigration attorney, she points out that restrictions on the number of H-1B visas available for graduate foreign students with a bachelor’s degree or higher is forcing this pool of skilled people to have to leave the U.S. As of 2015 only 85,000 H-1B visas were available while there were 233,000 applications.

According to Chan, “Our communities have become more global but our immigration system has not kept up”4.
These are highly skilled US higher educated potential migrants who are willing to live and work in America, most likely eventually getting a green card or citizenship. What is an unknown however, is how many of these potential migrants would like to leave open the possibility of, sometime in the future, being able to return to their home countries to live and work. After all, they would be highly sought after by U.S. corporations, with branches in these countries, who recognise the advantages of hiring people with extensive local knowledge.

International students in Australia

Despite Australia’s relatively small population of around 24 million, it is the third most popular destination for international students (approximately 300,000 in 2014). By 2015 this was a $15 billion industry and is Australia’s third largest ‘export’ following iron ore and coal. Skilled students are encouraged to stay in Australia after graduation and are considered as an important source of migration, which can address skill shortages and contribute to Australia’s long-term economic prosperity.5 As of February 2016 the international education sector in Australia had risen to a $20 billion export industry with data showing that international students were making a significant contribution to the economy.6 This is further confirmed by a 2015 extensive analysis on the value of international education to Australia by Deloitte Access Economics. They found that it was the professional, scientific and technical services which benefited the most from the international education sector. Deloitte estimated that Australia’s current stock of international students would contribute 130,000 skilled migrants to the Australian workforce after graduation. Other benefits included:

• Economic benefits stemming from increased entrepreneurship, knowledge exchange and international collaboration;
• Economic benefits derived from trade and investment links and soft diplomacy both in Australia and in source countries; and
• Social benefits flowing from improved cultural literacy, stronger cultural linkages and enhanced cultural capital in both Australia and in source countries.7

One of the issues raised by the Deloitte report was the volatility in international enrolments due to an increasing number of countries now competing for international students.8 It is important to point out here that the income generated from foreign students has become an essential part of maintaining the financial viability of the higher education sector in both the U.S. and Australia.

The FATCA risk factor for the U.S. higher education sector

In this increasingly globalized world, where a number of countries are competing for a bigger slice of the ‘international student’ cake, and in which Australia is competing with the U.S. for Asian students, FATCA will inevitably affect both countries but in opposite ways.

As the Committee is well aware of the controversy surrounding the provisions of the Foreign Accounts Tax Compliance Act I need not go into it here, other than briefly examining how it can ensnare unwary former international students into becoming a “US person for tax purposes” if they later decide to return to their home country.

• Most foreign students in the U.S. have an F-1 student visa. After graduation, he or she can remain in the U.S. for a period of 12 months for training, internships or employment related to their field of study. This is called Optional Practice Training (OPT).
• If the former student has obtained a degree in a STEM (Science, Technology, Engineering or Mathematics) field, then they would be permitted to remain for an additional period of 17 months.
• Then the former student has 60 days to depart from the U.S. If they then depart back to their home country they would not be subject to the FATCA provisions and would not be considered a “U.S. person for tax purposes.
• However, if they instead, qualify and apply for a H-1B temporary work visa (limited availability, as explained earlier) in preparation for a “green card” which then allows them to live and work in the U.S., or they later take up U.S. citizenship, they will have a significant tax problem if in the future they decide to leave the US to live and work elsewhere.
• This possibility is not being explained to prospective foreign students who apply to study in America.

Under FATCA, “U.S. persons” for tax purposes includes dual nationality citizens, Green Card holders (regardless of country of residence) and U.S. residents, or Deemed Residents, regardless of citizenship. In addition, a U.S. person is anyone born or naturalised in the U.S., foreign born people with a parent whom is a U.S. citizen, anyone who visits the U.S for an extended amount of time (180 days). Note that a Green card holder is still considered a U.S. person if they fail to surrender it when leaving the U.S. This is still the case if an un-surrendered Green Card has expired. For tax purposes it never expires unless surrendered.

A Possible Scenario under the FATCA Intergovernmental Agreement (IGA):

After graduation from a U.S. university an Indian born (or Chinese, or Canadian, etc.) student gains a H-1B visa and gains employment in a American tech company. He goes on to get a Green Card and soon after, full U.S. citizenship. Some years later, as an American citizen (U.S. person), he decides to return to his nation of birth to take up employment with an Indian company working in his field of expertise. However, he soon finds that as a “U.S. person” the company will not hire him in any position of authority for to do so could expose the company’s finances to investigation by the American IRS. He then finds that he cannot open a bank account because the bank is refusing to take on “U.S. Persons” as clients because of the onerous requirements placed on reporting financial details to the IRS. He marries an Indian woman who is not pleased to learn that, as a spouse of a “U.S. person” the IRS wants to see all her financial details as well. They then have a child, and much to their horror, they find that their child (and any subsequent children) is considered to be a “U.S. person” by the American IRS because the child has a parent who is a US citizen.9 He decides to renounce his US citizenship to be free of this quagmire but finds that it is very difficult process costing many thousands of dollars to do so. He then is given a tax demand from the IRS for “Exit Taxes” based on the value of all his assets – in American dollars10. He finally frees himself of the quagmire after several years of worry and at significant expense. He then is informed that, even though he has renounced U.S. citizenship the IRS still considers his child a US citizen who will have to start filing complicated U.S. tax returns when turning 18 if the young adult wants to continue to live outside the U.S. As with what the father found, his child will find that living outside of America as an adult U.S. citizen is a significant liability. The only solution to this for the young adult is to either move to the U.S. and live out his life there, or go through the complicated process of renouncing after the age of 18, as his father had done. Trying to solve all this for his family reminded the father of that lyric from The Eagles song, “Hotel California”, which he remembered from his university days: You can check out any time you like / But you can never leave…

The all–important question for the American international student education sector is this:

If prospective foreign students were given the full facts on the possible future impacts of the FATCA IGA, if they stay in the US after finishing their education to take up employment, would they consider it worth the risk of being ensnared by FATCA, when much safer alternatives exist, such as studying and working in Australia? If so, what is bad for America may turn out to be very good for Australia.

In my opinion FATCA constitutes a significant financial risk to the American foreign student higher education sector and this should be taken into account in your deliberations over FATCA and the wisdom of maintaining citizenship-based taxation.

Thank you for your consideration.

Sincerely,

Don Maisch PhD
____________________________________________________________

1 Project Atlas, http://www.iie.org/Services/Project-Atlas/United-States/International-Students-In-US#.WHW9RZL4mUc
2 Institute of International Education, http://www.iie.org/Research-and-Publications/Open-Doors/Data/Economic-Impact-of-International-Students
3 Fox News, Obama Administration Lets More Foreign Students Stay in U.S. for Jobs, Raising Competion Concerns, http://www.foxnews.com/politics/2011/05/17/dhs-allows-foreign-students-extended-stay.html
4 Chan E, Our Immigration Policies Are Telling Foreign Students To ‘Get Out’ After They Graduate, Forbes / Opinion, http://www.forbes.com/sites/realspin/2015/06/08/graduating-congratulations-now-get-out/#4305b47312d0
5 Group of Eight Australia, International students in higher education and their role in the Australian economy. https://go8.edu.au/publication/international-students-higher-education-and-their-role-australian-economy
6 Dodd T., Education revenue soars to become Australia’s $20 billion export,
http://www.afr.com/news/policy/education/education-revenue-soars-to-become-australias-20-billion-export-20160203-gmke3k
7 Australian Government document prepared by Deloitte Access Economics, The value of international education to Australia, https://internationaleducation.gov.au/research/research-papers/Documents/ValueInternationalEd.pdf
8 ibid.
9 U.S. Citizenship and Immigration Services, Citizenship Through Parents, https://www.uscis.gov/us-citizenship/citizenship-through-parents
10 Exit tax and further taxation of citizens who renounce,
http://web.archive.org/web/20121023090722/http://renunciationguide.com/Exit-Tax-on-Renunciants.html#MarkToMarketTax

The Devil is in the Details When it Comes to the U.S. Exit Tax

reposted from isaac brock society
 

A very   interesting discussionabout the Exit Tax has been taking place at Brock this week. In particular, the comment below from USCitizenAbroad highlights some of the major differences between the U.S. Exit Tax and the more benign Departure Tax that occurs in Canada and Australia. It cannot be overstated how punitive and destructive the U.S. Exit Tax is and anyone contemplating renouncing, should be certain to be familiar with all aspects of it; do a preliminary set of returns and an accurate accounting of all assets including pensions. While anyone can renounce at a Consulate before filing tax and information returns, anyone who is close to being “covered” should get counselling before taking such a step.

******

USCitizenAbroad says says:

@Watcher makes the point that:

As you see, then, the devil is very much in the detail. These latter two things have no analog in the Canadian exit tax. So… the US is not the only country to have an exit tax, but the exit tax it does have is one of the worst. And very likely the actual worst.

@Karen notes that:

On the Exit Tax – Australia also has an exit tax similar to Canada’s. When you cease to be a tax-resident of Australia you have a choice – pay capital gains tax on your current unrealised gains OR defer the tax until you sell the asset, at which time you pay tax to Australia on your entire realised gain, even the gain that accrued after you left Australia (Australian real property may be treated differently as most treaties would allow Australia to tax non-residents on real property gains where the property is located in Australia).

With respect the comments that compare the U.S. “Exit Tax” with “Departure Taxes” levied by other countries confuse the issue.

The “departure tax” imposed by Canada is a tax imposed based on a change in “residence”. The U.S. S. 877A Exit Tax is a tax imposed based on a change in “citizenship” in the case of “citizens” and a change in “immigration status” when applied to Green Card holders.

In the case of “Green Card Holders” the U.S “Exit Tax” (provided that it is applied when the Green Card Holder BOTH moves from the USA and surrenders the Green Card at the same time) is somewhat like the Canadian departure tax. It does however apply to more items and it applies to items that have no connection to the United States.

In the case of U.S. citizens, the U.S. Exit Tax is in NO way connected to residence in the United States. It does NOT apply at the time the a U.S. citizen moves from the United States. It applies at the time that they decide that they do NOT want to be a U.S. citizen and renounce U.S. citizenship. This means that it mainly applies to assets (both capital assets and pensions) that have no connection whatsoever to the United States. To put it simply the way the U.S. Exit Tax rules operate is that the United States uses it as a a mechanism to (in effect) confiscate the non-U.S. assets.

In addition, as @Neill, @Heidi and others have noted the confiscation is RETROACTIVE confiscation. In other words, the law appeared in 2008 (so NO Neill did NOT agree to this by moving to the USA) trapping assets that existed at that time. As @Heidi puts it:

NO ONE coming to the US could possibly expect to become a prisoner of the ‘freest country in the world’

Wrong, the simple fact is that there are many Green Card Holders who are now “in prison in America”.

Furthermore, as some comments have noted the application of the S. 877A rules has the practical effect of subjecting those assets to double taxation. And as @Watcher notes, there is NO realization event to pay the Exit Tax.

@Watcher concludes with:

the US is not the only country to have an exit tax, but the exit tax it does have is one of the worst. And very likely the actual worst.

The U.S. is NOT the only country that imposes taxation when one breaks “tax jurisdiction” with a country. But, because all other countries use “residence based taxation”, the U.S. IS the only country that has an Exit Tax based on a change in personal characteristic “citizenship or immigration status”. The pure evil of the Exit Tax flows from the pure evil of a system of citizenship-based taxation. Because there is NO other country that uses citizenship-based taxation, there is no other country that can have an “Exit Tax” that is based on a change in citizenship.

Therefore:

On the one hand to compare the Canadian Departure Tax to the U.S. Exit Tax is an incorrect comparison; and

On the other hand, (since many commenters seem to be making the comparison), some thoughts on the suggestion the U.S. Exit Tax is the worst.

When the U.S. S. 877A Exit Tax is compared to Exit Taxes imposed by current and past regimes, it is clear that the U.S. Exit is by far the worst by today’s standards.

But, the U.S. Exit Tax is also by far the worst by historical standards. The Exit Taxes imposed by the nastiest regimes in history (say during the World War II era) made NO attempt to confiscate assets acquired after the person left the country. As @Karen put its:

The US exit tax is, as others have said, much worse. At least with the Canadian and Australian versions, assets purchased after leaving the country are not included.

So, yes there is NO doubt that the U.S. 877A Exit Tax is the nastiest in history.

@Nononymous the S. 877A Exit Tax is unjust whether one complies or not, whether it is paid or not and whether one “feels the injustice” or not. The fact that an accidental American ignores the issue, is completely irrelevant to the injustice of the tax.

Accidental Americans (And Others): Do Nothing!

reposted from MapleSandbox

by Lynne Swanson

 

Backing up the above tweet, Keith Redmond posted the following on Facebook:

Dear Members: I just had a lengthy, robust call with an individual who spent 25 years in upper management with the Department of Treasury IRS Criminal Investigation. He confirmed what I thought about the IRS. There is more bark than bite. He stated that there are many, many Americans overseas ho have no business in entering the US tax system and that Accidental Americans UNDER NO CIRCUMSTANCES should enter the US tax system. He confirmed that there are MANY US tax pros who prey on Americans overseas and Accidental Americans through fear and falsehoods. (e.g. you will get arrested, etc.). Any US tax professional who pushes and scaremongers these individuals to comply are not professionals and should not be used! He confirmed that the IRS is NOT going to go after you in your country of residence (most especially if you are a citizen of that country) and the IRS is NOT going to arrest you at the US border. The IRS does not have the resources to do this plus they go after those who have committed a crime not the average American overseas. He stated that Americans overseas need to not succumb to the fear. Excellent conversation and I am glad my views have been validated.

This reflects what I have long believed. Unfortunately, there is still the nightmare of FATCA to deal with. In some countries, anyone born in the US cannot even get bank accounts. We are treated as criminals just for banking where we live.

I asked Keith how his contact explains and justifies this.

Keith replied:

He can’t. He finds the whole situation abhorent…

Accidental American “I Live Hell. I Had to Give up my dual Nationality. (i.e., Renounce my U.S Citizenship)”

original article in French HERE

reposted from Anmerican Expatriates Facebook Group

ACCIDENTAL AMERICAN’: I LIVE HELL. I HAD TO GIVE UP MY DUAL NATIONALITY (I.E. RENOUNCE MY US CITIZENSHIP)

Keith Redmond says:

Thank you Fabien Lehagre or making sure this injustice stays in the press! The homeland US press refused to report on it. I know Caroline and her story is one of millions where the US government is ruining the lives of people outside the US.

English translation below.

carolinec Caroline, 37, was born in the U.S. of French parents and lived there for two years. Franco-American, her dual nationality was unfavorable to her when she discovered that she had to pay taxes there. The U.S. is one of the only countries in the world to base the taxpayer’s status on nationality and not on place of residence. Stuck in a legal imbroglio, it tries desperately to regularize its situation.

Caroline says:

I was born in 1979 in Los Angeles. My parents were French, but they were expatriates in the United States for professional reasons.

All my life, I had dual French-American nationality. Even though I only lived for the first two years of my life on the other side of the Atlantic, I always found it amusing to have this double status. I was the only one of my siblings to have this peculiarity.

I remember returning to the United States when I was seven, then in 2008 with my husband. Always with my French passport since I never redone my American identity papers.

A legacy blocked because of “my clue of americanity”

Since July 2014, France and Switzerland have undertaken to disclose the tax data of their US residents. For the moment, this device is not reciprocal. As a lawyer, I had heard about the Fatca (Foreign Account Tax Compliance Act), a law to combat tax evasion, but I never thought I would be directly involved.

I have always paid my taxes in France, and since I have never really lived on American soil, why should I have had to pay taxes in the United States? I was wrong. In reality, the United States is one of the only countries in the world to base the taxpayer’s status on nationality and not on place of residence.

I understood it in September 2014, a few months after the death of my father. The succession had to be settled. I thought there would be no worry, but I received a letter from my father’s bank, BNP-Paribas, to point out that I had a “clue of americanity” because of my place Of birth. So I was concerned about the famous Fatca law.

To unlock the legacy, I had to prove that I was in good standing with the US Treasury (the IRS). In the meantime, the succession would be blocked.

It was the cold shower. After cashing in, I thought I wanted to be in order. If I were to pay, no worry, I would do it to live in peace.

I needed my US tax number. I have never had

I contacted the American Embassy to inquire. I was asked what was my tax number (Individual taxpayer identification number)? I did not have any. What to do ? I had to provide them with a US Social Security number. Same, I never had one. My father never used it because he was an expatriate.

By searching the internet, I learned that to obtain my social security number, it was necessary to have an extract of birth certificate. Immediately, I thought to myself. It’s good, the situation will soon be resolved. In France, it is obtained in a few clicks, but in the United States, it is another pair of sleeves.

To obtain such a certificate, I had to go there because the American embassy in Paris did not issue the required notarized document. No power of attorney was possible. And even if I did, I had no guarantee since I no longer had any American identity papers.

At the foot of the wall, I had to give up my dual nationality

This administrative imbroglio impacted not only me but all the members of my family. It was impossible to mourn the loved one whom we had lost. The situation was totally blocked.

I was also pressed for time: my husband and I had to move to Switzerland in January 2015.

After finding out, I realized that I could never open a bank account in Switzerland – a sine qua non for working in the country – without proving that I was in good standing with the US IRS. It was the snake biting its tail.

I checked with tax lawyers. I was asked 5,000 dollars to take my case. Can not imagine. During all this time, I harassed the US embassy which was unable to give me a solution. One day I came across a woman who said to me:

“If you do not want to do anything about your American nationality, the easiest way would be to give it up.”

At the foot of the wall, that’s what I did. Out of spite, I renounced a right because I saw no other way out.

It cost me the modest sum of 2,350 dollars

The American Embassy sent me a 25-page file to complete, written entirely in English in an indecipherable technical vocabulary for a non-bilingual person. I was asked to tell my story, to explain the reasons why I had to give up my nationality before stating a list of incredible consequences.

Once the form was completed, I got an appointment at the embassy. When I arrived, I was installed in a room with protective glass. I was not allowed to drink, to eat and my laptop was confiscated.

An official entered the three-square-meter room. She spoke with a hallucinatory flow. I did not understand anything. I asked to be assisted, that was refused me. Clearly, she did not care what I could live.

She asked me a few questions. I asked her if my tax situation would be in order after this waiver. She replied that it was not her problem before I exposed all the consequences of my act: it would be much more difficult for my children to study in the United States and not sure that I could ever get A visa if I were to settle there.

She’s gone for an hour so I can think about it. When she came back, I explained to her that my decision was made. I was then asked to go to the cash to pay the processing fees: it cost me the modest sum of 2,350 dollars!

I still have this sword of Damocles above my head

I waited almost three months to get my act of renunciation. The first barrier was crossed, it was necessary from now on that I am working on my regularization with the American tax authorities.

To the extent that I was going to receive an inheritance over 50,000 euros, I risked being taxed by the IRS. No worry to pay, I just wanted to no longer live with this sword of Damocles hanging over my head.

I have contacted them many times, but as I do not have a tax number or a social security number, I have not been able to find a way out of this impasse. No one was able to tell me whether I was going to pay a fee or not. I was even advised to continue “going about my business”, waiting for a providential outcome.

Regarding my father’s inheritance, the situation did not unlock overnight. The bank asked me to complete form W8-BEN, but again, I had to provide a US tax number. My act of renunciation was not enough.

Tired, furious, and accompanied in my steps by the collective “Americans accidental”, I decided to send emails to the governor of the bank of France, various government advisers, the Ministry of Foreign Affairs, etc. I do not know what happened, but one day the BNP called to tell me that the situation was going to be unblocked.

It took two years to glimpse the end of this story. But I’m still not reassured. I know that at any time, the IRS can fall back on me and ask me to pay taxes with retroactive penalties. The sword of Damocles is still there.

The feeling of being rejected on all sides

What is rather comical is that it is not the first time that I have to fight to prove my nationality. In 2008, I had a hard time renewing my French passport. Two years earlier, Nicolas Sarkozy, then Minister of the Interior, had passed a law requiring foreign-born persons of parents born abroad to provide proof that they were French.

My father was born in Morocco, my mother in the Congo, at the time of the colonies, both of them French, but that was not enough. It was necessary, although in possession of a national identity card and a French passport, that I recover the birth certificates of my family over three generations to prove that I was of French nationality!

With this new misadventure, I feel rejected. For two years I have lived a veritable calvary, and my family, too. My mother even told me that if she had known, she would have returned to France to give birth.

I am not the only one in this situation. The “accidental Americans” would be close to 50,000 people. Some have disbursed several thousand euros without getting out of business. Maybe it’s time to create a cell to regularize our situation? For, at present, no solution exists.

caroline

A Little More About Treasury’s Disallowment of SCE


Great article by Helen Burggraf regarding Treasury’s denial of ACA’s SCE program.

Just a couple of thoughts………

US officials reportedly felt that the potential risk of expat Americans using their “same-country” bank accounts to avoid their US tax obligations was ultimately too great to be able to grant them such an exemption – in spite of the inconvenience this would result in, as it already has, for many of the estimated 8.7 million American expats across the globe.

The stupidity of this comment by Treasury officials is beyond belief. Americans abroad do not use “foreign” bank accounts as a way to avoid their U.S. tax obligations. They also are not “foreign” but their local bank down the street whereby they can cash their cheques, pay bills and so on. Obviously, accounts used in this manner are not at all the same as wealthy people living in the U.S. using foreign banks to avoid taxation. This has been stated so many times over the last five years and yet it is STILL not understood. The government continues to use this as a way to keep up several misconceptions as a way to justify FATCA:

Americans who live in the U.S use foreign banks to avoid taxation are wealthy
creates the idea that

Americans who use foreign banks to avoid taxation are wealthy
this does not equal

Americans who live outside the US are wealthy and use foreign banks to avoid taxation.

K.I.S.S., doh, it’s not rocket science to see the difference here!

The key difference, is residence. We all know 99% of all countries on this planet, base taxation upon residence.

” The regulations say nothing about the problem of lock-out. They fix only on the un-quantified and un-weighted risk that what must be a relatively small population of US taxpayers residing in a foreign country and banking at their local bank might evade US tax.
The regulations do not say whether, and, if so, to what extent, Treasury Department took into consideration the widely-admitted fact that FATCA continues to put the community of 8 million Americans overseas at risk of lock-out from access to financial accounts needed for the management of basic living expenses, [including] paying bills, paying rent [and] receiving paychecks.

The Treasury Department has very little statistical information on the diaspora. That is why they have to resort to the fishing expedition that #FATCA is. There have been so many reports, letter-writing campaigns and so on, trying to communicate the problems. So the story has been told. Yet we see no meaningful feedback from the government, indicating what percentage of money they have supposedly collected comes from Homelanders, non-resident citizens, etc. In fact, it is rather amazing that Treasury has not actually said anything different that what they have always implied: Americans living abroad are tax cheats and criminals.

While many of us do not endorse SCE, I think we all respect the efforts of any expat organization that tries to rectify this situation.
And while the future actions of the newly-elected Administration and Congress may offer some hope, we should stay focussed on the fact that many years of concerted effort have failed to solve the situation. Litigation remains a hugely valuable option and may be our best hope.

“All Roads Lead To Renunciation” – #FATCA Same Country Exemption Edition

cross-posted from issacbrocksociety.ca

You can read it at the Americans Citizens Abroad site.

Highlights include:

 

In denying the request for SCE, the Treasury Department’s final FATCA regulations focused solely on the risk of US tax avoidance. “The Treasury Department and the IRS have also decided that the risk of U.S. tax avoidance by a U.S. taxpayer holding an account with an FFI exists regardless of whether the U.S. taxpayer holds an account in his or her foreign country of residence or another foreign country.”  The regulations say nothing about the problem of lock-out.  They fix only on the unquantified and un-weighted risk that what must be a  relatively small population of US taxpayers residing in a foreign country and banking at their local bank might evade US tax.  The regulations do not say whether, and, if so, to what extent, Treasury Department took into consideration the widely-admitted fact that FATCA continues to put the community of 8 million Americans overseas at risk of lock-out from access to financial accounts needed for the management of basic living expenses (paying bills, paying rent, receiving paychecks).

The problem of foreign financial account lock-out exists, and it has been proven that the FATCA rules are one of the root causes.  The Congressional Americans Abroad Caucus, the National Taxpayer Advocate, and ACA, as well as other overseas organizations, have testified to the existence of the problem and have asked for redress by the adoption of SCE.  ACA believes that Treasury Department either missed the point or failed reasonably to balance the considerations.

 

No, the administration of Barack Obama did NOT miss the point. The point is a simple one:

 

 

Unfortunately it’s the proponents of the FATCA Same Country Exemption Proposal  who are missing the point!

It’s simple: “All Roads Lead To Renunciation”.

Renounce and rejoice!

 

December 22 2016 Update on Canadian FATCA IGA lawsuit — Moving closer to the Charter-Constitutional trial

cross-posted from isaacbrocksociety.ca

This is a new update with some timelines from the Canadian Federal Court showing what has to be done before we know the Charter-Constitutional trial date (taking place next year). In part, there will be motions and responses related to differences of opinions as to what documents and information have to be provided prior to trial:

“Order dated 22-DEC-2016 rendered by Roger Lafrenière, Esq., Prothonotary Matter considered with personal appearance

The Court’s decision is with regard to Case Management Conference [recently held by the parties to move the litigation forward]

Result:

Court Orders:

1. D [The Defendants — Attorney General and Revenue Minister] are granted leave to s/f [serve/file] their motion in writing for production of documents and particulars.

2. P [The Plaintiffs — Kazia, Ginny, and Gwen] shall s/f their responding motion record within 28 days from the date of service of the D motion referred to in paragraph 1 above

3. P are granted leave to bring their motion for summary trial [the Charter-Constitutional trial]. P are dispensed from s/f a motion record at this stage and shall instead s/f a notice of motion and contemporaneously serve their affidavit evidence [e.g. testimonies from our Witnesses and Expert Witnesses].

4. The timeline for the D to file a response to the P motion for summary trial is suspended until further order

5. Any further affs, docs, or particulars, and anything else req’d by any order resulting from the D’s motion referred to in para 1 above shall be produced by the Ps to the Ds within 30 days of such order

6. The parties shall make best efforts to schedule the Ds examinations for discovery of the Ps within 45 days of satisfaction of the requirements, if any, described in para 5 above

7. The parties shall requisition a CMC [Case Management Conference] as soon as possible following completion of the steps set out in para 5 and 6 above in order to, among other things: A) fix a timetable for completion of the steps leading to the hearing of the P motion for summary trial; and B) schedule the hearing of the P motion for summary trial.

Filed on 22-DEC-2016 copies sent to parties”

Sorry again for the slow pace.

— I noticed on Brock a recent comment that “Brock is populated with anonymouses who toe the curb.” but confirm that our Witnesses (as well as our Plaintiffs) have all been willing to “out themselves” publicly — and that their names will be disclosed in the affidavits.

Stephen Kish

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