Give up your US Citizenship to Save Taxes

It is well known in the international tax forums that US citizens tax planning is an impossible mission.

As reported in the LA Times: Facebook’s Eduardo Saverin gives up citizenship: Shrewd tax move?

“Here’s a tax tip for Mark Zuckerberg: Give up your U.S. citizenship. The 27-year-old Facebook Inc. founder could face a tax bill of more than $1 billion after the company’s initial public offering, expected next week. His former Harvard classmate who is known as “the other Facebook founder” may have found a way to cut the bill. Eduardo Saverin, who now lives in Singapore, has given up his U.S. citizenship. Tax experts say it’s a shrewd move. Saverin, who was immortalized in the film “The Social Network” as Zuckerberg’s contentious former friend and business partner, has a 4% stake in the company, according to the Who Owns Facebook? website. His stake could be worth nearly $4 billion after the IPO.

“It’s definitely savvy tax planning,” said Edward D. Kleinbard, a professor of law at USC who specializes in federal tax policy and international taxation. “He can argue that the value of the Facebook shares in September, when he gave up his citizenship, were significantly less than the value that will be set at the IPO next week.”
Saverin’s spokeswoman said his decision to jump ship had nothing to do with the upcoming IPO and the potential tax liability. Continue Reading

US Non Resident Green Card Holders Must Revisit Their Position

As discussed in a number of previous Tax Alerts from, since 2009 the Internal Revenue Service has created three separate tax amnesty programs in order to encourage U.S. taxpayers to properly report and pay taxes on assets held abroad. These amnesty programs require U.S. taxpayers to pay any overdue tax, penalties and interest on unreported income, and pay an additional “in lieu” penalty (the “FBAR penalty”) based upon the amount of unreported funds held abroad. The cost of the FBAR penalty has increased successively with each of the three programs such that those who have waited until the current 2012 amnesty program to report their offshore income and assets pay an FBAR penalty of up to 27.5% of those assets as compared to the 20% FBAR penalty paid by participants in the 2009 amnesty program. Continue Reading

US President Tweaks Tax Vision in 2013 Budget

As reported by Grant Thornton, the Obama administration submitted a budget proposal on Feb. 13 with well over 100 proposed tax provisions that would result in trillions of dollars of revenue changes. The tax platform in the budget proposal is largely an amalgamation of provisions from earlier legislative initiatives and previous budgets, but it does include several new proposals affecting high-income individuals and multinational taxpayers.

The most significant new position may be the President’s call to return the top dividend tax rate to 39.6%. Last year’s budget proposed preserving the equivalent treatment of capital gains and qualified dividends, with the top rate for both increasing from a 15% rate to just 20%.

US Citizens and Offshore Trust Reporting Obligations

As a reminder of the Internal Revenue Code (“IRC”) § 6048(a), the 2011–2012 Priority Guidance Plan of the US Tax office focuses again on the reporting requirements for foreign trusts.

The IRC Code § 6048(a) imposes a duty upon the “responsible party” (settlor or transferror) to provide written notice of any “reportable event” to the Secretary disclosing the following information: names, addresses and identification information of the foreign trust, beneficiaries (including their percentage interests), the location of the trust, and the value of cash or other property transferred to the foreign trust, sending a copy of the 3520 Form to the IRS Philadelphia Service Centre. Continue Reading

IRS Warns US Taxpayers of Deadline for Disclosing Offshore Accounts


IRS Warns of Deadline for Disclosing Offshore Accounts

The IRS warned US taxpayers that if they are hiding income in undisclosed offshore accounts, time is running out for them to take advantage of its second special Voluntary Disclosure Initiative of Offshore Accounts which will expire on 31st August, 2011. Taxpayers who come forward voluntarily will be able to get a better deal than those who wait for the IRS to find their undisclosed accounts and income.

This will affect all US nationals and green card holders, even if they are not currently resident in the US.

Further details can be found in the IRS News Release here: Aug 31 Deadline – Second Special Voluntary Disclosure Initiative of Offshore Accounts


2010 OECD Model Tax Convention, Transfer Pricing and updated PE definition

From the OECD site 22 July 2010 — The OECD Council today approved the 2010 versions of the OECD’s Model Tax Convention, the 1995 Transfer Pricing Guidelines and the 2008 Report on the Attribution of Profits to Permanent Establishments. The updates are the result of several years of work to improve these core OECD instruments in the area of international taxation.

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Burdensome and costly tax requirements

The American Institute of Certified Public Accountants told members of Congress recently they should repeal the section of the new health care law that requires businesses to report to the Internal Revenue Service any purchase from a vendor of goods or services worth $600 or more during the calendar year.

During the last few years we have watched the Tax Offices worldwide  ‘delegating’ their collector and investigation powers to Professionals and clients, which in some cases may benefit all parties.

The trend however is in crescendo at a time where most governments worldwide are looking at reducing their administration costs. The Tax Officials, in producing draft legislation, should be mindful in their collection zeal and try to balance collection vs. taxpayer’s rights.  A right balanced approach helps the economy, by helping the clients of the tax office to succeed in their businesses.

It is encouraging to see the American Institute of Certified Public Accountants in the US confronting a legislative initiative to protect taxpayer rights. Well done!

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