Interesting read for those thinking about international business transactions:
Interesting read for those thinking about international business transactions:





indeed, and for good reason ... from your link
(snip)"American expats have long complained that the United States is the only industrialized country to tax citizens on income earned abroad, even when they are taxed in their country of residence, though they are allowed to exclude their first $91,400 in foreign-earned income.
One Swiss-based business executive, who spoke on the condition of anonymity because of sensitive family issues, said she weighed the decision for 10 years. She had lived abroad for years but had pleasant memories of service in the U.S. Marine Corps.
Yet the notion of double taxation — and of future tax obligations for her children, who will receive few U.S. services — finally pushed her to renounce, she said.
“I loved my time in the Marines, and the U.S. is still a great country,” she said. “But having lived here 20 years and having to pay and file while seeing other countries’ nationals not having to do that, I just think it’s grossly unfair.”
“It’s taxation without representation,” she added.
Stringent new banking regulations — aimed both at curbing tax evasion and, under the Patriot Act, preventing money from flowing to terrorist groups — have inadvertently made it harder for some expats to keep bank accounts in the United States and in some cases abroad.
Some U.S.-based banks have closed expats’ accounts because of difficulty in certifying that the holders still maintain U.S. addresses, as required by a Patriot Act provision.
“It seems the new anti-terrorist rules are having unintended effects,” Daniel Flynn, who lives in Belgium, wrote in a letter quoted by the Americans Abroad Caucus in the U.S. Congress in correspondence with the Treasury Department.
“I was born in San Francisco in 1939, served my country as an army officer from 1961 to 1963, have been paying U.S. income taxes for 57 years, since 1952, have continually maintained federal voting residence, and hold a valid American passport.”
Mr. Flynn had held an account with a U.S. bank for 44 years. Still, he wrote, “they said that the new anti-terrorism rules required them to close our account because of our address outside the U.S.”
Kathleen Rittenhouse, who lives in Canada, wrote that until she encountered a similar problem, “I did not know that the Patriot Act placed me in the same category as terrorists, arms dealers and money launderers.”
Andy Sundberg, another director of American Citizens Abroad, said, “These banks are closing our accounts as acts of prudent self-defense.” But the result, he said, is that expats have become “toxic citizens.”
The Americans Abroad Caucus, headed by Representative Carolyn B. Maloney, Democrat of New York, and Representative Joe Wilson, Republican of South Carolina, has made repeated entreaties to the Treasury Department.
In response, Treasury Secretary Timothy F. Geithner wrote Ms. Maloney on Feb. 24 that “nothing in U.S. financial law and regulation should make it impossible for Americans living abroad to access financial services here in the United States.”
But banks, Treasury officials note, are free to ignore that advice.
“That Americans living overseas are being denied banking services in U.S. banks, and increasingly in foreign banks, is unacceptable,” Ms. Maloney said in a letter Friday to leaders of the House Financial Services Committee, requesting a hearing on the question.
Mr. Wilson, joining her request, said that pleas from expats for relief “continue to come in at a startling rate.”
Relinquishing citizenship is relatively simple. The person must appear before a U.S. consular or diplomatic official in a foreign country and sign a renunciation oath. This does not allow a person to escape old tax bills or military obligations.
Now, expats’ representatives fear renunciations will become more common. (snip)
now just wait one fucking second.
the us government taxes us citizens who live abroad for money they make abroad and money here...
and there's friggin illegal aliens running around here not paying taxes and mooching off government services at the same time???
remind me again why we're the "greatest country on earth"???





again trying to avoid politics dominating over financials ...
Yes the US is virtually the only country in the world that taxes the worldwide incomes of its citizens ... as opposed to taxing only the 'home country' incomes of its citizens. But for what it's worth the first $91,500 of foreign income is exempted from US income taxes.
However, the point being made by this NYT article is that, due to supposedly unintended consequences of the US Patriot Act / Terrorist Anti-Money Laundering Treaty / IRS offshore tax enforcement measures ( specifically bringing charges against foreign banks for failure to disclose US account holder information to the USA / IRS ), American citizens living abroad are now becoming trapped 'between a rock and a hard place'. Foreign banks are beginning to close their accounts out of fear of the USA / IRS bringing criminal charges against those foreign banks if they don't fully report information on their US citizen customers ( which is squarely at odds with their basic business model i.e. Switzerland ). Domestic American banks are beginning to close their accounts if the ex-pat American citizen account holder does not maintain a US address in addition to their foreign address.
Thus ex-pat Americans are increasingly facing the option of renouncing their US citizenships, and with it ALL of their US income tax obligations, in order to receive 'normal' treatment by foreign banks and businesses. This is easy for anyone who has dual citizenship. But it is not so easy for ex-pat Americans whose only citizenship / passport is American ... because renouncing that only citizenship may cause them to be treated as 'stateless persons' in terms of international travel etc.
America's rich are renouncing U.S. citizenship at record levels. Said defections are expected to double this year as the rich try to avoid tax hikes of as much as 55%. There were 3,805 "renouncers" in 2011 according to ICE and the IRS. In 2012 there are an average of 154 a week ; an annual rate of over 8,000. This is in spite of having to pay a one time Exit Tax of 15% of the fair market value of all assets less their basis price. In other words, the rich have to fork over what amounts to a 15% capital gains exit tax.
Where are they going ? Australia , NORWAY ?, Singapore, Cayman Islands ( along with a LOT of hedge funds ) , Costa Rica, Guernsey and Antigua. They are also going to the U.S. Virgin Islands . U.S. citizens get a 90% tax credit if they live there at least 183 days out of every year resulting in an effective tax rate of 3.5%.





ahem ... a few of us did this two years ago, before the de-facto 15% 'exit tax' on US assets was put into effect. Also, if you're not a multi-millionaire, you can achieve a very low effective US tax rate without renouncing your citizenship thanks to the 'foreign income exclusion'. However, this requires that you don't spend more than 35 days per year within US borders.
Indeed the US Virgin Islands does presently offer some tax advantages ... for the moment at least. However, this is definitely a millionaire play due to the very high prices for 'decent' local real estate.
Also, in the way of commentary, 8,000 Americans becoming ex-pats in 2012 doesn't really sound like much. But keep in mind that, right now, the top 1% of American earners collectively pay something like 37% of all US federal income taxes while the bottom 50% of Americans collectively pay something like 3% of US federal income taxes. Between capital gains, dividend, and medicare tax increases which will be enacted under Obamacare, state income tax increases on the 'rich' etc. that have just been or will soon be enacted etc., the tax percentage affecting the top 1% of American earners is slated to quickly become even higher. So yes 8,000 'rich' Americans becoming ex-pats in 2012 will have a major effect on total US tax revenues ( not ) collected in 2013.




Aren't there talks to raise that 15% "exit tax" to 30% right now? I forget the article I read that in, but I believe it had something to do with a recent dual-citizen renouncing his citizenship. I think he had something to do with Facebook and was expecting quite the payday, so he renounced and it pissed off several politicians.





You're referring to Facebook IPO stock option beneficiary Eduardo Severin. And the 'tax shelter' specialists have pointed out that he may have actually 'cost' himself tax money by paying the 15% exit tax plus future Singapore taxes versus remaining a US citizen and taking advantage of available tax reduction 'loopholes' !!!
(snip)However, if any of his Facebook stake had moved into a trust, renouncing his citizenship wouldn’t have done him any favors or cost the U.S. government any immediate revenue.
Gideon Rothschild warns future dot-com billionaires to set up their trusts when their companies are still in the incubator.
“Maybe it’s going to be another Google, another Facebook, you don’t want to hold it in your name,” he says. “You want to put in in a trust.”
Hitting future billionaires on the way out
For those who weren’t lucky enough to take Rothschild’s advice early on, expatriation is becoming an increasingly attractive option.
After the IRS started cracking down on U.S. nationals taking advantage of offshore havens in 2009, the number of Americans giving up their citizenship has more than doubled.
While tax planning is probably not the main concern for most of these people, it’s prevalent enough that Congress is looking a little desperate as it tries to close the loopholes.(snip)
If there is a point to be gleaned from all of this, it might be that 'uber-rich' Americans never really need to worry about actually having to pay the very high 'published' tax rates ... because there will always be the smartest accountants, smartest attorneys etc. who will find ( or invent ) ways to legally get around those very high tax rates. But as you go down the income scale to the mere 'rich' i.e. Americans with as little as $200k of annual income ( $250k married ), the high 'buy in' costs involved to take advantage of most of these legal tax avoidance schemes ( i.e. $1 million minimum balance for an offshore private banking account, $1 million for a tax favored MLP partnership share etc. ) place them beyond the reach of merely 'rich' Americans.
So it is actually the merely 'rich' Americans who may benefit more from expatriation than the 'uber-rich'.
Last edited by Melonie; 07-04-2012 at 08:21 AM.



As someone who like Melonie has become a quite content expat, I wouldn't personally ever forsee giving up my US citizenship, no matter how much money was involved. US citizenship is a commodity and millions of people who would love to have it are unable to get it, and others are willing to pay $500,000 to $1 million and jump through additional hoops to get it. Whatever our current problems the US is a very safe and very stable place relatively speaking. In terms of taxation on worldwide income- the $94,000 exemption is pretty substantial and there are other legal remedies to lesson the tax and banking burdens through offshore private interest foundations. Besides money, in an uncertain world; safety, security and being able to return "home" is an awfully big benefit to throw away IMHO.
It's regrettable and disheartening to actually read elaborate defenses of the renouncement of US citizenship based not only on self-interest -- that's tragic enough -- but on relative tax burden.
I thank God I don't have to go into battle with these people.
Selfishness taken to the extreme is not virtue, people. Say what you will about the founders, but they all expected to be killed for the rebellion -- hanged by rope. After all, every other colonial rebellion against the British had resulted in complete failure and the gallows for the offenders.
They did it anyway.
It happened all over again in the abolition of slavery -- good people dying for a cause because the cause was more important than their own selfish interests.
I'm not arguing U.S. exceptionalism by any means, just commitment to a greater good (of any kind) rather than selfish self-interest.
Holy crap!





^^^ Trying to carefully phrase a response with a financial focus ...
In regard to America's colonial rebellion, apparently someone has forgotten the underlying reason for the Boston Tea Party ... 'no taxation without representation'.
Also, in regard to America's civil war, apparently someone has also forgotten that a key underlying reason was the imposition of very high 'national' tariffs on imported goods by the US federal gov't ... which effectively forced Southern states to choose between paying exorbitantly high prices for goods manufactured in Northern states versus paying exorbitantly high combined prices for goods manufactured in Europe plus the national tariff.
Historians with a realistic world view would point out that, in both these cases, the 'powers that be' tried to exert overwhelming force to make sure that the 'one directional' flow of revenues ... from the American colonists / southern states to the British gov't / US Federal gov't ... would continue to flow over the protests of those forced to pay the taxes ! For better or worse, less worldly historians / history teachers usually expouse a version of history that was written by the 'victors' !
Last edited by Melonie; 07-05-2012 at 02:54 AM.
So in other words. Work on Adultwork and quit after I make $91,399.99???? Good to know!!!! ... ****Storms AW like a bat out of hell!!!****






I couldn't agree with you more. I think there is a prevalent mindset in a lot of quarters here in the US for profit at any cost as the sole value. I think this is responsible for a lot of our current economic and social problems. I don't believe you can have a functioning society (people living and interacting together) where the sole and sometimes only motivation is for short-term personal financial gain.
Focusing only on ever increasing quarterly profits and large numbers of people looking out only for Number 1 will not be sustainable for any country or society for very long.





So in other words. Work on Adultwork and quit after I make $91,399.99???? Good to know!!!!
I have a friend who builds and sells one house a year for $90,000 profit. You have to be outside of the US for 330 days to qualify, I believe.
The foreign income exclusion amount for 2012 is $95,100. In addition, there are also some specific foreign exclusions available for such things as having your 'business' pay for your rent thus effectively adding the actual cost of that rent on top of the $95,100 resulting in a de-facto exclusion of something slightly over $100,000 in total foreign income from US taxes.
And yes to qualify for the full amount of the foreign income exclusion, you cannot be on US soil for more than 30 days per year ( = 335 days of residence OUTSIDE the USA ).
However, unlike gradually rising tax rates versus income levels that apply to US resident citizens, US citizen ex-pats are hit with the full amount of taxes due on the $100,001's dollar ( or whatever ) they earn. As a former New Yorker, between social security / medicare taxes, federal income taxes, NY state income taxes etc. this means that once I earn that $100,001st dollar I must pay a combined effective tax of about 43 cents on every additional dollar I earn. At that point, a cost - benefit analysis has so far resulted in a conclusion that it's simply not worth the effort for me to try to earn more dollars when I can only 'keep' 57 cents of each additional dollar earned.
Note that the above foreign income exclusion applies to Americans who KEEP their US Citizenship. If they renounce their citizenship then the $100,000 annual limit rises to 'infinity'. THIS is the reason that an increasing number of Americans earning more than $200,000 ( $250,000 married ) per year are now seriously considering this option ... because with proposed / already in the pipeline tax increases on the 'rich' take effect these Americans will potentially wind up paying more than 50 cents of every dollar earned towards US federal, state and local taxes unless they renounce their US citizenship.
Actually, world view financial history tends to show that the sustainability of economies where the opportunity for additional personal profit in exchange for additional personal risk / effort did NOT exist has been rather poor over time. Remember the Soviet Union ? How about the Deutsche Democratic Republic ( East Germany ) ? The old joke at the time was 'we pretend to work ... and they pretend to pay us'.Focusing only on ever increasing quarterly profits and large numbers of people looking out only for Number 1 will not be sustainable for any country or society for very long.
Instead, world view financial history tends to show that - in a manner totally opposite to the 'crony capitalism' being extended to the Wall St. banks, etc. - average humans will NOT work harder, will NOT take financial / business risks etc. if they are not allowed to personally benefit in proportion to their greater efforts / risks. Putting the expatriation / renounced citizenship issues aside, there is ample evidence that when highly productive citizens are subjected to tax levels that absorb 50+ cents of every 'marginal' dollar earned, money ( i.e. private capital ) that could have been used for business investments / 'permanent' jobs creation instead gets channeled into tax favored but far less productive investments such as green energy partnerships ( which temporarily create jobs ) tax free municipal bonds ( which mostly create income for Wall St ), and Cayman Islands secret bank accounts ( which mostly create investment income for the uber-rich Americans who can afford to open such accounts ).
Last edited by Melonie; 07-05-2012 at 09:20 AM.



You should be more like Mitt Romney then and figure out a way to pay 13.9% like he did in 2010.
Extremes in either direction will destroy sustainability. We have in the past implemented ratios that are very effective and there are economies operating today that have sustainable ratios and the results are easily seen in their economic growth and raising standard of living. Henry Ford said it best, he paid his employees well so they could afford to buy his cars. No person creates or gets wealth on their own- it all comes from someone else, if too many companies and individuals try to wring out too much profit the entire structure will collapse, just like it will if the opposite conditions are permitted to exist.Actually, world view financial history tends to show that the sustainability of economies where the opportunity for additional personal profit in exchange for additional personal risk / effort did NOT exist has been rather poor over time. Remember the Soviet Union ? How about the Deutsche Democratic Republic ( East Germany ) ? The old joke at the time was 'we pretend to work ... and they pretend to pay us'.
Instead, world view financial history tends to show that - in a manner totally opposite to the 'crony capitalism' being extended to the Wall St. banks, etc. - average humans will NOT work harder, will NOT take financial / business risks etc. if they are not allowed to personally benefit in proportion to their greater efforts / risks. Putting the expatriation / renounced citizenship issues aside, there is ample evidence that when highly productive citizens are subjected to tax levels that absorb 50+ cents of every 'marginal' dollar earned, money ( i.e. private capital ) that could have been used for business investments / 'permanent' jobs creation instead gets channeled into tax favored but far less productive investments such as green energy partnerships ( which temporarily create jobs ) tax free municipal bonds ( which mostly create income for Wall St ), and Cayman Islands secret bank accounts ( which mostly create investment income for the uber-rich Americans who can afford to open such accounts ).
Also, what I think you are failing to take into account is that for most people the amount they get to keep is more important than the amount they get taxed. Would you rather be taxed 50% in an economy that allowed you to earn $300,000 or be taxed 20% in an economy that allowed you to earn $100,000?. The US had some of it's biggest economic growth during periods where the tax rates where historically high.
Last edited by jimboe7373; 07-05-2012 at 10:18 AM.





... right along with John Heinz Kerry's 12% de-facto tax rate as reported during his presidential candidacy in 2004. The point of course is that personal politics has nothing to do with uber-rich Americans seeking 'legal' tax avoidance. As I stated earlier, once you start talking multi-million dollar annual incomes, 'legal' tax preferred options from trusts to muni bonds to green energy company partnerships yielding 'production tax credits' to offshore private banking all start to make sense. The American uber-rich never actually paid anything near the published tax rates in the past ... and there's little reason to think that will actually change in the future.You should be more like Mitt Romney then and figure out a way to pay 13.9% like he did in 2010.
What IS likely to change in the future is the de-facto tax rate paid by Americans with a few hundred thousand in annual income. In this income bracket, the costs associated with trust administration or green energy partnership purchases or private jets to ferry money to the Cayman Islands represent too large of an 'expense' to make these 'legal' tax avoidance measures financially practical. So this group WILL wind up paying higher effective tax rates if they remain American citizens. And, in general terms, it is this group who is the most likely to be small business owners / financial risk takers / job creators.
Where most 'passive' income is concerned, there's no effective difference between an investor in a central american country achieving capital gains from UK or German ADR's of a US company versus owning shares of the same US company as listed on a US stock exchange. Where camming income is concerned, there is no effective difference between sourcing a video stream from a central american country and sourcing a video stream from within US borders - if both are 'selling' their video streams via a webcam host based in Cyprus !Would you rather be taxed 50% in an economy that allowed you to earn $300,000 or be taxed 20% in an economy that allowed you to earn $100,000?.
Given an EQUAL income potential regardless of country of residence, I definitely prefer residing in a lower tax rate country !!! Welcome to the global economy !
Last edited by Melonie; 07-06-2012 at 01:54 AM.



We hadn't specifically mentioned passive income, most people do not currently make their money in that manner. If you are talking passive income from something like camming etc, then a US citizen living overseas may be in the best position of all. Every country that I can think that I would want to live in has taxes in one shape or form and many of them are higher than the US. A US citizen living overseas who earned their income from camming or other online methods, would likely be able to earn their first $95,000 or so free of US tax liability and not have any tax liability to the host country as the money was not earned from there.
Finances aside, the fact of the matter is that when you leave the US, wherever you go you are a foreigner. Things can change quickly and dramatically and the safety and security of you and your financial assets can be at risk without much warning. To give up the option of being able to return home to a safe haven to save money on taxes doesn't seem like a very smart trade for me regardless of how much money is involved. It's pretty easy to make more money- to have a place where you are always welcome and afforded full protection by the law etc. is a big value.
Denise Rich, ex-wife of Marc Rich has joined the ranks of the ex-pats. She is a well known ultra-lib supporter of both Clinton and Obama.





^^^ it's much easier to support 'tax and spend' policies when you won't actually be 'stuck' having to pay those taxes yourself !!! This is true for Americans with lower incomes ( i.e. <$50k per year ) as well as for uber-rich American ex-pats !!!
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