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U.S. expat taxation

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GSM8
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U.S. expat taxation

Postby GSM8 » Mon, 30 Dec 2013 11:29 pm

Hello all. This is addressed primarily to fellow American expats reading this forum, in the context of the rather inequitable practice of citizenship based taxation (CBT) that we as expat citizens of the US are currently subject to, and that almost no other country in the world imposes upon its expat citizens (Residence-based taxation, RBT, is the norm for citizens of most other countries, when working internationally.) In addition, there are increasingly intrusive reporting requirements like FATCA and FBAR, that Americans living within the US don't have to deal with . The “right thing to do" for the US would be to conform to the taxation practices of the rest of the world and adopt Residence Based Taxation (RBT) at the individual level.

Expat Americans usually have little or no representation for their problems, but the current tax reform efforts may present a small (and time-sensitive) window of opportunity to make our voice heard. I really feel we can't afford to be bystanders and ignore this - rather, we should take advantage of it to somehow reach out to Congress, and hope for an expedient change to this anomaly.

http://americansabroad.org/issues/taxation/your-suggestions-tax-reform/

Among the things we can do for now is write to our lawmakers about the unfairness of Citizenship-based taxation (especially to those who are on committees representing Americans abroad); Submit a personal story to non governmental organizations representing US expats; And, write directly to the Senate Finance Committee (by Jan 17, 2014, per its invitation).

I don't want to flood this board with information that probably does not concern a lot of the people, but just wanted to raise awareness about this issue among those whom it does (Moderators - I am wondering if they is some way to create a mailing list within this forum. I can share within that sub-group, some of the letters I have written to our lawmakers.) We expats are very a fragmented segment of the vote, so tend to get ignored, but this call for feedback presents a rare chance for us to be heard, and hopefully for the status quo to change.

Kind regards

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Postby sundaymorningstaple » Mon, 30 Dec 2013 11:45 pm

Nope, no mailing list, and I can guarantee you all the Americans on this particular board are well informed and tend to keep that way regarding the US tax laws. In fact two of the four moderators ARE Americans. One from each political flavor. So we tend to hash out a lot here. But thank you for asking.

I guess my biggest question is why are you posting from an Indian ISP but claiming you are in Singapore? :-k

General IP Information

IP: 59.93.51.166
Decimal: 995963814
Hostname: 59.93.51.166
ISP: BSNL
Organization: BSNL
Services: None detected
Type: Broadband
Assignment: Dynamic IP
Blacklist:
Geolocation Information

Country: India in flag
State/Region: Andhra Pradesh
City: Hyderabad

Methinks the fish smell funny in your barrel.

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GSM8
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Postby GSM8 » Tue, 31 Dec 2013 12:27 am

Relocated from Bay Area to Singapore in November, so yes it is an issue that actually affects me (and not a case of the Indian outsourcing industry at work.)

I am in Hyderabad, India, part of this week, therefore the IP (also, originally from India, studied and worked in US for 24 years, if it affects anything.)

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Postby PNGMK » Tue, 31 Dec 2013 12:50 am

I can't see the USA changing it's stance on this not other issues (such as submitting to the International Court process).

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Postby Beeroclock » Tue, 31 Dec 2013 5:30 am

PNGMK wrote:I can't see the USA changing it's stance on this not other issues (such as submitting to the International Court process).

Me too, think they are increasingly domestic-focused and reducing taxes collected from citizens abroad will not be politically popular for the majority at home.

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Postby Strong Eagle » Tue, 31 Dec 2013 8:10 am

There is the foreign earned income exclusion which eases the pain, and if you have been transplanted into a foreign company by a US firm, most make up the tax differential as part of the package.

Agreed that the new reporting requirements suck... although I've had to report my foreign bank accounts for years... and frankly, if the government can catch more tax cheating f*cks with this legislation, I'm kind of alright with it.

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Postby zzm9980 » Tue, 31 Dec 2013 8:28 am

Strong Eagle wrote: if the government can catch more tax cheating f*cks with this legislation, I'm kind of alright with it.


"I'm not a terrorist, so what do I care if the NSA reads all of my emails and keeps my phone records!"

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Postby GSM8 » Tue, 31 Dec 2013 9:32 am

Strong Eagle - I couldn't agree with you more about enforcing US tax law. However, it is easy to make a distinction between tax-dodging Americans (typically living in the US and hiding money overseas) vs. legitimate expats (living and paying taxes per the rules and cost structure of another country). Its called Residence Based Taxation (RBT), similar to how it is for other countries - per link in my first message.

I was moved to Singapore by an international company, but it is nowadays less common to provide tax equalization. Yes, there is FEIE and housing, but there is often additional US tax liability due to exclusions and thresholds. That said, its effect is minor for me compared to say big bucks bankers, or those who made large cap gains, but having just moved abroad, I am beginning to realize that the system itself is unfair and severely restricts our ability to invest/save also - its definitely not a "level playing field" as Pres. Obama likes to say. Also, local compensation levels are set based on the local tax structure and income tax rate alone is not the sole barometer of tax burden.

PNGMK and Beeroclock - I agree that anything like this is an uphill effort, especially in the current political climate. However, this demand has been heard and documented by the House Ways and Means Committee a few months ago (chaired by Rep. Dave Camp). Other Congressional bodies and lawmakers have now called for input on it as well, in the wake of comprehensive tax reform discussions. Having just turned expat, I am probably still naive on the outcome of past efforts like this, but I still think this is a key opportunity to have our our voice heard, instead of having it overlooked by the fact that we are not a significant vote bank.

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Postby sundaymorningstaple » Tue, 31 Dec 2013 10:23 am

All you have to do is join either of the political parties local affiliations and you will be kept up to date via email with the current status of the various efforts in the government regarding taxation of overseas expats.

I don't have the Democratic counterpart but I'm sure Strong Eagle has. If you have republican leanings you can use republicans-abroad.org and they will email you updates as and when.

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Postby zzm9980 » Tue, 31 Dec 2013 11:12 am

GSM8 wrote:I was moved to Singapore by an international company, but it is nowadays less common to provide tax equalization


And to add to that, tax equalization is yet another taxable benefit which makes it cost even MORE to the company providing it. Ultimately it is less compensation you receive and a larger burden on your employer for employing you as an American.

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Postby Beeroclock » Tue, 31 Dec 2013 11:46 am

zzm9980 wrote:
GSM8 wrote:I was moved to Singapore by an international company, but it is nowadays less common to provide tax equalization


And to add to that, tax equalization is yet another taxable benefit which makes it cost even MORE to the company providing it. Ultimately it is less compensation you receive and a larger burden on your employer for employing you as an American.


Indeed, when I used to work for a big MNC at the UK headquarters, it was observed that for the equivalent total cost of a youngish US expatriate (maybe 5 years experience), you could get an Oz/Kiwi/Safr with 15-20 years experience, after considering all the tax equalization, ongoing healthcare payments in US, etc. Was a clear headwind for receiving US expats.

Ultimately, US still seems a very favourable citizenship for many people to retain despite these constraints.

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Postby PNGMK » Tue, 31 Dec 2013 1:33 pm

Beeroclock wrote:
zzm9980 wrote:
GSM8 wrote:I was moved to Singapore by an international company, but it is nowadays less common to provide tax equalization


And to add to that, tax equalization is yet another taxable benefit which makes it cost even MORE to the company providing it. Ultimately it is less compensation you receive and a larger burden on your employer for employing you as an American.


Indeed, when I used to work for a big MNC at the UK headquarters, it was observed that for the equivalent total cost of a youngish US expatriate (maybe 5 years experience), you could get an Oz/Kiwi/Safr with 15-20 years experience, after considering all the tax equalization, ongoing healthcare payments in US, etc. Was a clear headwind for receiving US expats.

Ultimately, US still seems a very favourable citizenship for many people to retain despite these constraints.


I now work for the worlds 3rd or 5th largest company (I can't keep track of it). HR's stated position on expat benefits is 'there should be NO financial benefit to working overseas'. What this translates to is that expats are levied hypo tax at their home country tax rate (Canadians, Australians etc are really annoyed) and their salary is negotiated and paid in their home currency (i.e. AUD, CND, USD) at the rate commensurate for their skill level in their home country. They are then 'topped' up with a local living allowance depending on the hardship/economic rating of the country and of course some housing and vehicle allowances etc. As you can imagine it's not a popular system! I, fortunately, fell through the cracks as a Singapore PR - I pay tax in Singapore of course, I'm paid in SGD and my salary level is a little high for a local salary but has been left alone. I predict - because everyone seems to follow this companies trends - is that this will become more common.

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Postby ohmz52 » Tue, 31 Dec 2013 6:30 pm

sundaymorningstaple wrote:Nope, no mailing list, and I can guarantee you all the Americans on this particular board are well informed and tend to keep that way regarding the US tax laws. In fact two of the four moderators ARE Americans. One from each political flavor. So we tend to hash out a lot here. But thank you for asking.

I guess my biggest question is why are you posting from an Indian ISP but claiming you are in Singapore? :-k

General IP Information

IP: 59.93.51.166
Decimal: 995963814
Hostname: 59.93.51.166
ISP: BSNL
Organization: BSNL
Services: None detected
Type: Broadband
Assignment: Dynamic IP
Blacklist:
Geolocation Information

Country: India in flag
State/Region: Andhra Pradesh
City: Hyderabad

Methinks the fish smell funny in your barrel.

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Lol genius
The grass is greener on the other side.

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Postby zzm9980 » Wed, 01 Jan 2014 8:43 am

ohmz52 wrote:
sundaymorningstaple wrote:Nope, no mailing list, and I can guarantee you all the Americans on this particular board are well informed and tend to keep that way regarding the US tax laws. In fact two of the four moderators ARE Americans. One from each political flavor. So we tend to hash out a lot here. But thank you for asking.

I guess my biggest question is why are you posting from an Indian ISP but claiming you are in Singapore? :-k

General IP Information

IP: 59.93.51.166
Decimal: 995963814
Hostname: 59.93.51.166
ISP: BSNL
Organization: BSNL
Services: None detected
Type: Broadband
Assignment: Dynamic IP
Blacklist:
Geolocation Information

Country: India in flag
State/Region: Andhra Pradesh
City: Hyderabad

Methinks the fish smell funny in your barrel.

Moderator


Lol genius


Eh, not *every* post like this is a scam. I've come from similar IPs more than a few times while traveling for work. And I assure you I'm 100% ang moh American.

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Postby Beeroclock » Wed, 01 Jan 2014 10:23 am

PNGMK wrote:
Beeroclock wrote:
zzm9980 wrote:
GSM8 wrote:I was moved to Singapore by an international company, but it is nowadays less common to provide tax equalization


And to add to that, tax equalization is yet another taxable benefit which makes it cost even MORE to the company providing it. Ultimately it is less compensation you receive and a larger burden on your employer for employing you as an American.


Indeed, when I used to work for a big MNC at the UK headquarters, it was observed that for the equivalent total cost of a youngish US expatriate (maybe 5 years experience), you could get an Oz/Kiwi/Safr with 15-20 years experience, after considering all the tax equalization, ongoing healthcare payments in US, etc. Was a clear headwind for receiving US expats.

Ultimately, US still seems a very favourable citizenship for many people to retain despite these constraints.


I now work for the worlds 3rd or 5th largest company (I can't keep track of it). HR's stated position on expat benefits is 'there should be NO financial benefit to working overseas'. What this translates to is that expats are levied hypo tax at their home country tax rate (Canadians, Australians etc are really annoyed) and their salary is negotiated and paid in their home currency (i.e. AUD, CND, USD) at the rate commensurate for their skill level in their home country. They are then 'topped' up with a local living allowance depending on the hardship/economic rating of the country and of course some housing and vehicle allowances etc. As you can imagine it's not a popular system! I, fortunately, fell through the cracks as a Singapore PR - I pay tax in Singapore of course, I'm paid in SGD and my salary level is a little high for a local salary but has been left alone. I predict - because everyone seems to follow this companies trends - is that this will become more common.

I thought that was already the norm, I was on that approach through 2003-9. The hypo tax is a definite downside here, but personally I found the allowances made up for it a lot. Especially for those expats with big families, having International School fees, return home flights etc etc. Maybe companies have been trimming back on these allowances though.

The HR policy is naive, how dare you expect to financially benefit from an international career?! They must like it to be overly complicated to keep themselves occupied. All these allowances and adjustments needing to be continually reviewed and indexed, keeping at least a few HR advisors in a job.


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