US global income tax

NEW -> Contingent Buyer Assistance Program
T

tourbillon_IHB

New member
As many of you know I will move overseas soon, so I invested a great deal of my time investigating my future tax liability to the US government. It appears that US government wants a percentage of my money no matter where I am. There is really no way around it (not legally of course). This brings me to my question. If you are rich foreigner, why would you insert yourself into a situation where you have to pay 15% to 40% of your income to the US government? The global tax not only applies to US citizens, but also green card holders. In contrast, almost every other country on this planet do not have global tax, especially Asian countries, most of them don't even have capital gain taxes (rich people care about capital gain the most).





Even countries like Switzerland/Italy/France (the countries Americans usually think have the highest tax rate) don't have global income taxes or capital gain tax. Take my situation for example, because I am US citizen working in France, I will have to pay almost 100k more in tax every year compare to if I am a citizen of HK/Singapore/Italy/Switzerland. Some of my friends actually suggested me to give up my US citizenship to avoid paying taxes (since I do have Swiss citizenship), which comes to my second question, how many of you will give up your US citizenship for 100k a year?
 
tour - I don't remember the specifics, but I don't think that "trying" to renounce your citizenship relieves you of US tax liability. It can be done, but it is not as easy as just renouncing your citizenship. I would do alot of research or pay an expert before I leapt.
 
awgee


It does not relieve one from post liability, but it does release one from future ones since one is no longer American. For me, it is a difficult question, and it is not just about money. US gave my wife and I a lot of chances, especially in terms of education (Even after our repeated screw ups in high school/under), and my families are all here, to me, this is not a simple question.
 
blue


That will be true for both Green card/H1B folks. They have to pay for SSI also (but they don't qualify for the benefit unless they become citizens sometime in the future). I think requiring GC holder to pay global tax is something fundamentally wrong (although as a citizen, I am all up for it ) In the past, when US was the only game in town in terms of stability, living standard, etc, this was not a serious problem. As the economy become increasingly global, I think this will be a important issue in the future. From my own experience, only about 20% of my foreign classmates remained in US after their graduation. This is very different from just five to ten years ago, when anywhere between 50% to 70% of the people will remain.
 
<p>Tourbillon,</p>

<p>Where did you find that information, more specifically about the GC holder. I'm a canadian citizen, but a US citizen under TN Visas and H1-B more recently. I am being offered to get the Green card and never saw any downside until now! If I move back to my homeland, I would have to pay taxes to the US? Or is it only that US the US would pick up the difference between what I pay and what I would be paying if I lived in the US?</p>

<p>Back to your question, are you planning to come back in the US? The marginal value of $100k is different depending on your income. $100k if I have $10M in bank is not too bad (still sux).</p>
 
Hi, Roo


As far as I know, yes, you will have to pay tax in the US even if you move back to your home country (if you have a GC). There are several things to keep in mind though, there is a 75k exemption on foreign income. You only have to pay tax for any amount over 75K if the entire amount is made outside US. On the other hand, in order to keep your GC, you will have to stay in US for more than six month out of a year or else your GC will be invalidated, if you are in US for more than six month, then you have to pay regular US tax. So essentially, if you have a valid GC, you will have to pay US tax. As always, one can find ways to go around the rule, but this is the general case.





At this point, I don't know. I will have to visit US since my families are here, but I don't have to stay in US for more than 3 month at most. (My job won't allow me to leave that long in any case). Switzerland and US have visa agreement, so I can just come and go as I please. The 100k is for every year, not just one time deal, so it can potentially add up to more than 2.5 million (if I work for the next 25 years, since I am in my late 20s, that is very likely) en, no, I don't have 10M in bank (not even 1 mil at this point)
 
http://www.escapeartist.com/efam/90/art_citizenship.html





<em> As a national political issue, expatriation is hardly new. In the Foreign Investors Tax Act of 1966, Congress decided to make an issue of expatriation. In that Act, lawmakers tried to impose onerous taxes on exiting wealthy Americans who relinquished their U.S. citizenship "with the principal purpose of avoiding" U.S. taxes, a highly subjective intention that was virtually impossible to prove. The IRS couldn't prove such "intent" and very rarely even tried. </em>

<p><em> A 1996 anti-expatriation law inspired by the Forbes article asserts limited U.S. tax jurisdiction for a period of 10 years over persons who renounce their U.S. citizenship "with the principal purpose of avoiding U.S. taxes." Also covered by this law are permanent resident aliens ("green card" holders) or anyone else who has resided in the United States for any eight of the preceding 15 years.


</em></p>

Please read the rest of the article at the URL provide above (I won't cut & paste the whole thing here).





Yes, even after surrendering your US citizenship, you may still be liable for US income tax for up to 10 years.
 
<p>Screw the IRS, don't file a W-4 and list yourself as a Swiss citizen with your new employer. The IRS isn't going to come after you for for income they can't prove you earned unless your employer sends them money based on your W-4. As far as I am concerned, if you aren't here to use the things your taxes supposedly pay for, then why should you have to kick money back to uncle sam?</p>
 
mompi


That is very interesting. I am wondering if the law applies to people who have dual citizenship all along. For green card, I think it will be rather strange and difficult to enforce. In any case, this is my point initially that why would any rich person want to obtain GC/citizenship and pay taxes when they otherwise wouldn't have to. There are plenty of rich/stable countries where one can park one's money (Switzerland come to mind).





Nude


For me, it will be a honor system, my employer don't have any branch in US, so my income won't be known in any case.
 
<p>tour, </p>

<p>The global income tax makes no sense to me. I think you ought to go to the American Church in the 7th arrond. I am sure other Americans living in Paris would have the same questions and concern as you. I think they can give you some pointers. Also, I am sure that there are loopholes where you can avoid paying American Taxes.</p>

<p>I am going off on a tangent here. I agree with you about the stability and living standards. A while back, there was an article (LA Times) about the reverse "brain drain." I am sure you know what this means. In the 60s the US allowed lots of scientists into the US because they realized that we Americans were behind in sciences. Remember Spunik? I am in the same age bracket as you are, anyhow. Back to the Singapore situation. The Singapore govement gave those foreign scientists (mostly Americans) lots of incentives including lots of money for lab set up, health care, money for their childrens' private school. The Singapore gov also took advantages of the other so called structural limitations in America; that is, there is less money/grants for American scientists and the ban on stem cell research. After reading the article, I got a bit paranoid about America's place in the global economy and scientific endeavors. </p>

<p>Lots of folks return home once they finish their Ph.Ds and post doc works. I personally know an Indian software developer who just left a well paying job for India. </p>
 
Ban on stem cell research?





When did that happen?





There is no ban on stem cell research. If you want to do research with fetal stem cells, the federal government won't fund you unless you are using a line of cells that was already in use in 2001.





The federal government still subsidizes stem cell research.





State governments are free to subsidize fetal stem cell research.





Private organizations are free to subsidize fetal stem cell research.





Private organizations are free to pay their own way for fetal stem cell research.





If that is what you are calling a ban on stem cell research, you are sadly mistaken.
 
So, I'm an American living in london, The global tax only affects those who are living in high-cost &amp; low tax places such as HK. So you first have an $80k tax deduction for living abroad. Then, for whatever you pay in foreign taxes, you get a dollar-for-dollar tax credit toward your US tax liability.





Simple example





So lets say that you're living in France, you make $180k and taxes are 50%. So now you've paid 90K in taxes. Your average US liability lets say is 30% so you owe the US $30k (180-80=100*30%). Therefore, you have a tax credit in your favor for $60k. This credit is carried forward for 10 years. So you pull this trick for 5 years, build up $300k in tax credits, move back to the states and you don't pay taxes until you've exhausted your liability. Additionally, some level of rent payments are deducted from your taxable income as well, which further reduces your US liability





Now if your foreign income is gained in a 10% country, you've paid 18k in taxes to the foreign gov't and now you owe 12k to the US
 
aeneid


I certainly agree with you on the reverse brain drain. It is very pronounced in my field. EE is very closely connected to commercial applications, and I think it is one of the first field to see this kind of reverse brain drain. Back in the 80s, almost everyone stayed after completing their PhD. Today, people from Korea, Taiwan, and Japan most likely won't stay. Indian is not as active in EE as they are in CS, so I don't know any Indian PhD personally. But even my mainland Chinese PhD friends are going back, especially ones from big cities like Shanghai/Beijing and from top programs. The even more interesting part is that there is almost no native US PhD students. I only know two other people in my research group have US citizenship, and they are both immigrants from Taiwan. There is a joke in my field that if the conference does not have at least half of its paper submitted by Chinese then it is probably not a good conference. US created its wealth in the past due to its technology superiority, but now, I am not so sure. I believe US will be the technology leader for at least the next 10 to 15 years, beyond that, however, I am not sure it can maintain her lead the way things are going.





Winex


I have no idea about the stem research, but my friends in genetic engineering field are leaving US, most of them went to Europe/Singapore, so maybe there are some limitations.
 
Ericg


Thanks for your information. In my case, my compensation will mostly be in the form of stock/stock options (my company will issue me both), and since I will split my time between Asia and Europe, the stock will be granted from our Asian branch in HK. That means majority of my compensation won't have any tax at all (no capital gain in HK). I think my situation is somewhat unique in that respect. My salary itself is quite low and I think it will be below the 80k limit (I thought it was 76k?)
 
<p>Win, </p>

<p>You probably are right about the stem cell research. There were technicalities, which I have no clues about. I read the article at least 1 year ago so I don't remember much details. My point was about the "reverse brain drain." </p>
 
<p>tourbillion:</p>

<p>Don't forget about California state income tax. They also believe in global income. </p>

<p>What's worse, California also believes that you pay income tax based on a percentage of time you live in the state. For example you quit your job in March, but don't move to France until end of June. You start working in July in France. CA feels entitled to tax you on 50% of your wages that year regardless of whether it was earned in France or California. </p>

<p>This happened to a friend of mine who moved to Boston, MA. </p>

<p>If you can, move to Nevada for at least 6 weeks before you move to France. That is how long it takes to establish residency in Nevada. Change your address, drivers' license, etc.. That means you have to do this by mid November, this year. </p>

<p>Needless to say, don't own any real estate in California, otherwise FTB would want you to prove it is income property, not a residence.</p>

<p> </p>
 
irvinefsbo


Thanks for the info, one more thing to think about I guess. This brings me back to a question that I asked long time ago but was never answered. Why would a rich person subject himself/herself to these taxes by moving to Southern California? School for their kids? I don't consider myself rich, but even I am concerned about global tax. At my current US tax rate, I will have to pay 1.8 mil in the space of 18 years. 1.8 mil, if you invest that money properly, there is no need for the kid to go to school, he/she just live off that money (much like Paris Hilton).
 
II would like to know about this law....here is why.





In late 1997(december) I became aware of a guy from Korea that was fully educated by the united states government(Stanford PHD) and started a company with money from the United States Government. During his stay in the United States, he got a green card, and a US Citizenship. He sold the company for a few million dollars and fled the US without paying a dime in taxes. When he got back to Korea he mailed his passport back to the United States and denounced his citizenship. He left his wife and two children penniless and now lives like a king in Korea. He does travel to the US a few times a year. I would love to have the bastard picked up at an airport and arrested.





Does anyone know to notify the government ? I only have a few months to turn him in..........
 
You must log in or register to reply here.
Back
Top