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January 12, 2017 - Haoshen Zhong

Gaps Between PFIC and Controlled Foreign Corporation Anti-Deferral Coverage

Gaps between subpart F income and PFIC classification

Today’s post is about a few gaps between taxation under the subpart F rules for controlled foreign corporations and passive foreign investment company (PFIC) rules. If your business happens to fall into one of these gaps (or can be reconfigured to fall into one of these gaps), it can be useful for deferring US taxes on income.

Complement between subpart F rules and PFIC rules

Congress enacted the subpart F rules, applicable to controlled foreign corporations (CFCs), to prevent US persons from conducting certain kinds of operations through a corporation organized in a tax haven to avoid or defer US taxes.... continue reading

PFIC and CFCs
January 6, 2017 - Phil Hodgen

Digital Nomads and Eliminating Social Security Tax

American Digital Nomads With U.S. Corporations

This article is for entrepreneurs who, for valid reasons, need to have a U.S. corporation to operate their businesses. Maybe the customers are in the United States. Maybe there is an office full of employees in the United States. Maybe banking and financial transactions are simpler when there is a U.S. corporation.1

The entrepreneur, however, decides to live abroad. Let’s use the phrase “digital nomad” (the current favorite appellation). This person is going to travel from place to place, working for the U.S. business, but staying below the radar in the various foreign countries.... continue reading

Americans Living Abroad Friday Edition
January 3, 2017 - Phil Hodgen

How to Mail Your Form I-407 (And Why)

Conclusion

A joke should always be told punchline first. Right?

Here’s the conclusion of this little essay:

If you plan to file Form I-407 to abandon your green card, do it in person. If that is impossible, do not just mail in the form. Send it by certified mail, return receipt requested.

Tax Effect of a Green Card

The U.S. tax effect of holding a green card visa is that you are considered a “resident alien” until the visa status is terminated. This means you must file a resident’s income tax return every year (Form 1040). You are taxable on your worldwide income, and must satisfy all of the paperwork requirements imposed by the U.S.... continue reading

Expatriation
December 29, 2016 - Haoshen Zhong

Running Your IP Licensing Subsidiary

Today’s post is a followup to a post I made back in May. The setup is this:

I own 40% of a BVI corporation, and a nonresident alien owns the other 60%. The BVI corporation owns an operating subsidiary in country X. We set up a 2nd subsidiary in the Cayman Islands to hold IPs (software copyright, trademarks, domain name) and license them to the operating subsidiary.

We got into a lawsuit, and we settled it by having our IP licensing subsidiary grant a license to the other party for a modest royalty. Do we need to worry about anything?

... continue reading
PFIC and CFCs
December 23, 2016 - Phil Hodgen

The Green Card Holder’s Gift Tax Loophole

Green card holders living abroad can have a weird hybrid (tax) life. They are U.S. residents for income tax, but can be U.S. nonresidents for gift tax purposes.1

This is a useful tax planning tool. We use it for people who wish to abandon green card status because they no longer wish to live in the United States. By making large gifts, they can avoid covered expatriate status for purpose of the exit tax. But any green card holder who is permanently settled abroad can use this to solve cross-border tax problems.

Definitely a U.S. Resident for Income Tax

A person holding a permanent resident visa (aka the green card) is a “resident alien” for income tax purposes.... continue reading

Americans Living Abroad Friday Edition