Many members of the Expat Community Worldwide believe the U.S. needs to rethink its taxation rules for nonresident U.S. citizens.
Last week’s report on tax reform from the Republican staff of the U.S. Senate Committee on Finance has caused a flutter in the global expat community.
Page 282 contained these words: “The United States is the only industrialized country in the world that imposes citizenship-based taxation. In other words, the United States taxes its citizens on their worldwide income even if the citizen resides outside the United States and has no connection to the United States other than citizenship.”
And these: “The United States needs to rethink its taxing rules for nonresident U.S. citizens.” A footnote cited a proposal from the organization American Citizens Abroad that has gained traction among many American expats frustrated with their tax status.
Intriguingly, the Senate report calls for creation of a test “to determine at what point a U.S. citizen is considered a nonresident of the United States and then at what point the U.S. citizen is considered to be a resident again.”
A strong storm front passes over the U.S. Capitol (Photo By Bill Clark/CQ Roll Call)
Longtime watchers of expat-tax policy have taken heart at this official recognition of an issue that, they argue, penalizes the earnings, investments and savings of Americans who have little to no relationship with the U.S. as well as those living in countries where they aren’t protected from double taxation.
That the report comes just weeks before the GOP takes control of both houses of Congress has provided an added dollop of optimism to those who think the Republicans are more likely than Democrats to change tax law. But legislative and political wheels grind slowly, and cooler heads are warning that much number-crunching and politicking must occur before this concept comes close to becoming a reality.
All in all, the report addresses a major issue for many Americans living overseas, whether they plan to return to the U.S. after a short time or have chosen to spend their entire lives outside the U.S.
Source: http://blogs.wsj.com/
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