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Posts Tagged ‘Internal Revenue Service’

21st September 2017

In recent weeks various sources have discussed the changes to tax policy in Thailand, specifically with reference to changes in the excise tax regime. Specifically, with regard to excise tax (also described by some as a “sin tax”) there was discussion before the new measures were implemented concerning the possibility that the new taxes would be relatively significant. Ultimately, events have transpired which has shown that the new measures have not resulted in a substantial increase in terms of taxes passed on to the consumer. The increased taxes have turned out to be rather nominal, but the methodology by which taxes are calculated has changed. Therefore, the end consumer may not see much of a change, but those further up-stream in terms of distribution are dealing with issues associated with the new calculation method.

Meanwhile, other recent measures have taken effect throughout 2017 which is changing the way revenue collection and tax enforcement is conducted. First, it appears that there will be an increase in VAT (Value Added Tax) placed upon items purchased online in Thailand. It appears Thai officials are keen to increase revenues from the digital economy. In the past, the revenue collection system of Thailand was geared to deal with tax collection in a manner more suitable to the pre-internet online economy. Where once there were a number of exemptions for online purchases now those exemptions are being phased out as revenue authorities are coming to grips with the fact that more economic transactions are occurring online.

Finally, it is worth noting that so-called e-filing of certain corporate tax documentation is now mandatory in Thailand. Paperwork such as the audited financial statement are required to be filed online. To those with experience dealing with tax matters in other jurisdictions this new requirement may seem long past due as many other jurisdictions have conducted such matters online for years (in some cases decades). However this development has only come to pass in Thailand in 2017. In the future it appears likely that many corporate tax filings will be perfected online.

In conclusion, all of the above information, when taken together, illustrates a trend which has been progressing for a few years now. Namely, an drive to increase the efficiency and improve the methodology by which taxes are assessed and collected in Thailand. It seems logical to infer that this trend will culminate in the full transformation of the Thai tax system and that said system will be thereafter much more similar to internal revenue services in countries in the more developed world. This will likely occur before the back drop of an increasingly dynamic Thai economic and it seems sensible to expect that revenue to Thai state coffers will increase thereby.

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9th February 2017

In the aftermath of the new year, there have been many announcements which have had significant impacts upon those living outside the USA. It recently came to this blogger’s attention that the Internal Revenue Service (IRS) of the United States is poised to begin certifying delinquent taxes and communicating such certification to the United States Department of State. To quote the official IRS website directly:

The IRS has not yet started certifying tax debt to the State Department. Certifications to the State Department will begin in early 2017…If you have seriously delinquent tax debt, IRC § 7345 authorizes the IRS to certify that to the State Department. The [State] department generally will not issue or renew a passport to you after receiving certification from the IRS…Upon receiving certification, the State Department may revoke your passport. If the department decides to revoke it, prior to revocation, the department may limit your passport to return travel to the U.S.

As of January 1, 2016 US Federal statutes were amended to allow US passport revocation for those individuals who were delinquent in taxes under statutorily defined circumstances. Notwithstanding the fact that this law had been promulgated, it appears that until now the IRS had not put a frame work in place for notifying the State Department that an individual had tax delinquency issues. As can be seen from the IRS’s own website, that is no longer the case moving forward. For this reason it is prudent for those who may have tax delinquency issues to retain the services of a competent professional in order to rectify such issues before a situation arises where one is unable to get a passport issued, or a passport is revoked either in the USA or while traveling abroad.

Meanwhile, it appears that authorities in Thailand have adjusted the tax structure for certain taxpayers in Thailand. To quote directly from the Bangkok Post:

A revamped personal income tax structure aimed at increasing disposable incomes for taxpayers has officially come into effect…The amendment to the Tax Code, published in the Royal Gazette on Jan 27, applies to incomes received from Jan 1, 2017 to be filed in 2018…

It appears that under the restructure individuals will be able to make larger deductions for certain expenses while certain filing requirements have been changed requiring a larger number of individuals to file taxes. Those interested in these developments are strongly encouraged to read the article cited above and consult appropriate professionals in order to be apprised of the posture of a given tax situation.

Finally, The United States Embassy in Bangkok, Thailand has recently increased their official exchange rate to 37-1 (baht to dollars). This change reflects the fact that the Baht has been weakening against the US dollar in recent months and may be a signal that said currency may weaken further. The US Embassy in Thailand utilizes a set exchange rate which provides a level of certainty regarding the cost (in baht terms) of service fees for services provided by the US Embassy personnel.

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5th December 2015

In a recent article in the Wall Street Journal a new bill proposed by the United States Congress was discussed:

Under a new law expected to take effect in January, the State Department will block Americans with “seriously delinquent” tax debt from receiving new passports and will be allowed to rescind existing passports of people who fall into that category. The list of affected taxpayers will be compiled by the Internal Revenue Service using a threshold of $50,000 of unpaid federal taxes, including penalties and interest, which would be adjusted for inflation.

Clearly this proposed legislation could have significant ramifications for Americans living abroad. Presently, Americans abroad could only see their passports rescinded or applications for renewals denied where said applicants have outstanding criminal warrants in the United States of America or are delinquent on their child support. The proposed legislation comes after the relatively recent  implementation of FATCA (the Foreign Account Tax Compliance Act) which requires foreign banking institutions to report the financial activities of American citizens making financial transactions abroad. There have been some who disapprove of FATCA and there have been moves made in the US Federal Court to challenge the law’s constitutionality. However, at present the law remains part of the current American legal framework with respect to overseas bank accounts. As a possible consequence, in recent years there have been a growing number of individuals who have opted to renounce their United States Citizenship. It is clear that more and more people are opting to renounce their United States Citizenship. Each individual’s renunciation is likely based upon a different calculus, but it seems clear that recent changes to American tax policy have had a significant impact upon Americans living abroad.

The recent announcement that passports could be revoked as a consequence of tax delinquency seems likely to cause the number of Citizenship renunciations to increase. Although, it remains to be seen if this new policy will have a significant impact upon renunciations. Regardless of the fact that 50,000 USD seems like a substantial amount of money it will be interesting to see if the proposed legislation will allow for a form of COLA (Cost of Living Adjustment) style system whereby the amount of money in tax delinquency which would trigger a passport renunciation would increase year by year in order to track inflation. It is unlikely that such a scheme would be implemented because Foreign Bank Account Reporting (FBAR) requirements have not changed since the late 70′s. Therefore it stands to reason that the passport issuance requirements will stay frozen. Therefore, this legislation, although unlikely to have a significant impact upon Americans abroad anytime soon could have serious ramifications for Americans in 15-20 years time when 50,000 USD is not the representation of wealth that it is today.

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10th August 2013

Millions of people around the world wish to take up residence in the United States of America and often wish to become American Citizens. However, it would appear that some Americans are cutting ties with the USA and renouncing their United States Citizenship. Names of all those Americans who renounce their United States Citizenship are recorded and published in the United States Federal Register. These lists are generally not particularly newsworthy. However, in the most recent quarterly publication regarding US Citizenship renunciation it would appear that the number of Americans renouncing their United States Citizenship has jumped by over 60% when compared to previous quarters. In the last quarter 1,131 people renounced their United States Citizenship. This number is a large increase from the previous quarter which saw only 679 renunciation. Although, when compared against the same quarter of the previous year which saw only 188 renunciations the 1,811 figure is rather staggering. Is this simply a one-time anomaly or is this the sign of a growing trend?

While some are speculating as to what this trend means in a broad socio-economic context, I feel that some analysis is necessary to put some perspective on these numbers. A reader looking at the Federal Register’s official posting regarding these numbers will likely note the following information:

For purposes of this listing, long-term residents, as defined in section 877(e)(2), are treated as if they were citizens of the United States who lost citizenship.

The casual reader may wonder: what does this mean? Well to quote directly from the Cornell Law School’s website which lists sections 877 (e)(1) and 877(e)(2):

(1) In general

Any long-term resident of the United States who ceases to be a lawful permanent resident of the United States (within the meaning of section 7701 (b)(6)) shall be treated for purposes of this section and sections 2107, 2501, and 6039G in the same manner as if such resident were a citizen of the United States who lost United States citizenship on the date of such cessation or commencement.

(2) Long-term resident

For purposes of this subsection, the term “long-term resident” means any individual (other than a citizen of the United States) who is a lawful permanent resident of the United States in at least 8 taxable years during the period of 15 taxable years ending with the taxable year during which the event described in subparagraph (A) or (B) of paragraph (1) occurs. For purposes of the preceding sentence, an individual shall not be treated as a lawful permanent resident for any taxable year if such individual is treated as a resident of a foreign country for the taxable year under the provisions of a tax treaty between the United States and the foreign country and does not waive the benefits of such treaty applicable to residents of the foreign country.

Therefore, based upon the information provided by the Federal Register and the United States statutes noted above some of those listed in the Federal Register as those renouncing their Citizenship could be United States Lawful Permanent Residents (colloquially referred to as “Green Card” holders) who have chosen to give up their permanent resident status. This explanation probably does not account for all of the “Citizenship renunciations” listed in the recent Federal Register publication, but it may account for some of these numbers. In any event, the number of those expatriating from the United States remains high compared to previous points in American history. The question remains, why are higher numbers of Americans renouncing their citizenship?

There are some who contend that the recent spike in citizenship renunciation may stem from American policy regarding taxation of United States Citizens living abroad. American Citizens (as well as lawful permanent residents) are taxed on their worldwide income, regardless of where they physically reside. This situation is in stark contrast to the tax policies of virtually every other country in the world as most countries only tax those of their citizenry who reside in their country. There are exceptions to the previous statement as issues such as domicile play into many countries’ foreign taxation policies. Many feel that the recent increases in the number of renunciations is driven by Americans with high foreign derived incomes seeking to rid themselves of the need to pay American taxes. In a major story from last year it was noted that one of the founders of Facebook had renounced his United States Citizenship before the IPO of that company’s stock. It should be noted that some argue that his tax obligations at that time may not have actually decreased as a result of his decision to give up his citizenship (due to American tax laws such as the so-called “Expatriation Tax” or “Exit Tax”), although his future tax liabilities may be reduced as a result of that decision. Perhaps more Americans are taking the (somewhat drastic) step of renouncing their citizenship in order to save some money from the tax man. Without knowing each former-American’s motivations for renouncing United States Citizenship we are left to speculate.

There may be another impetus behind the recent increase in the number of Americans renouncing their Citizenship: the FATCA. The Foreign Account Tax Compliance Act (FATCA) compels financial institutions outside of the United States to report information about accounts maintained by American Citizens or lawful permanent residents to the Internal Revenue Service. Furthermore, foreign financial institutions are also required to report on accounts maintained by foreign corporations in which Americans or Lawful Permanent Residents own a significant interest. The FATCA’s implementation has been pushed back until July of 2014. Could the looming specter of the FATCA be the reason for the recent uptick in American’s renouncing their citizenship? One of the many upshots of the FATCA is the fact that the regulatory requirements imposed by the American government on foreign banking and financial institutions can be rather burdensome. One way that these foreign institutions can relieve themselves of these burdens is by refusing to accept American customers. If there are no Americans holding accounts at a given foreign bank, then the bank does not necessarily have to comply with the provisions of the FATCA. This has lead to a situation where more and more overseas banks are refusing to provide services to Americans living and working abroad. By renouncing United States Citizenship and naturalizing to the Citizenship of another country a former American could bank in much the same manner as other foreign nationals.

The decision to renounce one’s U.S. Citizenship is a significant one and should not me made lightly. There are many benefits to being an American Citizen so those thinking of renouncing their Citizenship should review not only their tax situation, but also the intangible and tangible benefits of their American citizenship (including the US Passport). Will this trend continue? It remains to be seen, but there are many who feel that as American oversight of global taxation matters becomes more ubiquitous there will be more American’s who question the value of their citizenship.

–Benjamin W. Hart is an American attorney who resides in Bangkok, Thailand.

For related information please see: Citizenship Renunciation.

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9th August 2011

It recently came to this blogger’s attention that some media outlets are noting the comparatively positive aspects of the economies which comprise the Association of Southeast Asian Nations (ASEAN). In order to provide further insight to the reader it is necessary to quote directly from the official website of The Wall Street Journal, WSJ.com:

JAKARTA—Investors and companies should look to Southeast Asia as they seek shelter from the world-wide markets meltdown, said the secretary general of the 10-member Association of Southeast Asian Nations. Surin Pitsuwan noted that Southeast Asia is growing, it is nestled between India and China and it dealt with its own scary debt problems over a decade ago, making it an attractive alternative amid the global volatility triggered by concerns about how the U.S. and Europe will deal with their debt, as well as whether the U.S. economy will slide into recession again. “If they are looking for a safer haven, this is it,” he told The Wall Street Journal in an interview. “The Chinese and the Japanese that are worried will want to look around for better prospects for their investments and this is one of the hopeful regions…”

The administration of this web log strongly encourages readers to click upon the hyperlinks noted above to read this well written article by Eric Bellman in detail.

Frequent readers may recall that the ASEAN region as a whole, and the component jurisdictions therein, have shown tremendous economic strength in recent months. Meanwhile, these jurisdictions are believed by some to have substantial economic potential in the future. There has been some discussion in recent weeks regarding the prospect of a possible ASEAN visa not unlike the Schengen system currently employed in Europe. Whether such a program will ultimately be implemented remains to be seen. In any case, there is certainly strong evidence to support the inference that the ASEAN jurisdictions will be increasingly important in a geopolitical and economic context moving forward.

In news pertaining to the continuing struggle for LGBT Equality in the United States, it recently came to this blogger’s attention that the Internal Revenue Service (IRS) of the United States appears to be refusing recognition of same sex marriages, even those legalized and/or solemnized in an American State jurisdiction. To provide further information this blogger is compelled to quote directly from the official website of MSNBC at MSN.com:

For all those same-sex newlyweds in New York, Lawrence S. Jacobs has a message: Enjoy the Champagne and the honeymoon, but expect no gifts from the IRS. Jacobs, a lawyer in Washington, specializes in estate planning for same-sex couples — and in delivering the bad news that their unions aren’t legal in the eyes of the IRS, a policy that will cost them time and money during tax season.Same-sex couples in Washington, which last year legalized gay marriage, must fill out a federal return to make calculations required for their D.C. joint return. But then they must set that work aside and fill out separate federal returns because the IRS doesn’t regard their union as legal, Jacobs says. “You just spent decades getting your marriage recognized, and now the feds say, ‘No, you’re not,’” says Jacobs, who as a partner in a same-sex marriage has firsthand experience of the problem.

The administration of this web log strongly encourages interested readers to click upon the hyperlinks noted above to view this story in detail.

Frequent readers may recall that the issue of same sex marriage has been a “hot button” issue in recent months as Senate Judiciary hearings have recently been held to scrutinize the Constitutionality of the so-called “Defense of Marriage Act” (DOMA) in light of proposed replacement legislation in the form of the bill colloquially referred to as the Respect for Marriage Act (RFMA). In an immigration context, the issue of federal recognition of same sex marriage is of substantial importance since agencies such as the United States Citizenship and Immigration Service (USCIS) and each and every US Embassy or US Consulate overseas is legally compelled to disregard a same sex marriage when adjudicating family visa matters pursuant to the provisions of DOMA. Therefore, bi-national same sex couples cannot obtain a travel document such as a K-1 visa, CR-1 visa, or IR-1 visa in the same manner as their different-sex counterparts. Meanwhile, there is some hope that this current legal discrimination will be overcome as some US Courts have ruled that DOMA’s non-recognition, at least at the federal level, of State licensed same sex marriage is Un-Constitutional. Concurrently, the United States Bankruptcy Courts have begun allowing joint bankruptcies for same sex married couples.

It remains to be seen whether same sex couples will ever be accorded the same benefits as their different-sex counterparts in the eyes of American law, but the overall situation appears to be gradually improving.

For related information please see: Americans Resident Abroad.

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5th February 2011

One of the Founding Fathers of the United States, and a true Renaissance man, Benjamin Franklin was once quoted as stating, “In this world nothing can be said to be certain, except death and taxes.” Truer words may never have been uttered as taxation and death seem as ubiquitous now as they likely did in the 1700′s. With that in mind, this blogger has recently noticed a great many American people outside of the USA who have misconceptions regarding the current state of American law with regard to taxation of Americans resident abroad. It would appear that there are those under the mistaken impression that individuals outside of the United States are not subject to American income tax. In fact, nothing could be further from the truth pursuant to current United States tax rules.

To quote directly from the official website of the Internal Revenue Service: IRS.gov:

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

As can be seen from the above quotation, Americans working or earning income abroad are still subject to American taxation regardless of the fact that they are physically located outside of the jurisdictional confines of the United States of America. There are many who do not agree with the current tax policies regarding individuals resident abroad, but as the law currently stands Americans must pay taxes even on income earned outside of the USA. That said, from a practical perspective there are some benefits accorded to Americans residents abroad. To quote further from the same page of the Internal Revenue Service website:

If you reside overseas, or are in the military on duty outside the U.S., you are allowed an automatic 2-month extension to file your return until June 15. However, any tax due must be paid by the original return due date (April 15) to avoid interest charges.

Of further note to Americans resident abroad is the foreign earned income exclusion which may allow Americans resident abroad to obtain a exemption from paying taxes on earned income up to a certain specified level. To quote directly from the Internal Revenue Service’s web page regarding the Foreign Earned Income Exclusion:

If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is now adjusted for inflation ($91,400 for 2009, $91,500 for 2010, $92,900 for 2011). In addition, you can exclude or deduct certain foreign housing amounts.

It should be noted that “living abroad” should not be construed to mean short term periods of residence outside of the USA. In fact, one wishing to claim the aforementioned exclusion would likely be required to spend a substantial period of time outside of the USA. In fact, the IRS currently uses a Physical Presence Test in order to determine whether or not an American who has been abroad qualifies for the foreign earned income exclusion. To quote further from another page of the IRS.gov website:

You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. The 330 qualifying days do not have to be consecutive. The physical presence test applies to both U.S. citizens and resident aliens.

This posting is merely intended to act as a primer for those interested in American tax issues and how United States tax rules impact Americans resident abroad. This posting should not be viewed as a complete or comprehensive analysis of an individual’s current tax situation. Those interested in obtaining advice regarding American tax matters are well advised to contact a licensed professional. At the time of this writing the Integrity Legal Network includes an American attorney licensed to practice law before the United States Tax Court.

For related information please see: Expat Tax Return.

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