United States Persons Investing Abroad

With the increasingly globalized nature of our economy, the possibility of going “offshore” has never looked more attractive to an increasing number of American individuals and corporations.  However, with the potential benefits, come certain burdens in the form of foreign account reporting and income tax obligations. Before going offshore, you need to seek the advice of a skilled and knowledgeable international tax lawyer that will help you to properly structure your offshore activities and make sure that you are in compliance with all U.S. reporting obligations. 

Going offshore may be a good idea for the U.S. individual, family or corporate investor

International investments by U.S. persons can be categorized into two groups: the individual U.S. investor or family who is looking to go offshore for asset protection, estate planning, or investment purposes and the U.S.-based business that is looking to expand its operations into a foreign country.  Here are some of the potential benefits of going offshore:

Tax and estate planning opportunities.  By effectively using foreign business entities and trusts to manage the stream of income from foreign investments that will be repatriated back to the United States, going offshore can create potential tax savings opportunities.

Investment opportunities.  Owning foreign financial holdings may make it easier to identify and undertake other international investment opportunities.

Investment diversification.  By keeping part of your net worth outside of the United States financial system, you can effectively hedge against adverse economic effects of a particular government policy or United States market shocks.

Lower corporate tax rates.  In the case of the U.S. corporate investor looking to expand their business abroad, going offshore provides access to favorable taxing regimes in foreign jurisdictions.

Lower cost of corporate inputs.  Going offshore may allow for more cost-effective access to raw materials and labor for the U.S. corporate investor.

Asset Protection.  The international investor can take advantage of asset protection and wealth preservation vehicles that help to prevent high net worth individuals, families, and business owners from being the targets of frivolous lawsuits.

Leave the heavy lifting to us 

Notwithstanding the potential benefits, the tax and legal complexity involved in undertaking these investments can be quite daunting.

This is not a do-it-yourself project.  We listen to your goals and concerns, and then guide you through this tax and legal jungle efficiently, and all along the way present solutions and recommendations applicable to your particular situation free of cumbersome legalese.  Our goal is to allow you to focus on your business and its growth.

FBAR & FATCA compliance, OVDI issues

Reporting of foreign accounts and financial holdings by United States taxpayers.  Unless you have been living under a rock, you’ve probably heard of the Internal Revenue Service’s recent efforts to police the activities of United States persons who have holdings abroad.

FBAR, FATCA, and the OVDI.  With the recent changes to the FBAR form (that is, TDF 90-22.1), the new IRS Form 8938, Statement of Foreign Financial Assets, the ongoing Offshore Voluntary Disclosure Initiatives (“OVDI”) for those who have unreported offshore financial holdings and accounts,  and now the recent implementation of FATCA and its accompanying information sharing agreements between the U.S. and foreign governments, the regulatory environment facing the United States taxpayer with foreign investments has become difficult, if not downright hostile.

While going offshore may still be a great idea for the right kind of investor, it does not come without its burdens.  The IRS is not fooling around and is deadly serious about catching those who are not in compliance with its increasingly complex international reporting rules.  Unless you think significant penalties and perhaps even jail time are a slap on the wrist…we do not recommend you take these matters lightly.  However, with proper advice from a skilled international tax attorney, you will be able to rest peacefully knowing you are in compliance with all the reporting requirements now demanded by the United States government for all its residents investing abroad.

Forgot to file?  Not a problem. We can help.  Moreover, if you believe you are currently not in compliance with these reporting requirements, you need to act now.  Don’t put it off because it frightens you.  Speak to an attorney with expertise in these IRS offshore reporting requirements in order to discuss your reporting obligations and options and if you have not been in compliance, then whether the OVDI program is right for you.

Expatriation of United States Citizens

While “pre-immigration” planning is almost always discussed in the foreign “inbound” investment context, there is another form of pre-immigration planning that exists – that for United States citizens, who for whatever reason, wish to formally renounce their United States citizenship and establish domicile in a foreign jurisdiction.  As in the foreign investor pre-immigration context, this is an area of law that is fraught with complexity and filled with traps for the unwary or ill-advised taxpayer.

For starters, there are two concurrent processes that the U.S. citizen wishing to expatriate will have to undergo.  There is the process under the immigration law and the process under the U.S. tax law.  Under recent revisions to the expatriation provisions of the United States tax code, the U.S. government will charge certain wealthy expatriate U.S. citizens an “exit tax” – which is basically a capital gains tax on a pretend sale of all his assets valued as of the day the expatriate formally gives up his U.S. citizenship.  Although not all U.S. taxpayers who wish to expatriate will be subject to this exit tax, as it applies only if the U.S. citizen crosses a certain net worth threshold (subject to adjustment by the U.S. treasury), it behooves any U.S. citizen considering expatriation to consult with a qualified international tax attorney before making any moves.

If you are a U.S. resident considering investing aboard or a U.S. citizen considering renouncing your United States citizenship, give us a call at (305) 403-0641 or email us at info@msquaredlaw.com to discuss how we can help you.