Services for International Tax

US taxpayers are subject to US income tax on their worldwide income and gains. US taxpayers are also subject to US Estate and Gift Tax on the transfer of their assets during life or at death. Similar taxes are imposed by other countries as well.

However, there are many areas where the US tax system and the various foreign tax systems are mismatched – in the timing, the amounts or what is actually taxable.

Inter-spousal transfers which most married couples believe should be tax-free may in fact be subject to tax in other countries.

Business entities are often treated differently from one jurisdiction to another. For example, an entity treated as a partnership in one jurisdiction may be treated as a corporation in another and thus the tax may be different as a result of the classification.

Trusts are frequently used as a tool for asset and estate planning. The US and many foreign jurisdictions have complex tax issues associated with the timing and the amount taxed to trustees, settlors and beneficiaries. This varies from jurisdiction to jurisdiction and requires sophisticated planning.

Investments that are tax efficient in one jurisdiction may suffer harsh taxes in another. For example, US tax-free mutual funds are often taxable to residents in other countries.

Pensions, like other investments, are often tax favoured in one jurisdiction but unfavourably taxed in another. A US citizen participating in a UK pension will be taxed by the US on employer contributions to the plan as well as the growth in the plan, even though the UK system allows a tax deferral. The US has an extensive treaty network, however, to address such matters.

Most of the problem areas can be addressed with a carefully considered tax structure.

Non-US taxpayers investing in or moving to the US face similar problems.

There are many variables with international tax, making every situation unique. Careful planning before the event can usually materially reduce a taxpayer’s exposure to double taxation, costly compliance fees and penalties.