Expatriate Tax Consideration, Essay Example

Published: 2021-06-30 09:05:05
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The citizens of United States of America who reside anywhere in the world are subject to taxation from the Internal Revenue Service. In order for exempted of such individuals from these taxes, they require to expatriate themselves from the U.S and thus become non- resident aliens. These individuals have a reduced tax liability and taxed on the revenue earned in the U.S and gifts considered to be subjected to the U.S gift tax and estate tax rules. Expatriation rules also provide for covered expatriates who are subject to the rules of exiting taxes. These individuals must be either U.S residents or citizens who have stayed for a long term and vacates, loses or renounces their citizenship or residence status. In order to qualify the individual must meet an average income test, a net worth test or failure to certify compliance for the previous 5 years.

For individuals who expatriated to Germany, the IRS requires such individuals to file annual tax returns notwithstanding that no taxes owed. The provision holds even where the individual has complied with German tax provisions. Highly paid individuals do not qualify for foreign income tax exclusion otherwise; they are not liable to U.S tax. Exclusion from this U.S tax liability is subject to either the substantial presence test or bona Fide residence test. Entities expatriated to Germany are subject to the mark-to-market tax policy, which is a provision that is a prerequisite. The U.S/Germany tax treaty provides for the taxation of other income items such as capital gains, dividends and interests. The treaty prevents fiscal evasion, and double taxation of parties who expatriated. The services of the Internal Revenue Services are available in the U.S consulate, in Frankfurt, to assist U.S expatriates who are in Germany.
The provisions regarding tax compliance to expatriates to Mexico provide that the individuals there liable to the Mexican tax provisions. The individuals, however, have a requirement to file their tax returns to the IRS all the same. Business entities expatriated to Mexico are subject to the mark-to –market policy on tax, which require the imposition of tax on the unrealized profit on assets based on their current market prices. The entities also required to file their tax returns to the IRS on an annual basis. There is the treaty between the Unites States of America and the Mexican governments on taxation to provide further guidelines on taxation and at the same time avoid fiscal evasion and double taxation.
On the other hand, expatriates to Singapore should follow the Standard expatriate rules on taxation, which include filling individual tax returns annually to the IRA regardless of the tax situation in Singapore. Business entities have an obligation to file annual tax returns to the IRS. Mark-on-market tax policies apply to the entities upon expatriation to Singapore. Expatriation to Singapore usually associated with a desire to reduce the quantity of taxes paid, as the taxes in Singapore are relatively lower as compared to the US.
The main aspect of the rules concerning the liability on taxation of expatriates supposed to guard against the incidence of double taxation while ensuring that there is international tax compliance. The filing of tax returns to the IRS even where compliance met in the other country ensures that the individual or entity is tax compliant.

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