8 ms·

> The obvious loss is to government revenue, but the more subtle and still very real loss is the diversion of high-powered talent from what could have been gain

by gwd 2y ago

> The obvious loss is to government revenue, but the more subtle and still very real loss is the diversion of high-powered talent from what could have been gains in efficiency and productivity to focus instead on corporate reorganizations and tax evasion games. It's also a loss to all of us who find ourselves owning a "foreign" corporation for legitimate reasons, and having to do a lot of work proving that we're not playing shell games. I'm an American living in the UK; I've started what's now a one-man bootstrapped company and it just makes sense for it to be incorporated in the UK. I don't mind paying taxes, but I don't want to have to pay them twice. UK taxes are generally higher than US taxes, and there are tax treaties to avoid double taxation, so no problem, right? Wrong. First, if a US citizen owns more than 10% of a foreign corporation, there's an insanely complicated form you have to fill out, two pages of which are incomprehensible questions ("Is your company considered an X corporation under sections Y and Z of the Blablablah act?") that simply require an expert to fill out. Secondly, if a US citizens owns more than 50% of a foreign company, by default, income from that company counts as personal income, but taxes paid by the company to another government don't count as personal taxes. You can get around this, apparently, but it's even more complicated. So because of [REDACTED] lawyers and accountants that have come up with these schemes, I have to spend precious starting capital to a bunch of accountants to prove I'm not evading taxes, rather than actually doing something useful with that money (and that accountant doing something more useful with their time).

jmyeet 2y ago
This is completely unrelated to the post. What you're complaining about is overreach by the IRS in relation to foreign assets held by US citizens (ie FATCA) and the reporting requirements (eg Form 7938 and FBAR). It's worth noting that real estate is carved out as an exception for reporting purposes somehow, even though it's a common vehicle for money laundering. That has literally nothing to do the Double Irish Dutch sandwich, which has historically been used by US companies (particularly Big Tech companies) to avoid taxes by moving their IP to a foreign subsidiary and then paying "royalties" to avoid paying US taxes.
- gwd 2y ago
  You seem to think that the IRS doing that just for a laugh, or just because they hate rich people, and that Big Tech companies are the only ones playing shell games with their revenue in order to shirk paying their fair share to support the society they've benefitted from. I think it much more likely that rich people also play shell games with their assets / revenue to avoid paying their fair share to support the society they've benefitted from, and that the IRS requires the extra reporting to try to counteract that. This article is specifically about a specific loophole invented by unethical accountants and lawyers, but it's also generally about all the effort spent by unethical accountants and lawyers to come up with such loopholes, causing not only harm to society (in the form of free-riding on those who are paying taxes), but which in turn forces effort on the part of tax agencies and legislatures, which then forces effort on normal people like me who just want to make some money and pay our fair share. It's pure wasted energy.
  - skissane 2y ago
    > and that the IRS requires the extra reporting to try to counteract that. The extra reporting largely exists because of the fundamental and rather unique misdesign of the US tax system - taxing citizens’ worldwide income for life. Most countries only tax (1) worldwide income for residents (2) in-country income for non-residents
- skissane 2y ago
  > What you're complaining about is overreach by the IRS in relation to foreign assets held by US citizens (ie FATCA) and the reporting requirements (eg Form 7938 and FBAR) A big problem is the US is one of the few countries in the world which taxes its citizens (and green card holders) worldwide, for life, no matter how long they’ve been outside the United States. Most countries don’t tax non-resident citizens, or only do so for a limited period of a few years. The only other country that does it, that I know of, is Eritrea - and it has been widely condemned by the international community for its “diaspora tax”. But no condemnation for the US diaspora tax, despite actually being far more onerous than Eritrea’s is
- jpat 2y ago
justchexking 2y ago
[flagged]
- bigstrat2003 2y ago
  Bro what. It's very clearly meant to cover up a swear word.
  - onionisafruit 2y ago
    They seem to think that [REDACTED] is something that hn automatically redacted and that dang will come check what the actual word was. Because this person assumes every negative comment about a lawyer must be antisemitic.
CatWChainsaw 2y ago
Would this be avoided if you renounced your US citizenship and became a UK citizen instead?
- deleted 2y ago
  [deleted]
gerdesj 2y ago
The "problem" you describe is your US citizenship requires you to pay tax on earnings from outside the US - that's a condition of US citizenship. If you don't want to pay those taxes, then renounce your US citizenship once you have, say, gained UK citizenship, if that works for you. A famous bloke once said (probably in Hebrew, written up in Aramaic or Greek and badly translated into middle, modern and somewhat strange English): "Pay unto Caesar, that which is due to Caesar and pay unto God that which is due to God" or words to that effect. Substitute IRS for God and you have a suitably cynical aside! If your firm over here is good enough and you are reasonably settled then why not go all in? I'm not sure what the rules are on reconnecting with the US if you have formally renounced citizenship. However, I'm sure a birth cert from Yeehaw, TX or wherever will go some way. Even so, UK citizens are generally welcomed in the Land of the Free. An ESTA (great scheme IMO) costs about £20 for two years coverage - more than enough to visit the relos. I know from second hand experience that our bureaucracy is just as convoluted as any other and it will take roughly one to two years (that was about 10 years ago) to get citizenship and probably involves a test that I would fail! You might like to look into where your company is actually registered. A Ltd is not you - it is a separate legal entity and the UK (etc) is quite a complicated setup within quite a complicated environment. You might explore Jersey and the Isle of Man for places to headquarter. Don't overlook Eire either (EU with UK to the north, with special arrangements) Anyway, the snag you have is solely US based and not UK (for a change).
- khuey 2y ago
  > I'm not sure what the rules are on reconnecting with the US if you have formally renounced citizenship. However, I'm sure a birth cert from Yeehaw, TX or wherever will go some way. It doesn't. Once you've renounced your US citizenship you're on exactly the same footing as any other foreigner in terms of visiting or living here. And that's assuming you're smart enough not to admit to the government that you're renouncing your US citizenship for tax purposes. If you make that mistake, you've made yourself permanently inadmissible to the United States under INA 212(a)(10)(E).
  - gerdesj 2y ago
    "And that's assuming you're smart enough not to admit to the government that you're renouncing your US citizenship for tax purposes. If you make that mistake, you've made yourself permanently inadmissible to the United States under INA 212(a)(10)(E)." Blimey, that's a bit harsh! I wonder if Mr Adams and co, when throwing off the yoke of something, something, imperialism and that, and those jolly beastly Britons, would approve of INA 212(a)(10)(E)? That is some legacy for those freedom fighters. cough terrorists (sorry - I'm a Brit, its only been 250 odd years!)
bozhark 2y ago
Would this encourage shell company ownership behavior?
deleted 2y ago
[deleted]
csomar 2y ago
Be careful it might be more complicated than that. I am not 100% sure but I think you might be required to pay taxes on unrealized gains for your company (or whatever assets you are owning).
Log_out_ 2y ago
The guild will get its due! Ironically this is also what the productivity gainsgames produce in the long run. All that excess human capability goes into bureaucracy labyrinths and highway robbery sometimes with the law behind and armed with subscription. The entrepreneur producing the beast that strangles him.
izacus 2y ago
> The obvious loss is to government revenue, but the more subtle and still very real loss is the diversion of high-powered talent from what could have been gains in efficiency and productivity to focus instead on corporate reorganizations and tax evasion games. Looking at all the corpo legal/HR departments really has to make you think - those are people that are paid to aggresively look for legal loopholes, to defeat the spirit of laws and to make sure that the corporation always has the advantage against the society and workforce they exist nearby. There's decades upon decades of man hours being put into chipping away the effectiveness of tax, workplace and other laws and finding loopholes to make them ineffective. We've been at war and we never even noticed.
jalapenos 2y ago
Yeah it's become an absolute nightmare now if you're an individual or small business involved in anything cross border. Even if you're not unlucky enough to be a US citizen, if you're tax resident in one country and incorporate in another for completely legitimate reasons, as an individual you're just screwed if you want to be compliant. Rocket science is significantly easier. You need some KPMG-tier advisor to work it out for you for $crap-ton/hr. Few sole operators have the revenue to afford that.
gamblor956 2y ago
Secondly, if a US citizens owns more than 50% of a foreign company, by default, income from that company counts as personal income, but taxes paid by the company to another government don't count as personal taxes. You can get around this, apparently, but it's even more complicated. This is the GILTI regime, which was intended to target foreign income from intangible assets. But, like most GOP legislation of the last two decades, it was written in a rush without regards to the practical consequences. Note however that if the foreign income (from the company's perspective, local income) is being taxed at a higher rate than 90% of the applicable U.S. tax rate on that income (currently meaning, 18.9% foreign tax rate or higher) then the income does not get included in its owner's income (aka the high-taxed exception). Also note that if you are for some reason subject to GILTI, you've basically just prepaid your taxes on actually receiving that income, meaning that you don't pay taxes again when the foreign corporation actually pays the income to you as a dividend. This was super complicated for a year or two until the IRS released guidance clarifying some points. Now, for any accountant worth their salt, it's pretty straightforward and if they're still complaining about it, find a new accountant.
nickfromseattle 2y ago
>Secondly, if a US citizens owns more than 50% of a foreign company, by default, income from that company counts as personal income, but taxes paid by the company to another government don't count as personal taxes. You can get around this, apparently, but it's even more complicated. Curious, what are the even more complicated ways?
yunohn 2y ago
Why is the top comment on this post a mostly unrelated rant about USA individuals being taxed in weird ways? The actual post is about global corporate shenanigans that enable them to evade astronomical amounts of taxes.

by gwd 2y ago

jmyeet 2y ago

This is completely unrelated to the post. What you're complaining about is overreach by the IRS in relation to foreign assets held by US citizens (ie FATCA) and the reporting requirements (eg Form 7938 and FBAR). It's worth noting that real estate is carved out as an exception for reporting purposes somehow, even though it's a common vehicle for money laundering. That has literally nothing to do the Double Irish Dutch sandwich, which has historically been used by US companies (particularly Big Tech companies) to avoid taxes by moving their IP to a foreign subsidiary and then paying "royalties" to avoid paying US taxes.

gwd 2y ago
You seem to think that the IRS doing that just for a laugh, or just because they hate rich people, and that Big Tech companies are the only ones playing shell games with their revenue in order to shirk paying their fair share to support the society they've benefitted from. I think it much more likely that rich people also play shell games with their assets / revenue to avoid paying their fair share to support the society they've benefitted from, and that the IRS requires the extra reporting to try to counteract that. This article is specifically about a specific loophole invented by unethical accountants and lawyers, but it's also generally about all the effort spent by unethical accountants and lawyers to come up with such loopholes, causing not only harm to society (in the form of free-riding on those who are paying taxes), but which in turn forces effort on the part of tax agencies and legislatures, which then forces effort on normal people like me who just want to make some money and pay our fair share. It's pure wasted energy.
- skissane 2y ago
  > and that the IRS requires the extra reporting to try to counteract that. The extra reporting largely exists because of the fundamental and rather unique misdesign of the US tax system - taxing citizens’ worldwide income for life. Most countries only tax (1) worldwide income for residents (2) in-country income for non-residents
skissane 2y ago
> What you're complaining about is overreach by the IRS in relation to foreign assets held by US citizens (ie FATCA) and the reporting requirements (eg Form 7938 and FBAR) A big problem is the US is one of the few countries in the world which taxes its citizens (and green card holders) worldwide, for life, no matter how long they’ve been outside the United States. Most countries don’t tax non-resident citizens, or only do so for a limited period of a few years. The only other country that does it, that I know of, is Eritrea - and it has been widely condemned by the international community for its “diaspora tax”. But no condemnation for the US diaspora tax, despite actually being far more onerous than Eritrea’s is
jpat 2y ago

justchexking 2y ago

[flagged]

bigstrat2003 2y ago
Bro what. It's very clearly meant to cover up a swear word.
- onionisafruit 2y ago
  They seem to think that [REDACTED] is something that hn automatically redacted and that dang will come check what the actual word was. Because this person assumes every negative comment about a lawyer must be antisemitic.

CatWChainsaw 2y ago

Would this be avoided if you renounced your US citizenship and became a UK citizen instead?

deleted 2y ago
[deleted]

gerdesj 2y ago

The "problem" you describe is your US citizenship requires you to pay tax on earnings from outside the US - that's a condition of US citizenship. If you don't want to pay those taxes, then renounce your US citizenship once you have, say, gained UK citizenship, if that works for you. A famous bloke once said (probably in Hebrew, written up in Aramaic or Greek and badly translated into middle, modern and somewhat strange English): "Pay unto Caesar, that which is due to Caesar and pay unto God that which is due to God" or words to that effect. Substitute IRS for God and you have a suitably cynical aside! If your firm over here is good enough and you are reasonably settled then why not go all in? I'm not sure what the rules are on reconnecting with the US if you have formally renounced citizenship. However, I'm sure a birth cert from Yeehaw, TX or wherever will go some way. Even so, UK citizens are generally welcomed in the Land of the Free. An ESTA (great scheme IMO) costs about £20 for two years coverage - more than enough to visit the relos. I know from second hand experience that our bureaucracy is just as convoluted as any other and it will take roughly one to two years (that was about 10 years ago) to get citizenship and probably involves a test that I would fail! You might like to look into where your company is actually registered. A Ltd is not you - it is a separate legal entity and the UK (etc) is quite a complicated setup within quite a complicated environment. You might explore Jersey and the Isle of Man for places to headquarter. Don't overlook Eire either (EU with UK to the north, with special arrangements) Anyway, the snag you have is solely US based and not UK (for a change).

khuey 2y ago
> I'm not sure what the rules are on reconnecting with the US if you have formally renounced citizenship. However, I'm sure a birth cert from Yeehaw, TX or wherever will go some way. It doesn't. Once you've renounced your US citizenship you're on exactly the same footing as any other foreigner in terms of visiting or living here. And that's assuming you're smart enough not to admit to the government that you're renouncing your US citizenship for tax purposes. If you make that mistake, you've made yourself permanently inadmissible to the United States under INA 212(a)(10)(E).
- gerdesj 2y ago
  "And that's assuming you're smart enough not to admit to the government that you're renouncing your US citizenship for tax purposes. If you make that mistake, you've made yourself permanently inadmissible to the United States under INA 212(a)(10)(E)." Blimey, that's a bit harsh! I wonder if Mr Adams and co, when throwing off the yoke of something, something, imperialism and that, and those jolly beastly Britons, would approve of INA 212(a)(10)(E)? That is some legacy for those freedom fighters. cough terrorists (sorry - I'm a Brit, its only been 250 odd years!)

bozhark 2y ago

Would this encourage shell company ownership behavior?

deleted 2y ago

[deleted]

csomar 2y ago

Be careful it might be more complicated than that. I am not 100% sure but I think you might be required to pay taxes on unrealized gains for your company (or whatever assets you are owning).

Log_out_ 2y ago

The guild will get its due! Ironically this is also what the productivity gainsgames produce in the long run. All that excess human capability goes into bureaucracy labyrinths and highway robbery sometimes with the law behind and armed with subscription. The entrepreneur producing the beast that strangles him.

izacus 2y ago

jalapenos 2y ago

Yeah it's become an absolute nightmare now if you're an individual or small business involved in anything cross border. Even if you're not unlucky enough to be a US citizen, if you're tax resident in one country and incorporate in another for completely legitimate reasons, as an individual you're just screwed if you want to be compliant. Rocket science is significantly easier. You need some KPMG-tier advisor to work it out for you for $crap-ton/hr. Few sole operators have the revenue to afford that.

gamblor956 2y ago

Secondly, if a US citizens owns more than 50% of a foreign company, by default, income from that company counts as personal income, but taxes paid by the company to another government don't count as personal taxes. You can get around this, apparently, but it's even more complicated. This is the GILTI regime, which was intended to target foreign income from intangible assets. But, like most GOP legislation of the last two decades, it was written in a rush without regards to the practical consequences. Note however that if the foreign income (from the company's perspective, local income) is being taxed at a higher rate than 90% of the applicable U.S. tax rate on that income (currently meaning, 18.9% foreign tax rate or higher) then the income does not get included in its owner's income (aka the high-taxed exception). Also note that if you are for some reason subject to GILTI, you've basically just prepaid your taxes on actually receiving that income, meaning that you don't pay taxes again when the foreign corporation actually pays the income to you as a dividend. This was super complicated for a year or two until the IRS released guidance clarifying some points. Now, for any accountant worth their salt, it's pretty straightforward and if they're still complaining about it, find a new accountant.

nickfromseattle 2y ago

>Secondly, if a US citizens owns more than 50% of a foreign company, by default, income from that company counts as personal income, but taxes paid by the company to another government don't count as personal taxes. You can get around this, apparently, but it's even more complicated. Curious, what are the even more complicated ways?

yunohn 2y ago

Why is the top comment on this post a mostly unrelated rant about USA individuals being taxed in weird ways? The actual post is about global corporate shenanigans that enable them to evade astronomical amounts of taxes.