Taxes for American Citizens and Permanent Residents Abroad

If you are a US citizen or permanent resident of the United States and live abroad you must pay taxes on your Worldwide income. However, you may qualify to exclude your foreign income from foreign income up to the amount of inflation that is adjusted annually, plus you may exclude a certain amount of foreign living expenses.

Expatriation Taxes

Sections 877 and 877A of the Internal Revenue Code (IRC) apply to U.S. citizens who have renounced their citizenship and to permanent residents who have terminated their resident status in the United States for federal tax purposes. Different rules apply according to the date of Expatriation. The IRS is sending notices to expatriates who have not complied with the requirements of Form 8854 (Required Form for Expatriated Individuals on or after June 4, 2004) including the imposition of a $10,000 fine where applicable.

Tax Information for Foreign Businesses and Foreign Persons with operations in the USA

Knowing the strategies on how to structure a foreign company operating within the United States can avoid unnecessary tax payments, even if you receive income from e-commerce accounts created in the USA.

Foreign Account Tax Compliance Act – FATCA (Foreign Account Tax Compliance Act)

For American Citizens and Permanent Residents of the United States.

You may be required to file certain information reporting forms if you do business in a country other than the United States or if you have:

Financial assets in a foreign country
Ownership of a foreign company
Financial movement of foreign origin
Tax Compliance for Foreign Accounts, Ensuring Transparency and Regulatory Compliance, which was passed as part of the Hire Act, requires foreign financial and non-financial institutions to report on foreign assets held by account holders in the United States or are subject to withholding on withholdable payments. The Hire Act also contains legislation requiring Americans to report the value of their financial accounts and foreign assets.

If you are required to file Form 8938 and fail to do so, you may be subject to penalties: a $10,000 penalty for failure to file, an additional penalty of up to $50,000 for failure to file after notification to the IRS, and a 40 percent penalty. cent due to an understatement of the tax attributable to undeclared assets.

FINCEN (Financial Crimes Enforcement Network)

Compliance with the agency’s regulations to prevent illicit financial activities.

Taxpayers must electronically file a Report of Foreign Bank and Financial Accounts (FBAR) using the BSA Electronic Filing System. For detailed information, see the Report of Foreign Bank and Financial Accounts (FBAR). FBAR) (in English).

Certain U.S. taxpayers who own foreign financial assets with an aggregate value greater than $50,000 must report information about those assets on Form 8938. It must be included on their tax return.

Corporate Transparency Law (Effective as of January 1, 2024)

The Corporate Transparency Act (or “CTA”) went into effect on January 1, 2024. Thereafter, many U.S. and foreign legal entities operating in the United States will be required to provide information about themselves, its beneficial owners and any company requesting a registration from the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”).

Both C Corporations and S Corporations are subject to the reporting requirements of the CTA. This includes both domestic companies and those formed in foreign jurisdictions but doing business in the United States.

Then, domestic and foreign LLCs as well, if they meet the criteria of a reporting company. This includes single and multi-member LLCs.

General partnerships and limited partnerships fall within the scope of the CTA if they meet the requirements for reporting companies.

And finally, business trusts, including real estate investment trusts (REITs), and other similar entities are subject to the CTA if they meet the criteria for reporting companies.

Declaring companies must communicate four pieces of information relating to each of their applicants and beneficial owners: their name, date of birth, address and a unique identification number from an acceptable identity document.

What are the consequences of non-compliance with the Business Transparency Law?

Failure to comply with this law can result in civil penalties of up to $500 per day with a maximum fine of $10,000, as well as the possibility of imprisonment of up to two years. It is important to note that these sanctions generally apply to intentional violations of the law’s reporting obligations.

Foreign bank accounts and legal tax filing requirements

These taxpayers must complete part III of Annex B to indicate that they have said account, although it is not necessary to indicate the amount it contains. They must also indicate whether they have filed a Foreign Bank and Financial Account Report (FBAR), also known as FinCen Form 114.
FBAR must be completed if the total in the foreign bank account is $10,000 or more during the tax year.
The IRS and FinCen impose heavy penalties when intentional conduct is proven.