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Crossborder Taxation of Retirement and Pension Plans Under the U.S.- India                                                                Tax Treaty

Crossborder Taxation of Retirement and Pension Plans Under the U.S.- India Tax Treaty

Tax Law
By Anthony Diosdi In an increasingly global economy, workers are experiencing unprecedented mobility. As such, foreigners living in America, even for a limited time, often participate in a pension or retirement plan in the United States; participation might even be mandatory. In most cases, pretax money is contributed into retirement accounts where it accumulates tax-free until retirement. U.S. retirement such as 403(b) plans, 401(k) plans, and Individual Retirement Accounts (“IRAs”) are commonly encountered by foreigners who are employed in the United States. In the alternative, Americans who are employed abroad often contribute to foreign retirement plans. Whether contributions, earnings, and distributions are includible in a foreign worker’s U.S. taxable income depends on how the worker is classified for U.S. tax purposes and whether a tax treaty exempts an event that…
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Crossborder Taxation of Cloud Transactions and Digital Downloads

Crossborder Taxation of Cloud Transactions and Digital Downloads

Tax Law
By Anthony Diosdi U.S. Taxation of the Digital Economy- a Broad OverviewNew technology and new transactions often raise difficult issues of tax policy and administration in part because existing rules were developed to deal with other situations. The dramatic expansion in electronic commerce facilitated by the use of the Internet and other technology is subjecting existing tax principles to new pressures. One area of concern is the application of source rules to electronic commerce transactions. Suppose, for example, that a corporation delivers software or a digital product to a customer on the Internet. The customer can download the product and use it commercially. Depending upon the nature of the transaction and the property interests involved, the income to the corporation might appropriately be characterized as a royalty for the use…
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Crossborder Taxation of Retirement and Pension Plans Under the U.S.- U.K                                                                Tax Treaty

Crossborder Taxation of Retirement and Pension Plans Under the U.S.- U.K Tax Treaty

Tax Law
By Anthony Diosdi In an increasingly global economy, workers are experiencing unprecedented mobility. As such, foreigners living in America, even for a limited time, often participate in a pension or retirement plan in the United States; participation might even be mandatory. In most cases, pretax money is contributed into retirement accounts where it accumulates tax-free until retirement. U.S. retirement such as 403(b) plans, 401(k) plans, and Individual Retirement Accounts (“IRAs”) are commonly encountered by foreigners who are employed in the United States. In the alternative, Americans who are employed abroad often contribute to foreign retirement plans. Whether contributions, earnings, and distributions are includible in a foreign worker’s U.S. taxable income depends on how the worker is classified for U.S. tax purposes and whether a tax treaty exempts an event that…
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A Win for Taxpayer in Non-Willful FBAR Penalty Case In The Ninth Circuit Court of Appeals

A Win for Taxpayer in Non-Willful FBAR Penalty Case In The Ninth Circuit Court of Appeals

Tax Law
By Lynn K. Ching In March 2021, a taxpayer prevailed on a significant issue in a non-willful FBAR case. The issue was whether 31 U.S.C. § 5321(a)(5)(A) authorizes the IRS to impose multiple non-willful penalties - up to $10,000 for each foreign bank account that was required to be listed on the FBAR - when an untimely, but accurate FBAR has been filed. The Ninth Circuit Court of Appeals concluded that § 5321(a)(5)(A) authorizes the IRS to impose up to one non-willful penalty of $10,000 per FBAR filing when an untimely, but accurate, FBAR is filed, no matter the number of foreign accounts (as opposed to $10,000 per FBAR account as argued by the government). Ninth Circuit Court of Appeals In United States of America v. Boyd, 991 F 3d…
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What Constitutes a Foreign Branch?

What Constitutes a Foreign Branch?

Tax Law
By Lynn K. Ching In general, a foreign branch for U.S. tax purposes is a division which operates a trade or business in a foreign country and maintains a separate set of books and records. The foreign branch generally is subject to the income tax laws in the foreign country in which it operates. Under the treasury regulations, the term foreign branch means an integral business operation carried on by a U.S. person outside the United States. Whether the activities of a U.S. person outside the United States constitute a foreign branch operation must be determined under all the facts and circumstances. Activities outside the United States shall be deemed to constitute a foreign branch for purposes of this section if the activities constitute a permanent establishment under the terms…
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A Guide to the Taxation of Crypto Staking and How Investors Can Calculate Their Basis In Staking Rewards

A Guide to the Taxation of Crypto Staking and How Investors Can Calculate Their Basis In Staking Rewards

Tax Law
By Anthony Diosdi and Kerrin Liu Just over a year ago, a couple from Tennessee fully paid taxes associated with Tezos network staking rewards earned. The couple then filed suit in federal district court in the middle district of Tennessee seeking a refund of the taxes paid associated with Tezos network. See Joshua Jarrett et ux. V. United States, No. 3:21-cv-00419 (M.D. Tenn. 2021)(May 26, 2021). Rather than allowing the case to move forward in the court, recently, the Internal Revenue Service (“IRS”) conceded the case. The concession prevents the court from issuing much needed guidance in this area. This article discusses the current state of the taxation of staking and how investors can calculate their basis in staking rewards. An Overview of Crypto StakingCryptocurrency staking takes place when an…
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The U.S. Tax Consequences of Terminating U.S. Residency With PFIC Shares and Potential Planning Options

The U.S. Tax Consequences of Terminating U.S. Residency With PFIC Shares and Potential Planning Options

Tax Law
By Anthony Diosdi In the last 20 years, there has been a significant upward trend of highly skilled foreign workers moving to the United States for temporary assignments. For foreigners planning to move to the United States for a temporary work assignment, pre-immigration tax planning is crucial. Whether the goal is to minimize the tax effects of the move or to structure the foreigner worker’s holdings to optimize tax consequences after the move, pre-immigration planning must be undertaken. One of the keys to developing strategies for minimizing U.S. federal tax in pre-immigration context is to understand that many foreign workers accepting a work assignment in the United States will become a U.S. person for U.S. federal tax purposes.Under Internal Revenue Code Section 7701(a)(3)(A), an individual is a U.S. person if…
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Unraveling the United States- Netherlands Income Tax Treaty and the Treaty’s Impact on the Global Taxation of Cross-Border Pension Plans

Unraveling the United States- Netherlands Income Tax Treaty and the Treaty’s Impact on the Global Taxation of Cross-Border Pension Plans

Tax Law
By Anthony Diosdi The major purpose of an income tax treaty is to mitigate international double taxation through tax reduction or exemptions on certain types of income derived by residents of one treaty country from sources within the other treaty country. Because tax treaties often substantially modify United States and foreign tax consequences, the relevant treaty must be considered in order to fully analyze the income tax consequences of any outbound or inbound transaction. The United States currently has income tax treaties with approximately 58 countries. This article discusses the United States- Netherlands Income Tax Treaty. There are several basic treaty provisions, such as permanent establishment provisions and reduced withholding tax rates, that are common to most of the income tax treaties to which the U.S. is a party. In…
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Unraveling the United States- Germany Income Tax Treaty and the Treaty’s Impact on the Global Taxation of Cross-Border Pension Plans

Unraveling the United States- Germany Income Tax Treaty and the Treaty’s Impact on the Global Taxation of Cross-Border Pension Plans

Tax Law
By Anthony Diosdi The major purpose of an income tax treaty is to mitigate international double taxation through tax reduction or exemptions on certain types of income derived by residents of one treaty country from sources within the other treaty country. Because tax treaties often substantially modify United States and foreign tax consequences, the relevant treaty must be considered in order to fully analyze the income tax consequences of any outbound or inbound transaction. The United States currently has income tax treaties with approximately 58 countries. This article discusses the United States- Germany Income Tax Treaty. There are several basic treaty provisions, such as permanent establishment provisions and reduced withholding tax rates, that are common to most of the income tax treaties to which the U.S. is a party. In…
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Unraveling the United States- Philippines Income Tax Treaty and a Closer Look at the Treaty’s Provision Regarding the Taxation of U.S. Based Retirement Accounts Such as 401K Plans and IRAs

Unraveling the United States- Philippines Income Tax Treaty and a Closer Look at the Treaty’s Provision Regarding the Taxation of U.S. Based Retirement Accounts Such as 401K Plans and IRAs

Tax Law
By Anthony Diosdi The major purpose of an income tax treaty is to mitigate international double taxation through tax reduction or exemptions on certain types of income derived by residents of one treaty country from sources within the other treaty country. Because tax treaties often substantially modify United States and foreign tax consequences, the relevant treaty must be considered in order to fully analyze the income tax consequences of any outbound or inbound transaction. The United States currently has income tax treaties with approximately 58 countries. This article discusses the United States- Philippines Income Tax Treaty. There are several basic treaty provisions, such as permanent establishment provisions and reduced withholding tax rates, that are common to most of the income tax treaties to which the U.S. is a party. In…
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