In an increasingly global world, many individuals and families have financial interests in more than one country. What many do not realise is that this can become quite complex in terms of cross-border tax planning. Different countries have different regulations and understanding all of them requires experience. Engaging professional legal advice is essential to navigate the various jurisdictions and plan effectively for the future.
Matthew Ledvina is a member of the International Tax Planning Association, STEP, International Bar Association and has a wealth of experience providing cross border tax planning advice to clients. Information about new cross border tax planning rules for EU countries can be found in the PDF attachment.
US Connected Individuals
Individuals can be classed as US connected for financial purposes if they are citizens of the United States, working and/or living in the United States, connected by birth to the US, holding a ‘green card’, or even if married to a US citizen who elects to file ‘jointly’ with the non-US spouse.
UK/US cross-border financial services any eligible individual may need to consider include tax regulations and liability, and pension, protection and investment planning. Accessing pension schemes can be particularly challenging, as many providers in the UK are reluctant to work with individuals who are British expats living in the US, or American citizens living and working in the UK.
In the short video attachment you can find out more about who may be eligible for foreign-earned income exclusion under US rules.
Cross-Border Tax Considerations
Situations where families or individuals have interests in the United States as well as the United Kingdom are becoming more common. These could be families where one or more members is studying abroad, executives who are required to make business trips and have income from more than one country, families with multiple citizenships, and a whole variety of other possibilities. These types of situations create complexities when it comes to tax planning, particularly with US regulations. The US tax system provides a series of tax reliefs for US tax residents and citizens who receive income from another country. These reliefs are in place to help prevent individuals from paying tax across multiple jurisdictions. The infographic attachment looks at tax exclusions for foreign-earned income in the United States.
Planning and Advice
World markets are becoming more convoluted, resulting in more individuals needing to consider complex disclosure requirements and rules when it comes to tax planning. With strict penalties a possibility, it is essential to access expert advice from qualified legal professionals to ensure that tax reporting is completed accurately and in a timely manner no matter what country income is earned in.
The types of problems that arise are often those that the majority of families would not think of without access to experienced legal advice, particularly as historically, people have considered each jurisdiction separately. Anyone who has assets held or earned in more than one country, multiple citizenships, or family members dispersed globally could benefit from working with a specialised advisor to ensure their tax planning requirements are sufficiently met.
Individuals who move countries either permanently or temporarily will often leave assets behind in their native country. UK citizens need to be aware that UK bank accounts will be recorded and reported with the Foreign Account Tax Compliance Act, which means reporting eligible assets in a way that is FATCA compliant. Poor investment planning can lead to an increased tax burden – specialist advisors can assist in ensuring that investments are structured to be tax compliant.