Prologue – The Circumstances Of Your Birth Should Not Determine The Outcome Of Your Life …
Kids stuck with $2000 bill each for KiwiSaver https://t.co/gLb5TlCv1z
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 24, 2022
The above tweet references a “human interest” story where US citizen children are denied benefits in their country of residence that are available to all people who are NOT US citizens.
The description includes:
The United States is a signatory to more than 60 income tax treaties with countries throughout the world. Each treaty offers unique planning opportunities. From permanent-establishment planning, subsidiary or branch formation, transfer-pricing considerations, anti-hybrid planning, and everything in between, our tax attorneys, CPAs, and experts provide insight and guidance that is custom-tailored to our clients and their unique circumstances.
International Tax Treaties
In addition to the U.S. and foreign statutory rules for the taxation of foreign income of U.S. persons and U.S. income of foreign persons, bilateral income tax treaties limit the amount of income tax that may be imposed by one treaty partner on residents of the other treaty partner. Treaties also contain provisions governing the creditability of taxes imposed by the treaty country in which income was earned in computing the amount of tax owed to the other country by its residents with respect to such income. Treaties further provide procedures under which inconsistent positions taken by the treaty countries with respect to a single item of income or deduction may be mutually resolved by the two countries.
The Tax Risk Of Permanent Establishment
Recent developments, such as the Tax Cuts & Jobs Act (TCJA) and the OECD’s Base Erosion and Profits Shifting (BEPS) initiative, have forced multinational businesses to re-evaluate global strategies and the tax impact of doing business abroad. Navigating the risk of a permanent establishment remains among the most important international tax risks.
While a nonresident alien or foreign corporation engaged in a trade or business in the United States is generally subject to taxation on its net taxable income that is effectively connected with the conduct of the U.S. trade or business, the rules are different (or at least, can be) when a resident of a treaty country conducts the business. Where a tax treaty is applicable, the concept of a permanent establishment—and whether income is attributable to that permanent establishment—replaces the concept of effectively connected income as the governing standard.
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