Transition and GILTI Tax Regimes and U.S. citizen overseas

The U.S. Congress needs more education on how U.S. citizens overseas have organized their businesses and what businesses they are running. Legislation like TCJA which was targeted towards big multinationals that were “offshoring” profits should not be applied to U.S. citizens running small businesses and consultancies overseas. These provisions can have a devastating effect on their ability to stay in business and profit.

Transition and GILTI Tax Regimes and U.S. citizen overseas

ACA advocates for the application of a de minimis ruling (threshold for reporting) which would remove from the reporting regimes small businesses owned and operated by U.S. citizens overseas subject to the provisions of the Tax Cuts and Jobs Act (TCJA). To transition to that new system, TCJA imposes a one-time deemed repatriation tax, payable over 8 years, on unremitted earnings and profits at a rate of 8 percent for illiquid assets and 15.5 percent for cash and cash equivalents. The dividends received deduction to offset this tax is available only to U.S. corporations that are shareholders in a Controlled Foreign Corporation (CFC). The deduction is not available to individuals, nor to foreign corporations, which, for example, are owned by US individuals, including individuals living abroad. The intent of the new law was to address the tax compliancy of large U.S. corporations, small consultancies, restaurants, exercise studies owned by U.S. citizens overseas should not be subject to these tax regimes.

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