Global Investing - US and international tax considerations

Section 9

U.S. and International Tax Considerations

As a U.S. citizen, the sad part of making money is the sizable sum that Uncle Sam demands regardless of where you live or where the source of income or profits are derived from. The eternal challenge to Americans is figuring out how to reduce this annual obligation to a minimum. The gradual increase in U.S. taxes has driven more and more Americans to go offshore.

The best advice for anyone seriously interested in reducing their taxes is to learn what is expected of them and what is available and then plan their affairs accordingly.

One way to begin this education process to acquiring sufficient knowledge on international tax planning is to obtain a copy of Tax Havens of the World by Walter and Dorothy Diamond, published by Mathew Bender & Co., Inc., Telephone (800) 833-9844. Regular updates keep you abreast of developments and changes, and it is a highly regarded service used by professionals worldwide. This is a sizeable manual, extremely informative and well worth its price of several hundred dollars per year.

With this publication in hand, any investor will be able to sharpen their knowledge of international tax planning, U.S. tax obligations of U.S. citizens and actual strategies to avoid taxes. A large library should have a reference copy.

This publication is comprehensible for non-professionals. After some reading, you will rapidly adapt to the material and ideas presented. A personal study and investigation of tax matters will enlighten and prepare you well for working with your chosen professional tax planner. This is not necessary, but the increased awareness will allow you to contribute valuable suggestions and invite an exchange of ideas that otherwise might not be feasible. Ultimately, self-education may save you undue expense down the road or allow you to make decisions without further professional consultation.

For the record, here are some of the significant U.S. tax requirements you may encounter as you travel through the offshore world:

The Controlled Foreign Corporation (CFC) tax
Foreign Personal Holding Company (FPHC) tax
Passive Foreign Investment Company (PFIC) tax
Accumulated Earnings (AE) tax
Effectively Connected with U.S. tax

And of course, for each international transaction, the IRS has a form that must be submitted. Unfortunately, as important as the subject of taxes is, it is beyond the scope of this report. Consult a knowledgeable accountant who is well versed on these types of requirements and taxes.