By Ronald Stampleton, Contributing Reporter
RIO DE JANEIRO, BRAZIL – International firms with expertise in investment advice, such as Looking for Dylan and UK-based firm London & Capital, have expertise in the area of U.S. investment planning and tax compliance. Ever responsive to the changes in U.S. tax laws, these firms stand out in their ability to help U.S. expatriates navigate obstacles and opportunities in the areas of international investment and wealth planning.
With the recent passing of complex tax laws in the U.S., many of which are aimed at ensuring tax compliance of U.S. citizens residing and investing abroad, now is an important time for expatriates to reach out to investment professionals to ensure they are investing optimally within the ambit of the law.
The complexity of the new rules, among them the Foreign Account Tax Compliance Act (FATCA) and the Hiring Incentives to Restore Employment Act (HIRE Act), has U.S. citizens – globally – concerned about their investment position within the rapidly changing compliance landscape.
These issues have recently been pushed to the forefront by Facebook; not the recent IPO but, rather, the recent renunciation of U.S. citizenship by the Brazilian-born co-founder of Facebook Eduardo Saverin. The decision has drawn the ire of U.S. politicians and highlighted the U.S. tax consequences of citizens living abroad.
While renunciation remains one of the most extreme solutions to deal with the increasingly complicated consequences of U.S. Tax, high-profile cases like Saverin’s do draw attention to the issues prompting such a controversial decision.
Howard Borsden, founder of Looking for Dylan, an Anglo-Brazilian financial planning group, notes: “Changes in the U.S. reporting requirements has lead to a dramatic increase of U.S. expatriates consulting with their advisers. The fact is, U.S. expatriates need to work with investment professionals in order to ensure they are compliant with the changes in the law but also to make sure their investments are structured in a way that minimizes U.S. tax exposure.”
The U.S. is one of the only countries that taxes its citizens based on citizenship (as opposed to residency), all U.S. nationals are subject to U.S. taxing power no matter where they reside. Not only are U.S. citizens responsible for contributing to the coffers of Uncle Sam wherever they may reside, recent legislation (adopted in response to banking scandals of 2008) has added another layer of complexity for U.S. nationals residing or investing abroad.
FATCA, as incorporated into the HIRE Act of 2010, has been the source of much confusion and concern for U.S. citizens with investments abroad. The law increases the reporting requirements of U.S. citizens with foreign assets.
Born out of the tax evasion scandals in recent years, the extent of the impact of the legislation has yet to be defined, though it has certainly lead to increased concern of U.S. citizens investing abroad.
The HIRE Act also requires U.S. citizens make a full disclosure of their assets held at foreign financial institutions; non-compliance has harsh penalties.
The increased reporting requirements of the HIRE Act are only one of many issues that U.S. expatriates must take into consideration when assessing their investment strategy.
In accordance with FATCA, foreign banks must identify U.S. account holders and disclose information about certain transactions (balances, withdrawals). Failure to comply can result in a thirty percent withholding tax levied on income and proceeds derived from U.S. financial assets held by the foreign financial institutions.
“There are many different types of expatriate investors, and different solutions for each,” mentions Borsden. “HIRE may be one of the most recent areas of concern for U.S. expatriate investors but it is certainly not the only one.”
Borsden mentions that there are many ways for U.S. expatriates to structure their investments in a way that limits unnecessary exposure to U.S. tax. For example, expatriate investors may be subject to increased taxation on income earned through passive foreign investment companies (PFIC).
The U.S. PFIC rules, intended to prevent tax planning through foreign companies, may result in higher taxation only because the investor is not aware of the options available.
“PFIC can wreak havoc on the well-intentioned U.S. expatriate investor. Certain solutions, for example investing in a compliant U.S. portfolio through an offshore fund platform, can optimize investment results with a minimal amount of planning. This type of difference can be significant and it is why life changes should always be discussed with a qualified financial adviser.”
Financial advisers, such as Looking for Dylan, can offer solutions to cross-border taxation issues as well as tax planning for U.S. residents. The use of deferred variable annuities (DVA) is one solution to mitigate U.S. taxation.
DVAs are also commonly used by U.S. citizens resident in the U.S. as part of income and estate tax planning. “The primary market for DVA instruments is U.S. residents. DVA, whether in the U.S. or offshore can help minimize U.S. taxation.”
Looking for Dylan often works closely with UK-based firm London & Capital when assisting U.S. expatriates in investment planning. The firm manages investments for a broad profile of U.S. expatriate investors; assisting in pension planning, often through Self-Directed IRAs.
Borsden explains, “London and Capital is a UK based Global Wealth and Asset Manager, specializing in providing global multi strategy/multi asset class investment portfolios for high net worth individuals or private families, many of which are subject to cross-border tax and legal considerations, requiring specialist investment expertise.”
Looking for Dylan stands out as one of Brazil’s most highly skilled financial professionals. If you are interested in developing an investment strategy that optimizes the opportunities of international investment while minimizing the risk of being outside the scope of international compliance rules, contact Howard Borsden today at [email protected] or call +55 (24) 2249-5011.
* This is a paid Advertorial for Looking for Dylan.