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Re: money matters for overseas retirees
Old 07-25-2006, 03:21 PM   #21
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Re: money matters for overseas retirees

Thanks for the heads-up on that. I'll check it out. I'm a green card holder, but am investigating becoming a citizen. The only reason I've baulked about becoming a citizen was that you are then liable (as I've been told) for US taxes on everything you earn etc in other countries. I believe that continuing as a green card holder mitigates that - but these things change constantly too.

Do you know of a website or somewhere specific that contains information on the tax rules as they pertain to those moving offshore?
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Re: money matters for overseas retirees
Old 07-25-2006, 05:05 PM   #22
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Re: money matters for overseas retirees

Quote:
Originally Posted by Rosalita
Thanks for the heads-up on that. I'll check it out. I'm a green card holder, but am investigating becoming a citizen. The only reason I've baulked about becoming a citizen was that you are then liable (as I've been told) for US taxes on everything you earn etc in other countries. I believe that continuing as a green card holder mitigates that - but these things change constantly too.

Do you know of a website or somewhere specific that contains information on the tax rules as they pertain to those moving offshore?
There are definite tax consequences in becoming a US citizen, you will be taxed on your worldwide income, but there are tax treaties with most countries that will let you avoid double taxation. You end up paying tax at the higher of the US or county of residence rates, the tax returns get complicated with all the offsets and foreign tax allowances.

As a Greencard holder you are still liable for US taxation and have to file with the IRS however, its become easier to expatriate see below

http://www.irs.gov/businesses/small/...=97245,00.html

What I'd like to know is how ERs abroad have organised their finances in light of the US laws regarding taxation and investing particularly iof they have ERed in Europe.
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Re: money matters for overseas retirees
Old 07-25-2006, 06:21 PM   #23
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Re: money matters for overseas retirees

nun has given a pretty good overview to rosalita. I would just add:

1) If you are not planning to settle in the US permanently, I would recommend that you NOT take US citizenship. Right now, as a green card holder, you face the same worldwide tax burden that a citizen faces, but if you expatriate, a former citizen gets treated differently (more strictly) than a former green card holder by immigration, which could be an issue if you might ever want to visit the US again in the future.

2) As for the nasty tax consequences on foreign investments to which nun alluded, they apply to companies which derive their income "passively," called Passive Foreign Investment Companies (PFICs). These include mutual funds, ETFs and REITs (LPTs in Australia). Regular stocks and bonds are generally treated the same as stocks and bonds in the US. But be careful, because some regular companies actually have enough passive income to fall under the PFIC rules.

As a result of 2), as I mentioned, I hold all my mutual funds in the US, and hold all my investments in Japan in the forms of individual stocks and bonds. And I try to avoid things like stock-holding companies among my individual stocks, which I think might be construed as PFICs.

As for where to look for info, there is a Publication 54 from the IRS which purports to tell you what you need to know if you live abroad as a US taxpayer, but it is somewhat inadequate. In particular, no mention is made at all of the PFIC issue. For that, see the instructions to Form 8621.
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Re: money matters for overseas retirees
Old 07-25-2006, 06:39 PM   #24
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Re: money matters for overseas retirees

Quote:
Originally Posted by bpp
nun has given a pretty good overview to rosalita. I would just add:

1) If you are not planning to settle in the US permanently, I would recommend that you NOT take US citizenship. Right now, as a green card holder, you face the same worldwide tax burden that a citizen faces, but if you expatriate, a former citizen gets treated differently (more strictly) than a former green card holder by immigration, which could be an issue if you might ever want to visit the US again in the future.

2) As for the nasty tax consequences on foreign investments to which nun alluded, they apply to companies which derive their income "passively," called Passive Foreign Investment Companies (PFICs). These include mutual funds, ETFs and REITs (LPTs in Australia). Regular stocks and bonds are generally treated the same as stocks and bonds in the US. But be careful, because some regular companies actually have enough passive income to fall under the PFIC rules.

As a result of 2), as I mentioned, I hold all my mutual funds in the US, and hold all my investments in Japan in the forms of individual stocks and bonds. And I try to avoid things like stock-holding companies among my individual stocks, which I think might be construed as PFICs.

As for where to look for info, there is a Publication 54 from the IRS which purports to tell you what you need to know if you live abroad as a US taxpayer, but it is somewhat inadequate. In particular, no mention is made at all of the PFIC issue. For that, see the instructions to Form 8621.
Hi Bpp,
That's a good heads up re citizenship. Taking US citizenship has definitely complicated my tax situation if or when I move to the UK. Since my last post about this topic I hoped that there may have been some new ERs with experience of Europe, but I think you have the most practical experience on the board.

I like the idea of invetsing outside of the US with individual stocks, I just don't know how to make sure they are not PFICs and do you have to prove to the US that your foreign stocks are not PFICs. I'm particularly worried about living in the UK and having most of my investments in the US in dollars, hence, I was going to buy mostly Vanguard international funds and maybe some iShares UK tracker funds through a brokerage account. It seems like a round about thing to do ie earn money in UK, take that and invest it with Vanguard in the US, but in a fund that tracks the UK market. But other than buying UK shares it seems like a reasonable approach to insulate me form US $ fluctuations as my US citizenship makes it onerous to buy UK mutual funds.

Is it ok to have savings or money market accounts outside of the US?
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Re: money matters for overseas retirees
Old 07-25-2006, 07:39 PM   #25
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Re: money matters for overseas retirees

Quote:
Originally Posted by nun
I like the idea of investing outside of the US with individual stocks, I just don't know how to make sure they are not PFICs and do you have to prove to the US that your foreign stocks are not PFICs.
You do not have to prove on an ordinary IRS return that your foreign companies are not PFICs. I imagine the question would only come up in an audit. On a regular tax return, you just list their sales on Schedule D and dividends on Schedule B, same as any individual stock in the US. (Of course you have to keep track of the basis in US$, regardless of what currency was actually used to make the transactions, which is one extra complication.)

To avoid PFICs, I avoid stock-holding companies, and startups which may still be living on financing or gifts of stock from a parent company and are not yet making a living from regular operations and sales. You can also check to see if the investor relations department has issued a statement that they believe they are a PFIC in the eyes of the IRS. (I have only seen one company in Japan that has such a statement -- a real estate development company, by the way (Orix).) Beyond that, I would guess that if it doesn't leap out at you as being a likely PFIC, it won't to the IRS either. Only so much you can do, really.

Quote:
I'm particularly worried about living in the UK and having most of my investments in the US in dollars, hence, I was going to buy mostly Vanguard international funds and maybe some iShares UK tracker funds through a brokerage account. It seems like a round about thing to do ie earn money in UK, take that and invest it with Vanguard in the US, but in a fund that tracks the UK market. But other than buying UK shares it seems like a reasonable approach to insulate me form US $ fluctuations as my US citizenship makes it onerous to buy UK mutual funds.
That's a fine approach, with the caveat that your US-registered mutual fund will be paying non-resident withholding taxes on your UK dividends, and depending on whether you can get proper credit for them on your UK taxes, you may end up paying double taxes. This concern keeps me from from buying US mutual funds that hold Japanese companies, for example.

Quote:
Is it ok to have savings or money market accounts outside of the US?
Savings accounts are no problem. You just declare their interest on Schedule B. Money-market funds I am not entirely sure about. Technically, they are bond funds that happen to have a fixed share price, so I suppose an argument could be made that they are PFICs. However, in reality they behave like an ordinary savings account, so I think an argument could also be made to treat them as such. I only have one MMF, perforce, in my Japanese brokerage account (that is all they offer as their cash-holding vehicle). I report the dividends from it on Schedule B, but don't file an 8621 on it. Since the share price is fixed on it, there would never be a gain or loss to report on 8621 anyway; I seem to recall that if you take your proceeds in a foreign currency, and if you use the default reporting for PFICs (not mark-to-market or QEF), then you calculate the gain/loss in terms of that foreign currency, so exchange rate fluctuations won't mess you up here. (This may be just about the only place in the US tax code where you are supposed to calculate capital gain/loss relative to a foreign currency rather than relative to dollars.)

Bleah. Does the above make any sense?

Added: Of course if you have any kind of foreign financial account (bank, brokerage, whatever), you also need to file Form TD F 90-22.1 if the total over all foreign accounts exceeds $10,000.
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Re: money matters for overseas retirees
Old 07-25-2006, 09:48 PM   #26
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Re: money matters for overseas retirees

Quote:

That's a fine approach, with the caveat that your US-registered mutual fund will be paying non-resident withholding taxes on your UK dividends, and depending on whether you can get proper credit for them on your UK taxes, you may end up paying double taxes. This concern keeps me from from buying US mutual funds that hold Japanese companies, for example.
I thought I'd just claim the foreign tax paid by the International funds as a deduction or a foreign tax credit on my US tax form.

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Re: money matters for overseas retirees
Old 07-25-2006, 09:56 PM   #27
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Re: money matters for overseas retirees

Quote:
Originally Posted by nun
I thought I'd just claim the foreign tax paid by the International funds as a deduction or a foreign tax credit on my US tax form.
I'm thinking about your UK taxes, once you are living in the UK.
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Re: money matters for overseas retirees
Old 07-25-2006, 11:11 PM   #28
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Re: money matters for overseas retirees

I wrote:

Quote:
Originally Posted by bpp
I'm thinking about your UK taxes, once you are living in the UK.
Just to clarify:

Let's suppose you are living back in the UK, and taxable on your worldwide income. (If this assumption is untrue, then never mind.) You have some UK stocks held within a US-registered MF/ETF. The MF/ETF will pay 15% (to pluck a number from the air) of dividends to the UK before distributing the dividends to your US account. The IRS will want, let's say, 15% (again plucked from the air) of those dividends, but you get the Foreign Tax Credit for the UK taxes already paid, so you end up owing the IRS nothing. Now it is time to file your UK income taxes, and you have to report that same dividend income again. Let's suppose they want 15% of your dividends. Is there a mechanism to tell them, "hey, my mutual fund already paid 15% on those dividends to the UK, so I don't owe you anything more"? In other words, you would need not a Foreign Tax Credit with the UK, but a Domestic Tax Credit...

Anyway, you'd have to talk to the UK Inland Revenue to find out what happens here. I don't know, but just thought it might be worth flagging as a possible concern.
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Re: money matters for overseas retirees
Old 07-26-2006, 07:09 AM   #29
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Re: money matters for overseas retirees

Quote:
Originally Posted by bpp
I wrote:

Just to clarify:

Let's suppose you are living back in the UK, and taxable on your worldwide income. (If this assumption is untrue, then never mind.) You have some UK stocks held within a US-registered MF/ETF. The MF/ETF will pay 15% (to pluck a number from the air) of dividends to the UK before distributing the dividends to your US account. The IRS will want, let's say, 15% (again plucked from the air) of those dividends, but you get the Foreign Tax Credit for the UK taxes already paid, so you end up owing the IRS nothing. Now it is time to file your UK income taxes, and you have to report that same dividend income again. Let's suppose they want 15% of your dividends. Is there a mechanism to tell them, "hey, my mutual fund already paid 15% on those dividends to the UK, so I don't owe you anything more"? In other words, you would need not a Foreign Tax Credit with the UK, but a Domestic Tax Credit...

Anyway, you'd have to talk to the UK Inland Revenue to find out what happens here. I don't know, but just thought it might be worth flagging as a possible concern.
This is why being a dual citizen gets so damn complicated, the way I'd be taxed would depend on my residency status in the UK. For the US I get taxed on my worldwide income just because I'm a US citizen, it doesn't matter where I live or my residency status. However as a UK citizen my residency status is cructial to how I'm taxed. Right now I don't reside in the UK and have no investments there so I have no UK tax liability. If I was to move there and become ordinarily resident I would NOT be taxed on my US finances unless they were remitted back to the UK, however, as my domicile would still be the US this might open me up to having to pay US state tax. If I become domiciled in the UK then I'm liable for tax on my worldwide income, but I'd get foreign tax credits for US taxes paid. In this stitation I'd end up paying tax at whichever is the greater tax rate in the US or UK.
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Re: money matters for overseas retirees
Old 07-26-2006, 07:32 AM   #30
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Re: money matters for overseas retirees

Quote:
I'd end up paying tax at whichever is the greater tax rate in the US or UK
nun, that's the way I understand it, too.
In a lower income bracket there's no beating the current US investment tax rates on cap gains and qualified dividends, but that aside, everything right now is in the US for simplicity's sake, except for a local bank account.

The tax liabilities w/r/t investments in Europe seem more onerous and complicated, though they are pointing towards some sort of "harmonization". I'll be investigating this soon just for my own information.

As for brokerage accounts, I can't recommend Charles Schwab highly enough.. in fact, I just came off of writing their customer service a letter of praise since I noticed they have recently waived wire transfer fees (well, 3 free ones/quarter which for me is the same thing) on accounts $500k and up. They also have an extremely low (under 1% over interbank rates) spread on forex.. and yes, I did check up on my latest transfer to see whether the fee waiver had translated to a higher spread but it appears not.

7/6/06:
€7000 =>$8937 interbank according to oanda.com on that date
=>$9026 interbank + 1%
=>$8977 out of my Schwab acc't.
(of course this does not take into account possible inter-day fluctuations)

We already own our house here outright so that is something of a hedge, also I have a high %age of foreign stocks and bond funds (tho' denominated in $).

bpp, do you plan to live in Japan indefinitely?
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Re: money matters for overseas retirees
Old 07-26-2006, 08:43 AM   #31
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Re: money matters for overseas retirees

Just found this synthesis, on the current Italian taxation of investments:

Quote:
Sono tassati al 12,50% interessi, dividendi, plusvalenze di Borsa e rendimenti di gestioni e fondi comuni. L´aliquota del 27% è applicata sugli interessi dei depositi e conti correnti bancari e postali, inclusi i certificati di deposito, oltre che in alcune ipotesi particolari (per esempio, obbligazioni private con scadenza inferiore a 18 mesi). Le plusvalenze realizzate da vendite di azioni che rappresentano una partecipazione "qualificata" (cioè superiore al 2% dei diritti di voto o al 5% della partecipazione al capitale se si tratta di titoli quotati in Borsa, o superiori al 20% dei diritti di voto o al 25% della partecipazione al capitale se si tratta di titoli non quotati) sono, invece, soggette a tassazione ordinaria per il 40% del loro ammontare.

Per quanto riguarda, in particolare, i fondi d´investimento, la tassazione del 12,50% si applica sul rendimento complessivo (principalmente dividendi e plusvalenze) ottenuto dalla gestione. Al momento del riscatto il risparmiatore non deve pagare nulla, perché le imposte sono prelevate direttamente dal patrimonio del fondo. Il valore giornaliero delle quote dei fondi italiani già è al netto dell´imposta. Nel caso di fondi esteri, invece, il guadagno è tassato al momento del disinvestimento (in misura del 12,5% a titolo definitivo in caso di fondi Ue armonizzati).
Interest, dividends, capital gains and mutual fund income is taxed at 12.5%. A 27% rate is applied to bank account interest, including CDs (except for in particular circumstances such as private obligations with terms of less than 18 months). Capital gains realized by the sale of shares that represent a 'qualified' participation (over 2% of voting rights or 5% of capital participation for exhange-listed* shares, or over 20% voting rights or 25% capital participation for shares not quoted) are, instead, subject to ordinary taxation of 40% of their total value.

As far as mutual funds are concerned, the 12.5% taxation is applied to the total income (dividends plus capital gains) obtained by the fund management. At the moment of redemption, the investor owes nothing, because the taxes are taken directly out of the fund's patrimony. The daily value of quoted Italian funds is already after-tax. In the case of foreign funds, the earnings are taxed at the moment of sale.. [and the last sentence I have no idea..].


Even Granny with €5000 in the bank and a €600/month pension pays 27% in taxes on her bank interest or CD. In fact, the bank helpfully deducts the sum for you, so you don't even need to write a check to the Agenzie delle Entrate. There is a level of income under which you don't pay taxes, but it only deals with earned income, not total income, apparently.

I think the EU is going to have gross problems with any kind of harmonization (barring the elimination of the member states' taxation authority) because their underlying business taxation policies, and perhaps more important, their business subsidy policies and histories, are so wildly different.

---
nun, I just found this site:
http://www.taxationweb.co.uk/guides/...d_domicile.php
as usual, the residency 'distinctions' make my eyes glaze over.
Best of luck!!
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Re: money matters for overseas retirees
Old 07-26-2006, 09:14 AM   #32
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Re: money matters for overseas retirees

Quote:
Originally Posted by ladelfina
bpp, do you plan to live in Japan indefinitely?
No particular plans or desire to leave at this point. We have built our dream house, and are likely to be here until retirement at least (which probably won't be early by the standards of this board). Then again, who knows what the future will bring. Had you told me 15-20 years ago that I would be living here at all, I would have been very surprised. I don't think it was even on my list of places to visit some day at that point.

It sounds like mutual funds are treated much better than bank accounts in Italy. Do you think this is intentional, to encourage investment?
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Re: money matters for overseas retirees
Old 07-26-2006, 09:46 AM   #33
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Re: money matters for overseas retirees

bpp. I just asked because at some point you may have to make your money moves in the opposite direction, away from Japan..

Intentional? Hard to say. The feeling here is very much "tax the rich", which is understandable as far as it goes. On the one hand, the high tax on bank interest seems an anomaly, especially for small to normal balances. On the other, really, very very few people in Italy have 'investment' accounts or pay any attention to the matter whatsoever, so it is unlikely to be an incentive. I know it is not advertised or promoted as such; I think the "low" rates were really under the radar. Coupled with the fact that the taxes are unseen (as is the VAT) and prices (and thus performance?) all around are generally quoted net of tax.

The barriers to small business ownership and the heavy taxation of entrepreneurial activity leads one to believe that promoting Italian businesses is really the farthest thing from anyone's mind, unless it is in the form of massive subsidies or rigged contracts to large, politically-well-connected firms.

The recently-elected center-left government has promised to equaiize all these investment taxes at 20%, including on government bond interest. And they got voted in by a hair's breadth, so...* a bit better for the small saver, a hit for everyone else and strangely, with their big deficit, a disincentive to buy Italian gov't bonds that were taxed at the 12.5% rate. No one ever said Italy was a rational place.

---
Just read a stat that 5% of families in Italy own shares of stocks, 5% own shares of mutual funds or insurance/stock/annuity products and 20% report owning goverment or other bonds. These percentages overlap one assumes.

Compare that to probably around 60% or so that own stocks or funds in the US.

Conversely, the percentage of Italians' net worth that is in RE is 68% (2005) up from something around 60% pre-Parmalat/Cirio (the Italian Enron/Worldcom).

Compare to 32% US net worth in RE in 2000 according to the census bureau.
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Re: money matters for overseas retirees
Old 07-26-2006, 01:36 PM   #34
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Re: money matters for overseas retirees

I think the levcel of invetsment sophistication in the UK, like in Italy, is less than in the US. Most people "invest" in savings accounts or a limited selection of mutual fund type investments offered by banks and building societies. This might not be a bad thing, sometimes I think there is too much choice and specailization available from firms like Vanguard and Fidelity. People in the UK were frightened off stock investmenst when so many pension funds went bankrupt at the the end of the 90s.

I'm settling in on the following strategy for US citizens abroad

1) Invest in US based funds, open an account with Vanguard, Fidelity etc before you leave the US.
2) Avoid foreign investments as there can be dangerous tax consequences
3) Keep a couple of years expenses in a local saving account, declare this to the IRS if its over $10k.
4) Get advice from an accountant experienced in US expatriate tax issues before leave the country.

If you are going to be away for a long time, 5 years or more,

5) buy local real estate.
6) Invest in US based mutual funds that hold stock in companys where you are living. This will insulate your investments from currency fluctuations.
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Re: money matters for overseas retirees
Old 07-26-2006, 05:45 PM   #35
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Re: money matters for overseas retirees

BPP - where did you learn so much about the expat taxation laws, do you work in that area? Are you aware of any specific authorities that I could approach/scan websites to pick up some basic information before seeking out an international tax expert?

I also had a question regarding holding mutual funds that invest only in US companies - why would that complicate matters further with respect to taxation? Isn't the tax liability based only upon the payout of the fund, and not what is happening with the individual holdings of the fund? Or does this revert back to the payouts that the fund makes?

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Re: money matters for overseas retirees
Old 07-26-2006, 07:24 PM   #36
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Re: money matters for overseas retirees

Hi ladelfina,
Quote:
Originally Posted by ladelfina
bpp. I just asked because at some point you may have to make your money moves in the opposite direction, away from Japan..
True, and I have modified my asset allocation as my view of the future has changed, too. Once we bought a house, the probability that we stay here forever went up, and so I bumped up the target allocation to Japan to reflect that. If it starts looking like we may move somewhere else some day, I will modify our allocations (and asset locations) accordingly. Life is like jello, can't nail it down, yes?

Out of curiosity, do you think you will be staying in Italy permanently?

Hi nun,
Quote:
Originally Posted by nun
[...]
If you are going to be away for a long time, 5 years or more,
[...]
6) Invest in US based mutual funds that hold stock in companys where you are living. This will insulate your investments from currency fluctuations.
Good basic principles. I avoid 6) myself, preferring to buy individual stocks in the country where I live for the tax reasons I mentioned (and also to keep more money close to home, in case, for example, the US goes weird on me -- even if that may be a low-probability event), but 6) is certainly a lower-maintenance approach.

Hi Rosalita,
Quote:
Originally Posted by Rosalita
BPP - where did you learn so much about the expat taxation laws, do you work in that area? Are you aware of any specific authorities that I could approach/scan websites to pick up some basic information before seeking out an international tax expert?
I am not an expert, just a taxpayer who has had to study up on this stuff to fill out his own tax returns. I have mostly learned what little I know from slogging through the IRS documentation and tax laws, and occasionally asking the IRS questions directly. I frankly don't know who I would trust as an international tax expert -- I have seen glaring errors in the advice proffered by self-proclaimed experts, and even the IRS staff are not well-trained as far as I can tell. They seem to be still at the level of trying to get taxpayers abroad to realize that they have to file returns at all, and haven't really addressed a lot of the more practical issues of how to actually fill out the returns in their material or training yet.

It goes without saying not to trust what I say, either.

Since you know that you will be heading to Australia, I would suggest you look for a tax advisor who is specifically familiar with both US and Australian tax law. An American tax attorney who is living and practicing in Australia would probably be ideal. I think that would be much more useful than a generic international tax attorney, since there are a lot of situation-specific issues.

For general US tax questions, www.fairmark.com is probably a good place to start.

Quote:
I also had a question regarding holding mutual funds that invest only in US companies - why would that complicate matters further with respect to taxation? Isn't the tax liability based only upon the payout of the fund, and not what is happening with the individual holdings of the fund? Or does this revert back to the payouts that the fund makes?
Maybe what I said was confusing. US funds that invest in US companies are fine. My concern (for my case) is with US funds that invest in Japanese companies, when I live in Japan and have to pay tax on my worldwide income to Japan. Reason being, my US fund will pay tax to Japan (based on what's happening with the individual holdings in the fund), and then Japan will ask me for tax again on top of that (based on the payouts of the fund to me), and I don't think I can get credit for the taxes already paid by my US fund to Japan, so I would end up paying double taxes to Japan on the investment.

In your case, that would be US funds that hold Australian companies, if you would have to pay tax on worldwide income to Australia after you move there. In nun's case, it sounds like he may have ways to avoid worldwide-taxation status in the UK, so it may not be an issue for him.

My general principle is to invest in US companies through US accounts, and Japanese companies through Japanese accounts. I think this minimizes tax complications in my case. (As for other countries, I buy mutual funds in the US, and individual stocks and bonds in Japan, for cost and tax reasons.) You may or may not find that the same principle works for you, depending on the details of Australian tax law and your status once you move there.

All this thinking about taxes is giving me a headache... Time for coffee!
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Re: money matters for overseas retirees
Old 07-26-2006, 09:18 PM   #37
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Re: money matters for overseas retirees

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Reason being, my US fund will pay tax to Japan (based on what's happening with the individual holdings in the fund), and then Japan will ask me for tax again on top of that (based on the payouts of the fund to me), and I don't think I can get credit for the taxes already paid by my US fund to Japan, so I would end up paying double taxes to Japan on the investment.
Bpp, You can claim foreign tax paid by US mutual funds as a credit or an itemized deduction on your US taxes, so wouldn't that eliminate the dual taxation senario you describe. What I've found is that if there's a tax treaty in place
its pretty difficult to get taxed twice as that's exactly what the treaty is there to prevent.

ladelfina, if you are a Greencard holder or a dual citizen and have paid into US SS look into whether the US has a reciprocal SS agreement with your country of origin. If it does you might be able to use US SS payments to top up SS payments in your home country or you might even be eligible for payments from both countries. FYI for people living in the UK who receive US SS payments they are only taxable in the UK...that's an weird wrinkle, it might be true for Australia too.

To find a suitable tax advisors I'd look at the australian/US expat websites. Be careful of anyone who claims you can invest offshore and pay no tax, what you want is someone who makes sure you pay the correct amount of tax.
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Re: money matters for overseas retirees
Old 07-26-2006, 10:52 PM   #38
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Re: money matters for overseas retirees

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Originally Posted by nun
Bpp, You can claim foreign tax paid by US mutual funds as a credit or an itemized deduction on your US taxes, so wouldn't that eliminate the dual taxation senario you describe. What I've found is that if there's a tax treaty in place its pretty difficult to get taxed twice as that's exactly what the treaty is there to prevent.
I don't see how this would help... The issue is not my US taxes, it is my Japanese taxes. I am talking about paying Japan twice for the same investment, not paying the US and Japan each once for it. (I agree that in the latter case I should be able to take a credit against one or the other's taxes.) Does what I'm saying make sense?

Quote:
ladelfina, if you are a Greencard holder or a dual citizen and have paid into US SS look into whether the US has a reciprocal SS agreement with your country of origin. If it does you might be able to use US SS payments to top up SS payments in your home country or you might even be eligible for payments from both countries.
I think the way that typically works is that the time spent making payments to either country would count towards both countries' minimum eligibility periods, but the actual payments themselves are only counted towards the SS of the country where you sent the payments. So you can get some prorated, reduced SS from both countries based on what you paid into each system, but can't choose to take full SS from just one country based in part on payments made to the other one. (A somewhat fine distinction, perhaps.)

Added: at least, that's the way the US-Japan treaty works. It may be different elsewhere.

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Re: money matters for overseas retirees
Old 07-26-2006, 11:27 PM   #39
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Re: money matters for overseas retirees

Bpp,
Wow this is getting way too archane. All I can talk about is the UK/US situation which is this. If a US citizen is domiciled in the UK then their worldwide income is taxable by both the UK and the US. However, the UK/US tax treaty allows you to take a credit for foreign tax paid. So if the capital gains tax is 15% in the US and 20% in the UK I'd pay 15% on my US capital gains to the IRS and 5% to HMRC. I'd pay 20% on UK investments (stocks NOT UK mutual funds as we've established they are a bad think for a US citizen to own) and as that rate is greater than the US 15% I'd have no tax liability in the US.

I think this is covered in Article 5 (Avoidance of Double Taxation) of the US/Japan Tax treaty, although don't quote me on any of this as it's obviuosly very complicated, which is why I'm going to pay someone to do my taxes when I go to the UK.

Redarding the SS thing (for the UK/US anyway) if you don't have enough payments in a country to qualify for a benefit then payments to the other country are used to help you to qualify, but as you say you get a reduced benefit reflecting the actual level of your payments to the country.
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Re: money matters for overseas retirees
Old 07-26-2006, 11:50 PM   #40
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Re: money matters for overseas retirees

Hi nun,

I agree with what you say in your post, especially the arcane part.

I think we are talking past each other a bit, but unless someone else can come in and disentangle this, I think I can feel my brain coming to a halt.

Aren't taxes fun?
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