As a result of the Tax Cuts and Jobs Act of 2017, US Tax residents owning more than 10% of a Controlled Foreign Corporation (CFC) must pay a 15.5% repatriation tax with 8 years. This tax applies to profits accumulated from business overseas.
The law was designed to recoup the vast sums held overseas by the likes of tech giants Apple and Google but is ensnaring many others, including small business owners.
A US Tax resident includes those who have been present in the country for 31 days during the current year and 183 days during the most recent three years (subject to a formula). US citizens and green card holders are also considered tax residents. Therefore, whether you’re living in the US or not , any US tax resident will be on the hook for this tax.
While many US corporations have the ability to claim a deduction on any dividends distributed to cover the bill, that is something CFCs are unable to take advantage of.
Further information regarding the effects this new tax will have on expatriates in the US can be found in this article, found in Financial Times (subscription required)
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