U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes • Hacker News Board

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#21

Post by philiphodgen » Tue, Apr 05, 2016, 2:41 PM UTC

For those of you starting companies that may one day be worth a lot of money, there is a key insight to draw from this: it is better (from a tax point of view) to be a foreign company than a US company.

This is especially true if you expect most of your future customers to be outside the US.

In the long run this gives an operating advantage to foreign corporations -- again for tax efficiency only.

In the intermediate time frame all governments change their laws all the time, and there are going to be changes in tax rules coming that will make cross-border SaaS sales painful for tax load and administrative burdens, for instance.

Your choice is when to flip your business from US to foreign status. You can see the government attacking late-stage inversions because that is where the revenue and political brownie points are.

This tells you that early-stage migrations are still possible and may be cost-effective for you. At some level, for small companies, practical considerations can be used to offset unfavorable tax rules. (Translation - amounts are small enough to not matter, or be swamped by normal expenses so that they don't matter).

The US tax system is King Canute.

Source: I am an international tax lawyer in my real life.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#22

Post by Shivetya » Tue, Apr 05, 2016, 2:42 PM UTC

benjaminl wrote: post #5

This is happening because unlike almost every other developed nation the US has a worldwide tax system. Almost every other nation has a territorial tax system. The rest of the world with their territorial system taxes income earned within that country, the US rather taxes income worldwide, regardless of where it is earned. For example, if a British company earns income in Germany, its pays German taxes on its German…

and this will merely accelerate the moves off shore as the US tax system and the petulant attitude of US politicians are both out of control. Heck, they seem to taking lessons of how to screw up straight out of Atlas Shrugged.

The real fix is tax reform, not going full on ballistic because companies and individuals are fleeing the taxation tyranny. The IRS long moved from taxation to a political weapon.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#23

Post by sremani » Tue, Apr 05, 2016, 2:42 PM UTC

zschallz wrote: post #19

sschueller wrote: post #13

Earlier quoted context omitted.

And the US double taxes their citizens living abroad the same way. As an American making the same money as your non-american co-worker you are left with a lot less just for having a US passport. It is even possible you have never set foot in the US yet are required to pay uncle sam's taxes. Wanna get rid of your US passport? Not before you pay 10 years projected taxes and pay an abhorrent fee. You will also be listed…

There's a large income exclusion that means unless you earn a really kick ass salary, you're unlikely to be double taxed.

tax is one part, but paperwork and penalties are the other scary part. I have only heard of it, how minute mistakes can end up with 50K fines etc. Probably some one who has gone through the filing taxes from overseas can give better insight.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#24

Post by kspaans » Tue, Apr 05, 2016, 2:43 PM UTC

codegeek wrote: post #20

sschueller wrote: post #13

Earlier quoted context omitted.

And the US double taxes their citizens living abroad the same way. As an American making the same money as your non-american co-worker you are left with a lot less just for having a US passport. It is even possible you have never set foot in the US yet are required to pay uncle sam's taxes. Wanna get rid of your US passport? Not before you pay 10 years projected taxes and pay an abhorrent fee. You will also be listed…

I agree that double taxation is crazy BUT lets add the fact that US will tax you ONLY if your worldwide income is over a certain threshold (believe it is $90,000 currently). Not that I am defending this but there is difference between saying that you are double taxed vs you are double taxed only for a certain portion of income

See my sibling reply, it's _not_ double-taxation. If a US citizen works in a foreign country and happens to pay higher income taxes than they would in the US (e.g. in Canada), the US won't charge them any extra.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#25

Post by raverbashing » Tue, Apr 05, 2016, 2:45 PM UTC

benjaminl wrote: post #5

This is happening because unlike almost every other developed nation the US has a worldwide tax system. Almost every other nation has a territorial tax system. The rest of the world with their territorial system taxes income earned within that country, the US rather taxes income worldwide, regardless of where it is earned. For example, if a British company earns income in Germany, its pays German taxes on its German…

Did you read the article?

This has nothing to do with personal income tax, but rather the acquisition of other companies to move their headquarters outside of the US

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#26

Post by colechristensen » Tue, Apr 05, 2016, 2:47 PM UTC

sschueller wrote: post #13

benjaminl wrote: post #5

This is happening because unlike almost every other developed nation the US has a worldwide tax system. Almost every other nation has a territorial tax system. The rest of the world with their territorial system taxes income earned within that country, the US rather taxes income worldwide, regardless of where it is earned. For example, if a British company earns income in Germany, its pays German taxes on its German…

And the US double taxes their citizens living abroad the same way. As an American making the same money as your non-american co-worker you are left with a lot less just for having a US passport. It is even possible you have never set foot in the US yet are required to pay uncle sam's taxes. Wanna get rid of your US passport? Not before you pay 10 years projected taxes and pay an abhorrent fee. You will also be listed…

The fist $100,000 income isn't taxed this way[1].

And it's not abhorrent. If you earned enough money to think it's advantageous to lose one of the most valuable passports in the world, you probably earned that money in large parts due to the support of the people and infrastructure of the United States. You don't get to drop your duties once you win big.

[1] $97,600 for 2013, $99,200 for 2014 and $100,800 for 2015

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#27

Post by x5n1 » Tue, Apr 05, 2016, 2:53 PM UTC

colechristensen wrote: post #26

sschueller wrote: post #13

Earlier quoted context omitted.

And the US double taxes their citizens living abroad the same way. As an American making the same money as your non-american co-worker you are left with a lot less just for having a US passport. It is even possible you have never set foot in the US yet are required to pay uncle sam's taxes. Wanna get rid of your US passport? Not before you pay 10 years projected taxes and pay an abhorrent fee. You will also be listed…

The fist $100,000 income isn't taxed this way[1]. And it's not abhorrent. If you earned enough money to think it's advantageous to lose one of the most valuable passports in the world, you probably earned that money in large parts due to the support of the people and infrastructure of the United States. You don't get to drop your duties once you win big. [1] $97,600 for 2013, $99,200 for 2014 and $100,800 for 2015

Empire costs money to build. Your money.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#28

Post by lowpro » Tue, Apr 05, 2016, 2:59 PM UTC

colechristensen wrote: post #26

sschueller wrote: post #13

Earlier quoted context omitted.

And the US double taxes their citizens living abroad the same way. As an American making the same money as your non-american co-worker you are left with a lot less just for having a US passport. It is even possible you have never set foot in the US yet are required to pay uncle sam's taxes. Wanna get rid of your US passport? Not before you pay 10 years projected taxes and pay an abhorrent fee. You will also be listed…

The fist $100,000 income isn't taxed this way[1]. And it's not abhorrent. If you earned enough money to think it's advantageous to lose one of the most valuable passports in the world, you probably earned that money in large parts due to the support of the people and infrastructure of the United States. You don't get to drop your duties once you win big. [1] $97,600 for 2013, $99,200 for 2014 and $100,800 for 2015

American Imperialism at its finest. "Since we're the best country in the world, you couldn't have possibly become rich without us, and therefore you must pay to leave us!"

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#29

Post by concernedctzn » Tue, Apr 05, 2016, 3:00 PM UTC

philiphodgen wrote: post #21

For those of you starting companies that may one day be worth a lot of money, there is a key insight to draw from this: it is better (from a tax point of view) to be a foreign company than a US company. This is especially true if you expect most of your future customers to be outside the US. In the long run this gives an operating advantage to foreign corporations -- again for tax efficiency only. In the intermediate…

> The US tax system is King Canute.

Interesting, I had never heard this phrase before. Are you referring to this? https://en.wikipedia.org/wiki/King_Canute_and_the_waves

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#30

Post by wavefunction » Tue, Apr 05, 2016, 3:01 PM UTC

colechristensen wrote: post #26

sschueller wrote: post #13

Earlier quoted context omitted.

And the US double taxes their citizens living abroad the same way. As an American making the same money as your non-american co-worker you are left with a lot less just for having a US passport. It is even possible you have never set foot in the US yet are required to pay uncle sam's taxes. Wanna get rid of your US passport? Not before you pay 10 years projected taxes and pay an abhorrent fee. You will also be listed…

The fist $100,000 income isn't taxed this way[1]. And it's not abhorrent. If you earned enough money to think it's advantageous to lose one of the most valuable passports in the world, you probably earned that money in large parts due to the support of the people and infrastructure of the United States. You don't get to drop your duties once you win big. [1] $97,600 for 2013, $99,200 for 2014 and $100,800 for 2015

@lowpro

Imperialism doesn't work that way. Don't the door hit you on the way out though.