What Your Really Need to Know about How Trump’s New Tax Law Affects Expats

Repatriation of profits, back to the U.S.

You are an expat and have read often vague reports about the effects the new tax code President Trump signed into law in December.

What do you really need to know?

The short answer is, the tax law changes largely go into effect this year, meaning that they’ll affect your income and expenses used to file your 2018 tax return (due in 2019). However, U.S. citizens and Green Card holders living abroad may be on the hook for taxes on profits on businesses they own overseas. While provisions in the law were ostensibly created to repatriate tax money from overseas operations of tech giants, such as Google and Apple, Americans and Green Card holders abroad may be caught in the net as well.

“Expats holding a controlling share of non-U.S. corporate entities are understandably concerned, as they may face unexpected tax liabilities on their long-term retained earnings held through offshore companies,” says Eric la Cara, Managing Partner at Capital Tax Ltd. (HK).

Under the Tax Cuts and Jobs Act of 2017, a 15.5 percent repatriation tax, or “Transition Tax” is due on profits of certain overseas companies owned by U.S. persons. This tax provision applies to any U.S citizen or Green Card holder who holds an interest in a controlled foreign corporation (CFC). The tax payments can be paid over a period of eight years through instalments.

So if you don’t hold a stake in a CFC, you have nothing to worry about. If you do, then you have a few years to pay what you owe, beginning, of course, with the 2018 tax year.

For more information, contact our team of U.S. expat tax experts to arrange a free initial consultation.