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American Expat Tax Issues: Thai Corporations & Deemed Repatriation

Transcript of the above video:

In this video today we are going to go ahead and discuss, as the title suggests, "matters pertaining to "deemed repatriation and matters pertaining to Taxes" and how I see possible scenarios moving forward in the future as a result of the recently promulgated so-called “Trump tax" as I like to call it; I believe it is called the "Tax Cuts and Job Act." specifically.  I believe its actual bill number is HR – 1, if you want to go and look it up in the government printing office, it is HR-1.

So some things I find interesting, and there is another video on this channel where in part 2 of a prior overview of “Trump tax” we discussed issues pertaining to so-called deemed repatriation.  As previously noted in that video, I think moving forward especially for multinational corporations, the name of the game is going to be basically having an incorporated entity own the shares directly of a foreign offshore entity, and then basically, in many ways, pulling cash back into the United States in the form of dividends from one company directly over to the on shore incorporated entity. It is probably going to become away for many corporations, especially multinationals with hubs or large operations in the States, to more effectively pull capital back into the United States compared with the past. So in the past it may not have been particularly conducive to maintaining the bottom line to go ahead and do that, but I think moving forward, at least under certain circumstances you are going to see situations where it is a good idea to do that that way. However, you have got issues with respect to those, where I see this being a real problem is, small companies owned by individual Americans outside the United States, I think you were going to see problems with respect to issues especially pertaining to certain one-time tax, one-time tax issues so things like, what we are talking about here is controlled foreign corporations, so we are talking about entities abroad where an American citizen has, a good rule of thumb is 10% or more in terms of stock shares, interest, stake if you will in the foreign corporation. Now this foreign corporation can be in the form of partnerships, flow through entities, sort of closely-held entities analogous to so-called S Corporations in the United States etc. The other thing with respect to this is where you have got offshore partnerships where one of the partners is an American corporation I should say. 

The thing to take away with respect to these one-time tax rates is, I read it, and let me be clear this video should not be viewed as definitive on this topic; this set of legislation is relatively new. I have only just finished reading at least what I consider to be the relevant parts, especially to dealing with matters pertaining to Americans abroad. I only got through reading the relevant parts of this stuff in about the past, I don't know about the last 10 days or so and I've been trying to keep up with all the commentary that I have found out there from various professionals whose opinions I value, and I have sort of taken all of that and tried to procreate  a distillate it for this video but that being said, this should not be viewed as being definitive. We still don't have a regulatory framework specific to this legislation. We have yet to see any comments directly, pertaining to how IRS is going to interpret certain aspects of this legislation; the forms with respect to these matters have yet to even be promulgated. So again this stuff is very much up in the air. I am simply trying to provide a general overview and again it should not be viewed as definitive on this topic. But it looks like there is going to be a one-time tax rate of 15.5% for cash or equivalents to cash, like liquid instruments or assets if you will and 8% for sort of so-called earnings and profits or sort of other assets, for lack of a better term, illiquid assets, that are on the books of a given company.  The way I am trying to look at this, at least to me it seems like retained earnings seems to be the relevant sort of locus of where to be looking, again I'm looking at this from the standpoint of small businesses abroad, you know where you have got an offshore company that basically says, you know it is going to maintain some retained earnings for reasons. For example American citizens may not want to take all of the profit margin out of a given entity that they own almost in whole because for example they may want to try to mitigate their tax burden in a given calendar year and roll it over to the next year or something like that. Retained earnings can be problematic and it looks to me like you are looking at the possibility of a 15 ½ percent tax rate on companies that have a retained earnings at least going back to 1986; again this is not definitive, I am just sort of giving my opinion based on what I have read. So far as deemed repatriation specifically and repatriation of earnings abroad, it looks like at least for larger entities, you are going to see sort of an optimal solution in a lot of cases I think. It is going to be basically just having an onshore, US onshore incorporated entity basically pull money through dividends from owning shares directly in an offshore controlled foreign corporation and that is probably going to be the optimal way to deal with it. One problem is this one-time tax of 15 ½ percent looking backwards on so-called retained earnings as I see it could be a problem for Americans citizens doing business abroad with entities located abroad.