It really does but, by way of preamble, we would emphasise that we do not give advice on US tax, but what we can do in this Focus is give you a heads-up and say – if you think you may be subject in any way to the US tax provisions then take, or re-take, advice as soon as possible.
There is a lot of confusion as to who falls within the United States tax net. Broadly, the United States imposes its Income Tax regulations on ‘US Persons’ based on the person’s worldwide income. It does not matter where you live – if you are a US Person, you are subject to US Tax.
And this Focus also gives notice that if you are a US Person and thereby subject to US tax regulations, it is vital that you advise us so that we may meet any reporting requirements that may become relevant.
So who or what is a US Person?
All ‘US citizens’. In very broad terms, an individual is a citizen if that individual was born in the United States or if the individual has been naturalized as a US citizen. You can also be a US citizen even if born outside the United States if one or both of your parents are US citizens. If you are born a US citizen you are a citizen. Having your birth registered or obtaining a US passport is not a prerequisite – you are a citizen and will remain a US citizen and subject to US tax unless you renounce your citizenship.
All ‘Tax residents’. You can become a tax resident of the United States under two rules: a) The ‘substantial presence test’ (see below) – this is a day count test and based on the number of days you are in the US over a three year period, and b) The ‘green card’ test – a person who has obtained a ‘green card’ and has been granted the right to lawful permanent residence in the United States.
Brief Summary of US Persons
* Born in the United States
* Born outside the United States of a US parent
* Naturalized citizens
* Green Card Holders
* Tax residents (see Substantial Presence Test on next page)
Substantial Presence Test
You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:
* 31 days during the current year, and
* 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting all the days you were present in the current year, and 1/3 of the days you were present in the first year before the current year, and 1/6 of the days you were present in the second year before the current year.
Complex or what! And they are just a few bullet points. But don’t shoot yourself in the foot. If in doubt, take advice.
And please remember, it is important that you advise us if you are a ‘US Person’.
Barry Fleming & Partners has grown from a tax advisory background into a broader business that encompasses investment management. Both things matter for wealth management, retention and creation. That expertise makes the company strikingly different from others.
This capability allows Barry Fleming and Partners to use its strength in tax advice to take a 360-degree-view of a financial situation to give much broader, more comprehensive advice.
We bring together up to the minute tax, estate, investment and retirement planning advice to create individual, ‘joined up’ financial strategies. This allows our clients to understand and have confidence in how they can best control, retain, and build their assets and income to achieve their objectives with least risk.
A high level of service is key to our long-term client relationships. We work collaboratively. That means our clients can benefit at all times from having ready access to our team of financial planners.
Barry Fleming & Partners are an independent financial advisor specialising in ISA’s, Pensions, Tax, Trusts, Estate Planning, Inheritance Tax Planning (IHT) and other Financial Planning areas. Please don’t hesitate to call on 01488 608 686 and ask to talk to one of our financial advisors. Alternatively use the contact form on our home page.