Sunday, May 31, 2020
Super-rich face bigger tax bills because of lockdown
Unfortunately, this article on the Bloomberg site is not about government's imposing a wealth tax in an effort to recover some of the cost of locking us down to minimise the impact of Coronavirus. Rather it records the circumstances whereby events have undermined the tax avoiding antics of the super-rich, and in doing so imposed a form of rough social-justice on them.
Bloomberg say that as nations have closed borders, some individuals are confronting unexpectedly complex tax situations. These include the prospect of higher levies from spending too many days in a foreign locale, or having to shelve plans to obtain tax breaks by moving abroad:
Spending more than six months in a country typically makes someone a tax resident, although the location of permanent homes and family links, travel histories and income sources are also factors. Determining tax residency is complicated -- even more so when each nation applies different criteria.
Nations also have tax pacts with other countries that override domestic laws and would apply to residency disputes in the absence of pandemic provisions. Resolving tax issues from the coronavirus will be a stressful and costly process for some. Goldring said he moved one client across Italy and France this year to ensure they didn’t exceed the U.K.’s residency thresholds.
There are thousands, “if not tens of thousands” of people, stranded in the U.S., many of whom face a thicket of additional tax scrutiny from the Internal Revenue Service, said Paul Sczudlo, an attorney on Withersworldwide’s private client team.
Ordinarily, foreigners can spend up to 183 days in the U.S., counted either in a single year or over the course of three using a weighted-average formula, before they’re required to pay income tax.
The IRS extended the threshold by an additional 60 days last month, but even that might not be enough to shield people who arrived in the fall or early winter from other states and haven’t been able to return home.
Business owners who find themselves unable to leave the country and become de facto tax residents will be on the hook for U.S. corporate income tax on any foreign company in which they own a majority.
“There’s a very wide range of possible impacts on families,” Sczudlo said. “It could affect retirement accounts, trust and estate arrangements.”
At minimum, they’ll face a mountain of additional paperwork to ensure they’re adequately disclosing holdings, he said. Failing to do so risks potentially large fines, calculated as a percentage of assets for certain entities. New York, for example, considers anyone who spends more than 183 days in the state a resident and therefore obligated to pay its comparatively steep income tax.
New York hasn’t issued official guidance about how it plans to treat out-of-state virus refugees, but accountants are advising not to hold out hope for leniency. When Hurricane Sandy devastated houses in the tristate area in 2012, many people moved temporarily into New York City apartments to wait out reconstruction and were taxed accordingly.
The pandemic has also thwarted plans of those hoping to relocate this year to a country with lower taxes. In the past, tycoons including steel magnate Lakshmi Mittal and Daily Mail owner Viscount Rothermere have made use of U.K. tax exemptions on overseas earnings in exchange for an annual charge.
The site goes on to say that when nations reopen their borders, the wealthy may face even more tax trouble from governments looking to recoup the economic costs of a virus that’s heightening global concerns over inequality.
I could say that I am sympathetic to the difficulties facing these super-rich individuals, who in normal circumstances are able to move around the world so as to minimise their tax burden, but I would be lying if I did so. It is this selfish activity which ensures that the burden of funding public services falls on those less able to pay. Now they can pay up along with the rest of us.
Bloomberg say that as nations have closed borders, some individuals are confronting unexpectedly complex tax situations. These include the prospect of higher levies from spending too many days in a foreign locale, or having to shelve plans to obtain tax breaks by moving abroad:
Spending more than six months in a country typically makes someone a tax resident, although the location of permanent homes and family links, travel histories and income sources are also factors. Determining tax residency is complicated -- even more so when each nation applies different criteria.
Nations also have tax pacts with other countries that override domestic laws and would apply to residency disputes in the absence of pandemic provisions. Resolving tax issues from the coronavirus will be a stressful and costly process for some. Goldring said he moved one client across Italy and France this year to ensure they didn’t exceed the U.K.’s residency thresholds.
There are thousands, “if not tens of thousands” of people, stranded in the U.S., many of whom face a thicket of additional tax scrutiny from the Internal Revenue Service, said Paul Sczudlo, an attorney on Withersworldwide’s private client team.
Ordinarily, foreigners can spend up to 183 days in the U.S., counted either in a single year or over the course of three using a weighted-average formula, before they’re required to pay income tax.
The IRS extended the threshold by an additional 60 days last month, but even that might not be enough to shield people who arrived in the fall or early winter from other states and haven’t been able to return home.
Business owners who find themselves unable to leave the country and become de facto tax residents will be on the hook for U.S. corporate income tax on any foreign company in which they own a majority.
“There’s a very wide range of possible impacts on families,” Sczudlo said. “It could affect retirement accounts, trust and estate arrangements.”
At minimum, they’ll face a mountain of additional paperwork to ensure they’re adequately disclosing holdings, he said. Failing to do so risks potentially large fines, calculated as a percentage of assets for certain entities. New York, for example, considers anyone who spends more than 183 days in the state a resident and therefore obligated to pay its comparatively steep income tax.
New York hasn’t issued official guidance about how it plans to treat out-of-state virus refugees, but accountants are advising not to hold out hope for leniency. When Hurricane Sandy devastated houses in the tristate area in 2012, many people moved temporarily into New York City apartments to wait out reconstruction and were taxed accordingly.
The pandemic has also thwarted plans of those hoping to relocate this year to a country with lower taxes. In the past, tycoons including steel magnate Lakshmi Mittal and Daily Mail owner Viscount Rothermere have made use of U.K. tax exemptions on overseas earnings in exchange for an annual charge.
The site goes on to say that when nations reopen their borders, the wealthy may face even more tax trouble from governments looking to recoup the economic costs of a virus that’s heightening global concerns over inequality.
I could say that I am sympathetic to the difficulties facing these super-rich individuals, who in normal circumstances are able to move around the world so as to minimise their tax burden, but I would be lying if I did so. It is this selfish activity which ensures that the burden of funding public services falls on those less able to pay. Now they can pay up along with the rest of us.
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Your last paragraph is bang on.It is also ONE BIG REASON WHY THE WELL-OFF WANT BREXIT. Any restrictions on them they do not like and they are quite happy to let the rest of us pay,not them..
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