Estate Tax, US and Compliance, or How the US Can Tax 40% of Your Assets Even If You Are Not A Resident

Even with local nuances, paying taxes is mandatory in every country of the world. This is why the matter must be addressed cleverly and safely. Lack of compliance can end up in severe fines or even jail, which is why it's always good to get proper corporate, income, or inheritance tax advice, depending on the case.

When it comes to tax, US law is quite strict for citizens and green card holders, which turns it into one of those jurisdictions in which you really, really have to do your homework. In this article, we explore an aspect of the estate tax that not everyone is aware of.

Inheritance Or Estate Tax: US Approach To Taxation Of Foreign Individuals 

Let's stop for a while and think about what we know regarding taxation in the US. The image of an angry old man wearing a hat with the colors of the flag and looking threatening might be the perfect symbol for this country. This is Uncle Sam, this is the protector of the free world and the interests of the American people, but this comes with a price. 

Together with Eritrea, the US is one of the few countries that taxes global income, and that's not it: it taxes regardless of your place of residency. Some call it citizenship-based taxation because it reaches everyone who has citizenship, even if they have never lived in the territory.

On the opposite side, we have jurisdictions like Nevis, where it is possible to access ultimate protection through a trust while the territorial taxation regime exempts all foreign assets. A similar case can be found in a place like Panama, which is also known for its ample financial and immigration possibilities.

Coming back to the US, we can agree or disagree with such an ominous tax treatment, but it is what it is with everyone related to the United States. So, what happens with those who aren't?

Non-US persons don't have to file FATCA forms when opening a bank account, and they can gladly tick that little box on the banking forms that reads “non-US person”. Nevertheless, any non-US resident can also be subject to tax, more specifically estate tax. This is why we recommend that anyone with property asks for inheritance tax advice from reliable professionals. 

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Exploring The Furthest Corners Of Tax: US May Tax Non-Residents

Owning tangible or intangible assets in the United States will trigger estate tax regardless of your residency. People will be facing an estate tax between 18% and 40% for all assets surpassing a value of 60,000 dollars.

A special approach must be made especially for non-US people whose parents have stocks, incorporated businesses, or any kind of property. You’ve heard right: if your parents have an apartment in California, the estate tax may reach you. This is why it’s highly recommended to seek estate and inheritance tax advice at the time of purchasing real estate.

Inheritance Vs Estate Tax: US Assets

While estate tax applies to the deceased, the inheritance tax applies to the heirs. However, when there are several jurisdictions involved, it's imperative to consult with certified professionals specialized in each of them. Careful considerations are also recommended before buying property or incorporating companies abroad, whatever the country may be. In a complex international environment and with increasingly tighter regulations, planning ahead is more important than ever.

What Can Mundo Do For You

We are an online publication closely related to providing best-in-class financial services. Some of our partners and experts have been with us for a long time and have been leading straightforward processes for those who want to take their businesses to a global scale. Moving forward with transparency and professionalism, we can help businesspeople find reliable solutions.

Disclaimer: this article is published for informational purposes only; however, it doesn't constitute tax advice. In order to comply with your tax responsibilities, we strongly recommend consulting with certified professionals.

Tax, US, and How It Can Affect You

To sum up, nobody should rest on their laurels. While tax compliance can be easy when limited to one jurisdiction, it becomes a complex subject when many countries are involved. If you never set foot outside your country but your parents have an apartment in Florida, then the estate tax in the US can reach you, and it surely won't be pretty to kiss almost half of your worth goodbye. This is why Mundo recommends a smart approach to taxation, thorough planning, and seeking reliable estate and inheritance tax advice. 

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