The Wiewel Law Firm

Estate Tax in China

Over 100 nations currently have an estate or inheritance tax of some form. China is not one of them, but that might change soon as the government is considering a decade old proposal that would institute an inheritance tax.

 

In recent decades the Chinese economy has expanded greatly. As is often the case in countries that experience rapid economic expansion, most of the new wealth is concentrated in a small percentage of the population.

 

Whether that is a good thing or not is debatable. Governments often react to it by imposing an estate tax, which also serves as an important source of revenue.

 

Now that China is an economic power it too is considering an estate tax, as reported by Want China Timesin an article titled "Beijing said to be close to imposing inheritance tax in 2016."

 

In the United States the fairness of the estate tax is a hotly contested issue. What cannot be contested, however, is that the US estate tax is much fairer than the Chinese proposal.

 

The estate tax in China would kick in when an estate is worth a mere $129,000. The heirs would also need to pay the entire tax amount in cash within 3 months or any property to be inherited would be auctioned off.

 

If instituted, this proposal has the potential to cause wealthy people to flee China. Consequently, this development is something to monitor for its potential impact on the world economy, as well as China's reaction to any fleeing citizens.

 

Reference: Want China Times (December 29, 2014) "Beijing said to be close to imposing inheritance tax in 2016"

 

International Love Has Its (Legal) Challenges

Love has no borders, of course, which may help explain why it's not just the economy that's gone global. To hear estate and tax planners talk, cross-border marriages are skyrocketing—along with a host of international estate and tax-planning headaches.

If you have an international family, then you know things can get complicated in a hurry. You are not alone. As the world becomes ever smaller, it logically follows that people of different nationalities will meet and tie the knot. That is when things can get knotty.

International marriage can trigger a taxation and estate planning headache.

In fact a recent article in The Wall Street Journal reported the following: “All told, nearly five million Americans in 2010 were married to someone who was born in another country, twice as many as in 1960, according to the Minnesota Population Center. Other countries have had similar jumps.”

The article, titled “A Global Love Affair,” observed that these global affairs bridge the invisible lines on the globes between nations and unite loving couples from Russia, the U.S., France, Germany, and places more exotic – then tie the laws of those same countries into knots.

If you and a loved one are separated by an incidental national barrier, then be wary of how the respective laws of your respective nation may conflict and potentially confound. There are almost as many sad legal stories as there are happy love stories.

Reference: The Wall Street Journal (May 21, 2013) “A Global Love Affair”

International Living Can Be Taxing

LIVING and working abroad may sound romantic. But having a financial life in more than one country — if one of those countries is the United States — is becoming increasingly complicated.

Living across national boundaries is an exciting life for an increasingly large portion of the population, not to mention a daily reality for immigrants heading one way or the other. That said, if you are skipping back and forth across a U.S. border, beware of the attending financial hurdles and the ever heightened attention of the IRS.

If you are no stranger to frequent border traffic, then likely you are aware of the recent adjustments in IRS practice, not to mention several large developments involving overseas accounts and income. Essentially, the IRS is on a mission – it wants to capture more and more overseas accounts and assets taxable under U.S. law. How? By working in sync with international banking institutions.

Ostensibly, the targets are tax-evasion type accounts in Swiss banks. In reality, the dragnet is catching a broader group of individuals and families of all means and intentions. And many of these individuals and families are unaware that they are targets and even fewer are aware the rules of the (tax) road.

The problem has been growing with the surge in IRS attention to the matter and The New York Times tackled the issue not too long ago in an article titled “Overseas Finances Can Trip Up Americans Abroad.”

Bottom line: if you’re going to be crossing borders regularly, whether for work, for family, or even as part of your retirement, then this is an important reminder about the hurdles those little lines on the map can pose if you aren’t careful. Whether you work, live, or retire abroad, it’s important to be aware of the new international complications.

Reference: The New York Times (April 5, 2013) “Overseas Finances Can Trip Up Americans Abroad”

The IRS Wants to Know About Your Gifts from Foreign Sources

With the sharp eyes of the IRS abroad and looming FATCA compliance, foreign bank accounts are less secret than they used to be. Income from abroad is taxable and you must report your foreign bank accounts.

If you have received a gift or inheritance from a loved one in a foreign country, the IRS wants to know about it. The recent Forbes article, “Beware IRS Reporting Of Foreign Gifts Too,” states that you will need to file an IRS Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, if you receive:

More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests; or

More than $14,375 from foreign corporations or foreign partnerships (including foreign persons related to such foreign corporations or foreign partnerships) that you treated as gifts.

You are required to report these bequests on Form 3520 when you actually or constructively receive them. Late reporting penalties are high – five percent of the gift’s value for each month the gift is not reported, up to 25 percent of the total value.

One way to avoid penalties is to consult with your estate tax attorney for counsel on your individual circumstance. Remember that income from abroad is taxable, and the IRS is looking at foreign accounts ever more closely under the Foreign Account Tax Compliance Act (FATCA). To learn more, read the Forbes article, “How to Report Foreign Gifts and Bequests to IRS.”

Reference: Forbes (August 13, 2012) “Beware IRS Reporting Of Foreign Gifts Too”