Helm U.S. Tax assists Trustees and beneficiaries with their foreign trust (Foundations and other entities) reporting requirements and other tax related filing responsibilities.
In general, U.S. persons and permanent residents (a/k/a “green-card” holders), even those living outside the United States, must report their worldwide income, and therefore are required to file certain U.S. tax and other informational returns unless exempt under very limited circumstances. Non-U.S. persons (a/k/a “non-resident aliens” or “NRAs”) may also be subject to U.S. taxation based on certain U.S. source income, investments, or business activities.
The Helm team will provide you with the highest quality of professional advice and U.S. tax preparation, in order to complete and timely file your individual income tax returns and other tax related documents.
If you are not a U.S. person and have U.S. income or U.S. tax related issues Helm will help analyze your U.S. tax situation. Please also ask us about how Helm deals with issues related to Switzerland’s Pillar 2 and Pillar 3 pensions and withholding tax.
Both past and current places of residence, domicile and citizenship for each and every Grantor and Beneficiary of the Trust, and whether any change to the current status of the Grantor or Beneficiary is anticipated.
Whether the Trust is considered to be a Foreign Grantor Trust and/or a Non-Grantor Trust for U.S. federal income tax purposes.
These types of tax consequences need to be considered on occasions in which there are (i) certain powers or rights in connection with the Trust or the entities owned by the Trust and conferred on the Grantor or the beneficiaries; (ii) transfers of property to the Trust whether direct or indirect, (iii) direct/indirect actual or deemed distributions or loans from the Trust and (iv) rights to potentially benefit from the Trust.
Trustees should consider how to administer the entities which the Trust owns in a tax-efficient manner. For example, how to deal with assets which appreciate and retained earnings, as well as when to make a “check-the-box election”.
Trustees should consider what changes need to be made to the Letter of Wishes; the Trust Deed; and/or any entities owned by the Trust to ensure that the Trust is structured in a manner that is tax efficient. As examples of the types of issues that Trustees need to be on the look out for: a “general power of appointment” of a U.S. person; and the existence of a “step-up in basis” upon the death of the Grantor.
By conducting a due diligence along the lines outlined above, Trustees will be in a relatively good position to ascertain if there are any U.S. taxation and reporting issues in the administration of their trusts.
This due diligence check list is merely a tool to assist Trustees in the administration of their trusts, but given the complexity of the issues highlighted above, will often require further analysis by qualified U.S. Counsel. The attorneys at Helm are familiar with these issues and should be consulted in order to ensure that all relevant U.S. issues are canvassed by Trustees in administering their trusts.
Trustees should consider which types of investment structures should be held directly by the Trust or indirectly through an entity.
Whether the Trust is considered to be a foreign Trust for federal tax purposes and the circumstances under which that may change.
Who, both currently and in the past, has been considered Grantor of the Trust and who, both currently or in the past, has been considered the owner of the assets of the Trust and under what circumstances that might change.
Trustees should consider to what extent they could be held liable for federal withholding tax or federal and state transfer taxes (for example, estate and gift taxes).
If a U.S. person receives a distribution from a foreign trust, the distribution will have to be reported on the taxpayer’s Form 3520 and tax return statement called Foreign Grantor and Nongrantor Trust Beneficiary Statements. Those statements ensure that the distribution is properly taxed.
The Foreign Account Tax Compliance Act (“FATCA”) is U.S. legislation aimed at combating tax evasion by U.S taxpayers through the use of non-U.S. accounts and assets. To achieve this main, FATCA generally requires non-US financial institutions to identify and report certain information concerning their U.S. account holders or else suffer a 30% withholding tax. Although FATCA is U.S. law, many non-U.S. jurisdictions have entered into so-called “intergovernmental agreements” (“IGAs”) with the U.S. to facilitate the local implementation of FATCA and thereby require resident financial institutions to comply with FATCA. As a result, FATCA is now part of the tax and information reporting framework of many jurisdictions. In addition, FATCA has engendered other information reporting regimes, including the UK “FATCA” Agreements with the Crown Dependencies and Overseas Territories and the OECD Common Reporting Standard (“CRS”). These other reporting regimes are substantially based on FATCA Model 1 IGA.