The ‘long arm’ of the IRS may have just been extended further, as a bill passed last week in the US Senate seeks to tax wealthy Americans relocating offshore.
Jurisdictions such as the Bahamas are home to many high net worth Americans who have either retired there or set up businesses.
The so-called ‘exit tax’ aims to tax assets worth over $600,000 owned by people with a high net worth at the time that they decide to move abroad. It is estimated that around a quarter of a million US taxpayers leave American shores each year to take up residency in other parts of the world, though most are not considered ‘tax exiles’ under the IRS’s definition of the phrase.
The Senate bill, which has not yet passed into law, defines a wealthy individual as somebody with either a net worth of $500,000 or an annual tax liability of $100,000 in the five years preceding their renunciation of American citizenship. Those who fit this definition are liable to pay estate tax of 50% on assets that are valued over the $600,000 threshold.
Speaking to the Nassau Guardian, Andrew Law, Managing Director of Credit Suisse Trust Ltd urged Americans to make sure their taxes are in good order before leaving the country. Questioned on the bill, he observed that it is an approach that more and more countries are taking. When asked by the Guardian if the Bahamian authorities would be encouraging Americans to pay their taxes, he said that the Island should ensure it acts responsibly in such situations.
By Mike Godfrey, Tax-News.com
