Continuing Education Provided By

1. Continuing Education Provided By

2. Executives Going Global:Inbound/Outbound Tax ConsiderationsJune 20, 2014 Circular 230: This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state or local tax penalties.

3. Increasing number of Americans living and working abroad • 6.8 MM in 2013, up 200K from 2 year ago. (U.S. Dept. of State) • Increasing number foreigners living and working in U.S. • 22.2 MM of U.S. population are green card holders and NRAs (2011 ACS survey) • In 2012 alone, over 1 MM became LPRs (U.S. Dept. of Homeland Security) • Estimated 757K became naturalized (U.S. Census Bureau) Globalization in the Workplace

4. U.S. citizens/residents living/working in foreign country • U.S. citizens/residents with assets in foreign country • U.S. citizens/residents who inherit foreign assets • U.S. citizens/residents who receive assets from foreign persons • U.S. citizens/residents with noncitizen spouse • Nonresidents with U.S. citizen spouse • Nonresidents with assets in U.S. • Nonresidents living/working in U.S. Who’s Globally Affluent?

5. Tax Considerations • Income tax rules • Transfer tax rules • Minimizing or eliminating double taxation (FTC, FEIE, treaty) • Reporting obligations (informational returns) • Expatriation • Non Tax Considerations • Immigration • Foreign property rights/succession planning • Treaties • Social insurance programs • Employer/Employee legal rights General Considerations

6. U.S. citizen/resident • Subject to U.S. income tax on worldwide assets • “Resident” for U.S. income tax purposes: • Permanent Resident (Green card Holder) • Substantial Presence Test (183 day test) • Some exclusions from presence • Some VISA holders are exempt for certain time period • Other exemptions • Election (if eligible) • Non resident • In general, subject to U.S. income tax on U.S. source income • Dividends paid from U.S. Corporation • Rent from U.S. real property • Capital gains from sale of U.S. real property • Interest on debts of U.S. obligors (excludes bank deposits) • Salaries paid for services performed in U.S. • U.S. royalties Primer on Income Tax Rules

7. Foreign Tax Credit (IRC 901 and 904) • Main requirements to qualify for FTC • Foreign Tax must be actual foreign tax liability • Foreign Tax must be imposed on taxpayer • Foreign Tax must have been paid or accrued • Foreign Tax must be an income tax • Foreign tax must be compulsory • No double dipping • Take FTC or Deduction • Can’t take FTC for income excluded under FEIE • Other exceptions and complicated rules apply • Limitations, losses, basket rules • File IRS Form 1116 with US income tax return Minimizing Double Taxation on US Taxpayers

8. Foreign Earned Income Exclusion (IRC 911) • To qualify, taxpayer must (i) be a “qualified individual” who has (ii) foreign earned income and (iii) tax home in foreign country • Must meet one of following tests to be “qualified individual” • Bona Fide Resident Test: US citizen who is a resident of a foreign country or countries for an uninterrupted period that includes entire taxable year • Physical Presence Test: US citizen or resident who, during period of 12 consecutive months, is present in foreign country or countries during at least 330 full days in that period • Only earned income (“sweat of brow”) • Maximum amount excluded is $99,200 (2014) • Add “housing cost amount” provided by employer • Complicated formula • Sometimes difficult to classify housing expenses • If employer doesn’t provide, can take deduction for expenses • File Form 2555 with US income tax return • Timing issues on when to claim Minimizing Double Taxation on US Taxpayers

9. Tax Treaty • Affects both inbound and outbound • Does income tax treaty exist b/t foreign country/US? • Is taxpayer “resident” under treaty? • Minimizes or eliminates double taxation by sourcing rules, exempting certain types of income, and reducing tax/withholding rates • Need to consult both statute and treaty (given equal weight but last in time rule if conflict) • Watch out for Permanent Establishment (PE) • Savings clause as applied to US citizens • Tie breaker rules for dual residents • Multiple Forms May Apply To Elect Treaty Benefit • Form W-8BEN • Form 8233 • Form 8833 • Form 8854 Minimizing Double Taxation on US Taxpayers

10. U.S. citizen and resident • subject to U.S. estate, gift, and generation-skipping transfer taxes on worldwide assets • Complex rules apply if non-U.S. citizen spouse • “Resident” for transfer tax purposes is a person who is domiciled in the U.S. • Domicile is a person living in the U.S. with no definite present intention to leave • Subjective component to test • Many factors support domicile • Nonresident • subject to U.S. transfers taxes only on U.S. situs assets Primer on Transfer Tax Rules

11. Source of Assets for U.S. Estate Tax

12. Source of Assets for U.S. Gift Tax

13. U.S. Transfer Tax Exemption Amounts for Nonresidents (2014)

14. Many reporting obligations for U.S. citizens and residents with assets or accounts in foreign country • Hiring Incentives to Restore Employment Act (HIRE Act) • Foreign Account Tax Compliance Act (FATCA) • Bank Secrecy Act & Foreign Bank Account Reporting (FBAR) • Small Business Job Protection Act (Jobs Act) • Heroes Assistance & Relief Tax Act (Heroes Act) • Some reporting rules overlap • Severe penalties for failure to file or properly report • Potential criminal penalty exposure • IRS voluntary disclosure programs Informational Reporting

15. Informational Reporting Cont.

16. Inbound Executive (nonresidents coming to U.S.) • Know difference between income tax/transfer tax residency • Minimize U.S. source income • Minimize double taxation on US source income (foreign tax credit, treaty benefits) • Nonresidents exempt from 3.8% Medicare surtax • 30% NRA withholding—tax may be reduced by applicable treaty • Avoid becoming U.S. income tax resident • Monitor filing requirements for foreign accounts and assets, including foreign retirement plans, if become U.S. income tax resident (FBAR, Form 8938, Form 3520) • Avoid triggering “long term resident” for purposes of exit tax • Beware of anti-deferral rules applicable to PFICS/CFCs • “Check the box” planning with disregarded entities for basis step up Income Tax Planning/Considerations

17. Outbound Executive (U.S. citizens/residents abroad) • Subject to income tax on WWI • Understand applicability and rules of foreign earned income exclusion, foreign tax credit, and treaty benefits to minimize or eliminate double taxation • Understand “Permanent Establishment” principles • Monitor filing requirements for foreign accounts and assets, including foreign retirement plans (FBAR, Form 8938, Form 3520) • Understand “covered expatriate” rules before give up or lose citizenship/green card • Watch “long term resident” status for exit tax rules • Careful not to elect treaty benefits for purposes of exit tax rules • Beware of anti-deferral rules applicable to PFICS/CFCs Income Tax Planning/Considerations

18. This material is not specific legal or tax advice of any kind. Always get experienced help specific to your situation. • Circular 230 Disclosure: This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state or local tax penalties. Disclaimers

19. Slides prepared by: Raj A. Malviya Miller Johnson o: 616.831.1799 f: 616.988.1799 malviyar@millerjohnson.com MJ#26272587

20. Thanks for your attention and interest. To learn more about SABA North America, please visit www.sabanorthamerica.com.