The leading U.K. expat magazine: Impact of Repatriation Tax on American Business Owners in the U.K.
The American - the leading expat Magazine in the United Kingdom. Article by Monte Silver
This article focuses on the Repatriation Tax created by the 2017 US Tax Reform and its impact on American business owners who live in the UK. The Repatriation tax was aimed at large US companies like Apple and Google who for years had shifted trillions of dollars to off-shore subsidiaries to avoid high US Corporate tax rates. The Repatriation tax forced these multinationals to pay a one-time tax on profits they had hoarded in these subsidiaries (called CFCs -controlled foreign corporations). Under the reform, all profits that accumulated between 1986 through December 31, 2017 are treated as income to their US parent company (Apple and Google, for example) and taxed at 15.5% for profits held in cash form, and 8% for profits held in non-cash form, all from the first dollar of profit.
What does this tax have to do with American expats? Under the Repatriation tax law, US citizens and Green Card holders ("expats") living in the UK are treated is if they are Google US, the parent company. And it treats the UK company in which the expat has an interest as if it were the foreign Google subsidiary. Therefore, if an expat owns at least 10% of a UK corporation, and over 50% of that UK corporation is owned by Americans, that corporation is a CFC for purposes of the tax. Accordingly, the individual US expat will pay the Repatriation Tax with one surprising catch – the expat pays tax at rates higher than Google/Apple: 17.54% on cash and 9.05% on non-cash profits!!
For the entire article, see: www.theamerican.co.uk/pr/ea-Repatriation-Tax-American-Business-Owners-UK.php