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=> But if a US company earns income in Germany it pays both German taxes and US taxes.

This is not portrayed accurately. If you pay German taxes, you claim exception for that amount. So if you pay more taxes than the rate in US, you owe no tax for that income in US. If the rate is less in the country than in US, you pay the difference.

If there's a double taxation treaty for corporate income in place. I have no idea, but it's somewhere in https://www.irs.gov/pub/irs-trty/germany.pdf ...

Yes, that is correct but since the US had until recently the highest corporate tax in the OECD, the US corporation will would almost always pay more taxes on German income than a German corporation would on German it’s German income. Giving the US corporation a systematic disadvantage unless they kept the money out of the US. But all this has now changed.

> What is little known about this tax bill

> But all this has now changed

I live in Australia. As a casual outside observer, can you inform me as to whether this tax bill has passed in to legislation, or is likely to?

It's law, as of a few weeks ago. Some provisions will go into effect over the course of this year.

It's law: http://thehill.com/sites/default/files/styles/thumb_small_ar...

It passed, but there are parts of the bill that only last ten years (those applying to personal/small business taxes), and then those tax rules revert to the previous version after ten years unless they are passed again under non-Byrd rules in the Senate. https://www.bloomberg.com/news/articles/2017-11-14/how-the-b...

Which will of course be extended as no government would survive a personal tax increase

Which assumes rational government. Our government is controlled by one party and yet we are heading to a government shutdown over immigration. Rational seems far away.

If the opposing party is threatening shutdown of the government then it would seem that the government is not ruled by that single party.

That single party has the majority of both houses of Congress and also the White House, and yet cannot manage to get a majority vote in the Senate because of disagreement within their own party.

The opposing party is not threatening shutdown. A group within the majority is. Since that group within the majority party won't play ball, the majority of the majority party is hoping to garner some support from the minority party.

As it happens, some of the changes they want to make would require 60% of votes rather than just 50%+1, but they haven't yet demonstrated they can get to 50%+1, so that's irrelevant here.

A 'personal tax increase' does not have to be across the board. You could e.g. increase the marginal rate for incomes above $1 million, while keeping other rates the same. That would not be politically difficult. Divide et impera.

Yes you get a credit for the foreign taxes paid, but even still it's absurdly punitive for being an American corporation.

I would not consider taxes to be “punitive.” Taxes aren’t punishment. They are much more like a membership fee.

I think it's fine to view taxes that way, but we should also realize that to a business taxes are a cost to be minimized. No for-profit business willingly conducts their affairs to maximize taxes.

We live in a rules based system and the rules should be designed to incentivize the behaviors we want. Expecting any business to deviate from whats in their best interest is just... out of touch with reality.

That's been repeated ad nauseum and isn't relevant to this discussion. Parent was replying to someone who said "punitive".

What's good for America is good for General Motors.

Many public corporations want to (indirectly) maximize taxes. That's because taxes are levied on profits, and maximizing profits to increase share value is often a good thing.

Taxes are very often used as a punishment to modify people's behavior.

A mandatory membership fee.

It's not mandatory, you're free to move to Somalia and renounce your citizenship if you don't like having a government.

- They do have a governament, even if it doesn’t work.

- I’m not free to move anywhere I wasn’t invited nor is anyone paying my trip there.

All in all, death and taxes as they say.

But of course Apple isn't paying no German taxes. They didn't pay taxes on any of this overseas money, and they had the gall to ask for an "repatriation holiday" so they could pay overall zero taxes on that huge heap of money.

Now they are paying the US gov. Unless they can keep coming up with more Irish tax avoidance schemes, going forward they will probably also have to pay in Europe.

Yes, they paid taxes in Germany, France, etc. it’s reported in their financial statements. They’ve already paid 8 or 9% foreign income taxes on their foreign earnings.

Really?

Because those are EU countries and Apple has a tax deal with Ireland in the EU.

Their corporate headquarter is in Ireland. They pay payroll taxes, VAT etc. in each EU member state just like every business has to. They do not, however, have to pay taxes on their corporate earnings in EU countries other than Ireland. That is a central part of "Freedom of Commerce" in the EU. (One of the EU's 4 foundational freedoms.) What Apple has been rightfully accused of is not paying their taxes on corporate earnings in Ireland.

How do you evade sales tax, labor overhead? 9% is a far ways off from the nominal.

Apple paid millions in VAT, income tax for German employees, environmental (packaging) taxes, etc.

They did not pay much tax on their profits in Germany, but it's debatable which part of the profit of a firm designing phones in the US and building them in China should fall to Germany.

And either way you have to do all the work for both countries' tax systems. Compliance costs are not negligible.

They will still be taxed on foreign profits. It's the global minimum tax of 11%. So if they are based in Ireland they'd pay 2% in Ireland and 9% to America. If in China, they'll pay 15% in China and 0% in America.

Regardless of this, stopping the flow of capital and investment into the country with a 35% tax is extremely dumb. Everyone will say effective is far less, but it's far less because of foreign profits and IP stashed in Ireland and effective may be 20% for tech, but marginal to bring back in the states is still 35%

The worldwide tax law sucks even more for an individual. And it makes absolutely no sense when you’re not even a citizen!

If you are not a citizen, you can at least avoid it if you are not staying in the US, as you'd be a non-resident for tax purposes.

But if you are a non-citizen who is a resident for tax purposes, then yeah you are out of luck.

Yeah the latter sucks because as a resident I can’t even start a business here. I have to jump through hooves like Estonia’s e-residency program to just publish an app.

The expression is "jump through hoops". Sorry to nitpick.

Hoopes (yes, a misspelling) gets autocorrected to hooves for me, so could’ve been a typo and not that they didn’t know the expression.

Probably because the word is "hoops", without the "e"; the plural of "hoop".

^ Not meant as sarcasm, just noting the possible reason the spellchecker gets confused.

Right, but if you notice, the e and the s are adjoining keys on most common keyboards. Apologies if my wording was confusing, but I didn’t call out the es as the OP misspelling the pluralization, but rather specifically as a typo.

My mention of misspelling was there only to prevent another person from pointing it out, but alas, I still failed it seems.

damn autocorrect!

jumping through literal hooves would be hilarious.. lol

US corporations are citizens except that they just can't vote... but they can contribute unlimited campaign contributions.

> US corporations are citizens

No they're not. You're confusing the already commonly-confused concept of legal personhood with citizenship.

> but they can contribute unlimited campaign contributions

Citizens United ruled that actual human beings had the right to make unlimited campaign contributions and that the right to do so could not be rescinded just because those flesh-and-blood individuals decided to pool their money into a corporation. People have the right to organize for political action and congress cannot take that away.

This is so beyond the pale as to be far beyond the realm of logical discussion.

If I have pooled my 'right of personhoop' contributions into a corporate asset base and thus absolved myself of liability laws regarding the disposition of this asset base -- what basis do I have to have to claim 'my' personhood rights over how this asset base is distributed to political campaigns?

If what you say is _actually_ true then it should be illegal for corporations to disperse campaign funds in anything other than an amount that _exactly_ reflects the relative ownership amount of every single stockholder in that corporation -- otherwise an individual shareholder's claim on the percentage of personhood ownership of the corporation has been rescinded.

I have no problem limiting campaign contributions and certain political activities. The constitution does, though. The law generally likes to treat corporations as separate from their owners, but no such notion exists in the constitution. And if it comes to a question of constitutionality, then it doesn't matter that our laws limit the financial liability of a stockholder to his or her contribution because that's not a constitutional question.

The constitution as interpreted by five out of nine sitting judges at the time the question was last ruled on. It's reasonable to think the constitution says otherwise, although you are correct as to the law of the land at the moment.

True enough.

And I also think it's fair for you to use the shorthand, "The constitution says ..." as a stand-in for this. But there seem to be some people in the thread who are not too familiar with the American legal system, and I don't want those folks to be confused into thinking the document actually says anything directly about corporate person-hood and free speech. Not trying to put you on the defense or anything.

It's only beyond the pale because you appear to misunderstand the ruling and the existing law.

A corporation still cannot make unlimited campaign donations. They can however spend their money however they choose. As long as they are not coordinating with any compaign.

If a candidate is running and promises to raise income tax to 99%, then I can form a political action committee or corporation and spend as much money as we want trashing the candidate that is pushing that idea. We cannot, however, donate unlimited funds to his opponent or work directly with any campaign, pay their expenses, etc.

It is a perfectly reasonable freedom that just happens to have negative consequences.

The corporation cannot make campaign donations. They can't even talk with or coordinate with any specific campaign. They can, however take a public stand about who they want to win and run commercial to that effect.

Actually campaign contributions weren’t the issue. Citizens United decided that’s Congress could not take away the right of flesh and blood people to air a political advertisement just because they were organized as a corporation.

> Citizens United ruled that actual human beings had the right to make unlimited campaign contributions

No, it didn't. Campaign contributions are still limited.

Citizens United built on the established precedent that people unaffiliated with campaigns are free to spend their own money how they wish, as long as they don't coordinate with campaigns.

Citizens United ruled that this right applies to people who pool their money together.

Taxes are paid by "tax residence", not by "citizenship". If you live in the US, I bet you enjoy all the greatness of public schools, transportation, legal system, well preserved natural reserves... you should pay for that.

This thread was about US citizens living abroad, which is a whole different issue.

Note that US citizens living abroad are still subject to US's worldwide tax. The tax bill only moved corporations from worldwide to territorial tax.

Wonderful, any details on why that’s the case?

Nope. Feel free to pose the question to any of the House/Senate representatives who hurriedly signed the bill because it was certainly considered in the legislation according to worldwide news outlets. I hope you don't get a canned response answer.

Corporations > People

> That means that there won't be any more hordes of overseas profits. And means the end of those tax inversions or corporate inversions you have been hearing about. [1]

This won't stop companies selling their IP to overseas shells and then paying royalties.

The IRS really does not like that. I believe it's in litigation. Still if a citizen is subject to a tax on the difference between foreign taxes paid and US taxes owed, a corporation should be as well.

The converse is also true.

Wait, is that actually the case here?

    For example, if a British company earns income
    in Germany, its pays German taxes on its German
    income. But if a US company earns income in
    Germany it pays both German taxes and US taxes.

If a British company sets up a company in Germany and that 'subsidiary' earns income in Germany and pays tax in Germany, and then wants to send its money back to the British company, does the British company need to pay tax on that?

Isn't that money new income for the British company, and therefor would be taxed accordingly? I think that's the key here.

Not answering your question, but the companies do tricks so they don't have incomes in some countries.

E.g. Starbucks in Germany... they buy their coffee from Sbucks Luxembourg, the amount of coffee needed to make a 7 euro coffee will also cost close to 7 euros, payable to the seller, Sbucks Luxembourg. So the German subsidiary has very low profits (7 euros for coffee beans for 1 cup of coffee!), and pay very little taxes. The Luxembourg subsidiary pay the local taxes, which are much lower -- as arranged by their then premier, and now current head of European Commission, Jean-Claude Juncker:

> In early November 2014, just days after becoming head of the commission, Juncker was hit by media disclosures—derived from a document leak known as LuxLeaks—that Luxembourg under his premiership had turned into a major European centre of corporate tax avoidance. With the aid of the Luxembourg government, companies transferred tax liability for many billions of euros to Luxembourg, where the income was taxed at a fraction of 1%. Juncker, who in a speech in Brussels in July 2014 promised to "try to put some morality, some ethics, into the European tax landscape", was sharply criticised following the leaks.[52] A subsequent motion of censure in the European parliament was brought against Juncker over his role in the tax avoidance schemes. The motion was defeated by a large majority.[53]

> In 2017, leaked diplomatic cables show Juncker, as Luxembourg’s prime minister from 1995 until the end of 2013, blocked EU efforts to fight tax avoidance by multinational corporations. Luxembourg agreed to multinational businesses on an individualised deal basis, often at an effective rate of less than 1%.[54]

If you buy something from European Amazon, the bill will be from Amazon Luxembourg. Same with Apple and Ireland...

Does that transition to a territorial system apply only to corporations or do individuals count too? American expats are among the few in the world who have to pay taxes to the mothership no matter how long they live abroad.

US citizens living abroad are still subject to the worldwide tax. The Republican's tax bill only affected corporations.

If you are living abroad, you only have to pay tax on your income in excess of ~$110k

But you still have to file, which is not only a pain, rather expensive. My tax prep bill last year was around 1200 EUR in the Netherlands on top of my Dutch tax prep.

would it be hard to do it by yourself?

Yes and no. You have to do a 1040 no matter what and you have to include a number of special forms that you must get absolutely right or you deal with alot of BS from having to talk to the IRS. And that's just for a simple tax situation.

If you have income from multiple sources, some of which may be in the U.S. and some not, even if it's as simple sideline business, then it gets more complicated as you also have to calculate profit/loss for that as if it were in the U.S., then subtract your taxes paid in your country, and demonstrate that it's all below a certain threshold. And there's also payroll tax exemptions, etc.

That is extremely overpriced. It is more labor intensive for working abroad, but not by that much. But if you were paying someone in the Netherlands to do your US tax return, that might explain it. Next year, get a US tax preparer and I can't imagine it being more than $200-$300.

Wait a minute. Does this tax bill end the situation where e.g. Google earns $100 million/year in my European home country, but pay only $150,000 in taxes to my home country, using an Irish holding company to ensure their net tax rate (including to the US) on this amount is only a few percent? That would seem like a very good thing to me. The current situation is quite unjust.

It doesn't. It just means Google will now pay less money to the US government when they want to spend their overseas profits in the US.

I think more that Google will hoard less money in Europe to avoid US taxes and will be able to move more back to the US for investments there. It's the US' new isolationist policies in action.

You mean the new tax law that's more in line with the rest of the world when concerning corporations? Those damn US isolationists acting like the rest of the world! Next thing you know the globalists will start insisting on strong borders and immigration controls.

Nope. That's an intra-EU thing and is very unlikely to change.

> For example, if a British company earns income in Germany, its pays German taxes on its German income.

This isn’t entirely accurate (heh, taxes are complicated). The company would most likely pay VAT/sales tax in Germany, but would pay corporate/income tax in the U.K. If your customer is a VAT registered business you would usually exclude the VAT, unless they are based in the same jurisdiction as you (it doesn’t matter where the item is going).

Up until 2015 this wasn’t the case for digital goods as VAT was charged at the ‘place of supply’ (where the company was based), but it is now accounted for where your customer is located. This is what caused the VAT MOSS kerfuffle, as you now need to account for 28 sets of tax rules depending on where your customer is located.

Not if the sale is made out of a branch or subsidiary based in Germany. Then its profit is calculated in the same way as any local company and taxed locally. And I think this what we are talking about in Apple's case. Not sales made directly by Apple Inc in the US but sales made by foreign subsidiaries of Apple.

VAT is paid by consumers, not companies. In principle, companies just collect the tax from their customers and send to the state the part that they are not transferring to their providers (but of course, taxes are complicated).

It’s kind of obnoxious that they reformed this for corporations but not for individuals.

Thanks for this. Sounds win-win to me.

> For example, if a British company earns income in Germany, its pays German taxes on its German income.

Or, like Apple have a double Irish with a Dutch sandwich.

http://www.independent.co.uk/news/business/news/eu-takes-ire...

I live in UK, and I earn some money in Spain. In UK I am required to pay the difference between UK and Spanish taxes if I bring the money here. That's pretty standard everywhere.