Expatriate Executive: US

The US taxes foreign nationals based on a residence qualification, using a 3-year formula totalling the number of days in the current year plus one third of the number of days last year, and one sixth of the number of days in the previous year. If the total is more than 183, you are a tax resident, and this applies whatever your visa status (a complex question in itself, not dealt with here).

Tax-resident foreign nationals in the US are taxed just about on the same basis as a US national, that is to say, on their world-wide income, comprehensively defined. There are tax credits under double tax treaties for some foreign tax deductions.

Unfortunately, the offshore investment options are not very interesting, indeed your existing offshore investments may fall under US tax laws, so that you are well advised to take professional advice on your situation before becoming tax-resident in the US.

Under US PFIC (Passive Foreign Investment Corporation) legislation, gains on disposal of your holdings in almost any kind of offshore or mutual fund are likely to be taxed as income, spread over the years in which you held the investment.

Trading activity in shares while you are US-resident may quite possibly bring on capital gains tax or income tax charges, depending on where and how the acquisitions were made. You are not likely to be able to make use of the various pensions-related tax-breaks for share acquisition available to US citizens, unless your residence is for a long period; and at the same time you will almost certainly not be able to obtain tax deductions for US tax purposes on continuing contributions to pension plans in your home country.

All in all, it will probably be best for you to make sure that existing offshore investments do not mature and are not disposed of during US residence, and that any new investments will not need to be changed and will not mature until after US residence has ceased.

You also need to be aware that a long period of US residence, particularly if close to retirement, may mean that the IRS will continue to have an ability to tax you after you have ceased to be US-resident.

The Heroes Earnings Assistance and Relief Tax Act of 2008 (The 'HEART Act'), which was primarily intended to offer tax breaks to military personnel working abroad, also introduced penal new rules applying to expatriates, as well as addressing some other perceived offshore abuses.

Under the HEART Act, individuals terminating their citizenship are treated as having disposed of all of their property at fair market value on the day before they expatriate or terminate their residence. Such gains are taxable to the extent that the aggregate gain recognized exceeds USD600,000 (indexed in future years).

In the light of all the above, it can be seen that professional advice is even more than usually essential for anyone contemplating US residence, or thinking of carrying on an investment activity while US resident.