Offshore Tax with HTJ.tax

The One Big Beautiful Bill Act (OBBBA) represents one of the most significant shifts in U.S. international tax policy since the 2017 Tax Cuts and Jobs Act (TCJA). By transitioning from the Global Intangible Low-Taxed Income (GILTI) regime to the Net CFC Tested Income (NCTI) system, Congress not only simplified the rules—but also brought the U.S. statutory rate on international income closer to global standards under Pillar Two.In this episode, we unpack what that alignment means, how it affects U.S. multinational corporations, and why the OBBBA’s rate reforms may signal the end of America’s “outlier” position in global tax policy.🧩 Key Topics CoveredFrom GILTI to NCTI: How the OBBBA modernizes the U.S. approach to foreign income.The 15% Benchmark: Why Pillar Two pushed countries toward a global minimum rate.Rate Adjustment: U.S. NCTI effective rate now between 12.6% and 14%—nearly matching global norms.Foreign Tax Credit Increase: Raised from 80% to 90%, reducing double taxation risk.End of Indirect Expense Allocation: Eliminating a key distortion that previously inflated U.S. tax on foreign income.💡 Key TakeawaysGlobal Alignment: The U.S. now mirrors international standards rather than competing below them.Simplified Compliance: Removing indirect expense allocation streamlines corporate tax planning.Reduced Double Taxation: The higher FTC percentage better reflects taxes already paid abroad.Corporate Relief with Balance: Though rates rose slightly, complexity and unpredictability fell.Policy Symbolism: The U.S. can now credibly argue it complies with OECD Pillar Two principles.🧠 Why It MattersThe OBBBA’s tax realignment is both technical and symbolic—a recognition that global coordination is now central to corporate taxation. It gives U.S. companies more predictable outcomes in cross-border operations, while removing some of the odd mismatches that once made GILTI both complicated and controversial.For advisors and international tax professionals, understanding this shift is critical. It affects foreign tax credit modeling, global structuring, and future treaty negotiations.

When the Tax Cuts and Jobs Act (TCJA) repealed section 958(b)(4) back in 2017, it unleashed chaos across the cross-border tax landscape. The repeal allowed downward attribution from foreign to U.S. persons — causing hundreds of unintended Controlled Foreign Corporation (CFC) classifications and widespread compliance headaches.Now, with the One Big Beautiful Bill Act (OBBBA) of 2025, section 958(b)(4) is finally restored — and a new section 951B introduced — providing a more surgical fix for the original “de-control” problem Congress had aimed to solve.This episode explores what’s changed, what’s been fixed, and what tax professionals need to prepare for before the 2026 effective date.🧩 Key Topics CoveredThe 2017 Repeal Fallout: How TCJA’s removal of §958(b)(4) unintentionally turned non-U.S. structures into CFCs.Why OBBBA Restored the Rule: The logic behind bringing §958(b)(4) back.New §951B Explained: The “foreign controlled U.S. shareholder” (FCUSS) and “foreign controlled foreign corporation” (FCFC) framework.Effective Dates & Transition: What happens on January 1, 2026 — and how to prepare.Practical Implications: Impacts on portfolio interest exemption, Subpart F, and GILTI/NCTI exposure.💡 Key TakeawaysDownward Attribution Is Contained: §958(b)(4) reinstatement restores pre-TCJA logic.Targeted Fix, Not Overkill: New §951B isolates true abuse cases without collateral CFCs.Clarity for Inbound Investors: U.S. minority shareholders in foreign groups regain normal tax treatment.Compliance Relief: Simplified ownership testing for multinational structures.Effective 2026: Tax teams should reassess CFC mappings and update entity classification models now.🧠 Why It MattersThis correction marks a rare moment of bipartisan agreement in U.S. international tax — fixing one of the most disruptive technical issues from the TCJA. For cross-border tax advisors, multinational CFOs, and legal teams, the restoration of §958(b)(4) means greater certainty, stability, and alignment with long-standing ownership attribution principles.

The One Big Beautiful Bill Act (OBBBA) quietly rewrote one of the most consequential areas of U.S. international tax — rebranding GILTI (Global Intangible Low-Taxed Income) as NCTI (Net CFC Tested Income).But behind the name change lies a profound policy shift: from a hybrid territorial system to a quasi-worldwide model designed to align—at least cosmetically—with the OECD’s global minimum tax.In this episode, we unpack what really changed, what didn’t, and why it matters for multinationals, policymakers, and tax planners.🧩 Key Topics CoveredThe Origin Story: How GILTI emerged under the 2017 Tax Cuts and Jobs Act.What OBBBA Changed: From QBAI removal to expense allocation and income blending.Effective Rates & the Pillar 2 Paradox: Why the new NCTI rate stays below 15%.The Politics of Blending: How Congress protected U.S. competitiveness while appearing compliant with OECD norms.Practical Implications: What CFOs, tax directors, and advisors need to know for 2026 and beyond.💡 Key TakeawaysNCTI = GILTI 2.0 — broader base, lower effective rate.Blending Survives: Cross-jurisdictional offsets remain the biggest taxpayer win.QBAI Is Gone: No more routine return exclusion; all active income now tested.Interest Allocation Tightens: Less FTC capacity, more domestic loss absorption.Optics vs. Reality: The U.S. looks aligned with global norms—without actually paying more.🧠 Why It MattersThis reform represents Washington’s latest attempt to balance international competitiveness with global tax diplomacy. While branded as simplification, OBBBA’s changes deepen the complexity of U.S. cross-border taxation — and open new strategic questions for global tax planning.

In 2024, headlines screamed of a millionaire “exodus” from the UK and other countries—10,900+ news pieces carried the story. The supposed flight of the rich was even credited with pressuring the UK Labour government to soften tax reform plans.But here’s the catch: the narrative rests almost entirely on a single report from Henley & Partners, a firm that sells residence-by-investment schemes.A review by the Tax Justice Network, with Patriotic Millionaires UK and Tax Justice UK, shows the numbers don’t stack up:The 9,500 millionaires said to have left the UK in 2024? That’s just 0.3% of Britain’s 3.06 million millionaires.Across 2013–2024, migration rates stayed consistently close to 0% per year.Academic studies agree: wealthy individuals respond to taxes with minimal migration.So, was there really a millionaire flight? Or just a media storm amplifying a consultancy’s marketing report at the exact moment when calls for wealth taxes on the super-rich were gaining momentum?#WealthTax #MillionaireExodus #TaxJustice #Narratives

When does technical advice cross into criminal risk—and how can advisors protect themselves?If an advisor tells a U.S. client:“Yes, Svalbard’s unique status means a financial institution there may not report to the IRS under FATCA. But this does not eliminate your personal obligations. You must still report on FBAR, Form 8938, and Forms 3520/3520-A—and failure to file carries severe penalties.”That advice is accurate, complete, and defensible. The advisor is informing, not concealing. The key element of willfulness—intent to defraud—is missing.But even with compliant advice, risks remain:Abusive Tax Shelter Risk: If the advisor exaggerates benefits, promotes a sham trust, or ties fees to secrecy, they could be penalized.Aiding Evasion: If the client ignores reporting duties and the advisor knowingly helps prepare false returns, liability follows.Step Transaction Doctrine: The IRS may disregard the structure if it exists solely to achieve an unlawful result.Negligence: Incorrect or sloppy advice can trigger civil penalties.Bottom line: Advisors protect themselves by being accurate, complete, and transparent—always reminding clients that structures may affect reporting, but never erase it.#FATCA #AdvisorLiability #TaxCompliance #WealthManagement

Can an advisor get into trouble for giving technically true—but incomplete—advice? Under FATCA, the answer is yes.Take the example of Svalbard. Norway has a FATCA Model 1 IGA with the U.S., but Svalbard is excluded from the treaty definition of “Kingdom of Norway.” That means a financial institution in Svalbard could, in theory, be treated as a non-participating foreign financial institution.The problem arises when an advisor uses that narrow fact to suggest a broader loophole, while leaving out critical context. That transforms a technical truth into a misleading strategy. U.S. prosecutors don’t need the original fact to be false—they only need to show that the advice was reckless, incomplete, or designed to deceive.In short: advisors can be held criminally liable not just for lies, but also for dangerous omissions.#FATCA #AdvisorLiability #TaxCompliance #FinancialCrime

Owning foreign accounts or assets isn’t illegal, and it’s not inherently unlawful to fall outside FATCA’s scope. The real issue is knowing what counts as a reportable asset and making sure you’re not failing to disclose something that is covered.FATCA is primarily an information-reporting regime. For individuals, this means filing Form 8938 (Statement of Specified Foreign Financial Assets) if the value of certain foreign assets exceeds set thresholds. These “specified assets” include accounts at foreign banks or brokerages, as well as stock in foreign corporations.Not everything is reportable. Directly held real estate, personal property like art or jewelry, and assets inside U.S.-based retirement accounts are not covered by FATCA. But if you hold property through a foreign company, the company itself becomes reportable.A big source of confusion is the difference between FATCA and the FBAR (FinCEN Form 114). FATCA has higher thresholds ($50k+ for U.S. residents, higher for expats), while FBAR applies if your total foreign accounts exceed just $10,000 at any time. That means an account that doesn’t trigger FATCA might still require FBAR filing.What is illegal? Using foreign structures to deliberately hide income or assets. That’s when mistakes cross into tax evasion, false return filings, and willful FBAR violations—all of which can bring severe civil and criminal penalties.#FATCA #FBAR #USTax #TaxCompliance #OffshoreAccounts

An Expanded Affiliated Group (EAG) is defined under Code section 1504(a) and Treas. Reg. §1.1471-5(i). It generally means one or more chains of entities connected through ownership by a common parent. Normally, the parent must directly own more than 50% of another member’s stock or equity interests.In FATCA, the EAG rules are designed to prevent avoidance of reporting obligations. The “one bad apple” rule applies—if any member of the group is a non-participating FFI, then no member can claim participating FFI status.While the definition is based on corporate ownership, trusts or partnerships can be part of an EAG if they elect to be treated as such under Treas. Reg. §1.1471-5(i)(10). This makes it possible for a trust to act as the common parent of an EAG, provided the proper election is made.#FATCA #TaxCompliance #EAG #InternationalTax #FinancialInstitutions

Between 2017 and 2019, the OECD published FAQs and addendums to CRS to close loopholes—such as residence by investment, broad-based retirement plans, nil-value reporting on settlors, and the treatment of cash. FATCA, however, never addressed these loopholes. Eventually, the OECD abandoned the “whack-a-mole” approach and instead introduced Mandatory Disclosure Rules (MDR). But MDR was largely ineffective: few countries implemented it, and promoters in non-participating jurisdictions or under lawyer privilege were exempt.Example: a UK non-resident trust classified as a custodial institution with a trustee in Svalbard. It owns an investment entity company but reports nil, since the equity interest is in an FFI custodial institution. The trust, itself an FFI, has no reporting duties because Svalbard is excluded from the U.S. IGA. This makes the trust a non-participating FFI—yet it avoids FATCA’s 30% withholding, since it receives no U.S.-sourced income.#CRS #FATCA #TaxLoopholes #GlobalTax #TrustStructures #InternationalFinance

CRS and FATCA treat non-participating institutions very differently. Under CRS, non-participating Investment Entities are classified as Passive NFEs, meaning the paying agent must look through to the controlling persons. FATCA, on the other hand, penalizes non-participating FFIs that fail to register for a GIIN by imposing a 30% withholding tax on U.S.-sourced payments like dividends, interest, or asset sale proceeds. FATCA also pressures FFIs to close accounts of non-participating FFIs. However, FATCA’s reach is limited where no U.S.-sourced payments are received, such as when a custodial institution only holds company shares.#FATCA #CRS #GlobalTax #WithholdingTax #InternationalCompliance #CrossBorderFinance

Financial institutions do not report on account holders that are themselves financial institutions. This enables chains of entities, with each level classified as a financial institution. The weakness of AEoI arises when the top-level entity is a non-participating financial institution. FATCA and CRS only weakly address this vulnerability, leaving opportunities to establish structures that remain non-reportable.

The UAE has become a leading hub for Foundations, especially in DIFC, ADGM, and RAK ICC. These structures blend trust-like asset protection with company-style governance, making them ideal for families and businesses. A Foundation is a distinct legal entity with no shareholders, governed by a Council through its Charter and private By-laws. Assets are contributed by a Founder, with an optional Guardian ensuring oversight. Their flexibility, global appeal, and strong governance standards make them powerful tools for asset protection, succession planning, and wealth management.

UK trust structures offer unique privacy and asset protection benefits. Unlike the FATF model, the UK relies on the Person of Significant Control (PSC) framework, often recording trustees as controllers instead of settlors or beneficiaries. Non-UK and UK non-resident trusts usually avoid registration with HMRC or the Trust Registration Service, except in limited cases. When layered with tools like PPLI, UK companies can even file as dormant, bypassing audits. In certain setups—such as non-resident trusts in CRS non-participating jurisdictions—no CRS reporting is required, adding further confidentiality.

A sham trust occurs when a trust exists on paper but is not intended to operate genuinely. Key indicators include the settlor retaining excessive control, treating trust assets as personal property, lack of trustee independence, and abuse of fiduciary duties. A landmark example is the New Zealand case Clayton v Clayton, where the Supreme Court emphasized that proving a sham trust is challenging but possible. Courts can set aside a trust if it’s shown that the parties never intended to be bound by its terms and the trust was effectively a facade.

Offshore jurisdictions remain an important part of global finance, offering tax efficiency, privacy, and asset protection. But evaluating them requires more than just looking at low taxes. Four key factors stand out:Reputation: The strongest jurisdictions avoid blacklists and align with international standards, like Singapore, Hong Kong, and New Zealand.Banking: A stable, globally connected banking system is essential—but stricter KYC/AML rules can make access challenging.Secrecy vs. Privacy: Financial secrecy has shifted toward transparency under CRS, but reputable centers still uphold robust privacy protections.Asset Protection: Offshore structures can safeguard wealth from legal risks and foreign claims, though protections aren’t absolute.This episode breaks down what matters most when comparing offshore financial centers—and how to balance opportunity with compliance.

Offshore jurisdictions are often associated with secrecy and tax advantages—but the reality is more nuanced. These countries and territories provide favorable regulations, low or zero taxes, and enhanced privacy for non-residents. They can deliver clear benefits such as reduced tax burdens, asset protection, regulatory flexibility, and streamlined business structures. Common examples include the British Virgin Islands, Cayman Islands, Jersey, Isle of Man, Luxembourg, Switzerland, and Liechtenstein. While they offer legitimate tools for global business and wealth management, they remain at the center of ongoing global debates about transparency and compliance.

The Global Financial Centres Index (GFCI) is one of the most influential benchmarks for evaluating financial hubs worldwide. GFCI 37 ranked 119 centres, drawing on 140 instrumental factors from institutions like the World Bank, OECD, and United Nations—alongside over 31,000 assessments from nearly 5,000 respondents. Produced by the China Development Institute (Shenzhen) and Z/Yen Partners (London), the index is published twice yearly in March and September, guiding policymakers, investors, and professionals across the global financial community.

New Zealand’s tax system treats trusts according to the residence of the settlor. Under section CW 54 of the Income Tax Act 2007, resident trustees can access an exemption for foreign-sourced income if they meet the criteria in section HC 26. Following the 2016 Government Inquiry into Foreign Trust Disclosure Rules, New Zealand introduced stricter requirements—formal registration, greater disclosure, and broader access for authorities such as the Department of Internal Affairs and the New Zealand Police. These changes aimed to safeguard New Zealand’s reputation while tightening oversight of foreign trusts.

When applying for a residence permit in Madagascar, avoid shortcuts that could cost you time and money. Always start with official government sources for accurate forms and requirements. If you need assistance, hire a licensed immigration lawyer rather than unregulated agents, and always verify their credentials. Above all, be completely truthful in your application. Disclosing everything—good and bad—gives your lawyer the chance to prepare a strong case, while dishonesty can derail the entire process.

Madagascar’s banking sector is small but highly concentrated. Of the 13 commercial banks, 11 are subsidiaries of foreign institutions, with four banks accounting for 86% of loans as of January 2025. Key players include AccessBanque, Bank of Africa Madagascar, BMOI, BNI Madagascar, MCB Madagascar, and Société Générale Madagasikara. Many maintain correspondent relationships with U.S. banks like Citibank and the Bank of New York, making international transactions more accessible.