Straightpoop

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About Straightpoop

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  • Nationality USA
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  • Year of birth 1949

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  1. Should I declare non-german income in tax refund?

      Yep.   Because the tax rate on the income you earned in Germany before your termination of German tax residency (Wegzug) will be determined by adding to it your income earned in the remainder of the year in which you left.  This is called Progressionsvorbehalt.   The same principal applies to the year in which you arrive in Germany and become a tax resident. The income earned elsewhere in the portion of the year before your arrival gets added to the German income to determine a (usually higher) rate of German tax on the German income.  
  2. Double taxation of an Estate's income - AStG

      Nope.  Not in the least.   The US tax code is highly flexible on the subject of timing of foreign tax credits. Credits can be claimed for taxes "paid" or "accrued" at the taxpayer's option. If a creditable foreign tax in a calendar exceeds the credit limit for that tax year, the balance can be carried back 1 year and forward for 10 years until finally exhausted in prior or subsequent tax year.    
  3. Roth conversion oppertunities for US citizens in Germany

      Nope.   Each withdrawal has a proportional amount of the tax-free contributions.  The difference will be taxable.   Basically, Germany applies the same principle used in US tax law for withdrawals from traditional IRA/401(k) accounts in which you have a (US) tax-free basis (see:  Form 8606).    Also, keep in mind that the mere change of residence to Germany will not change the US source of IRA distributions allocable to contributions from US-sourced earnings.  For example:  If you contributed 25,000 to an IRA before coming to Germany and then proceeded to contribute another 25,000 from German sourced employment/self-employment income (not excluded under §911) and then took a distribution, 50% of that distribution would be considered US sourced and 50% would be German sourced.    The treaty would not allow you to resource that US-sourced 50% because Germany would be taxing only the 50% of the distribution allocable to the contributions made since you began your German residence. That being the case, there would be no double taxation and hence, no resourcing to avoid same.  You would declare the entire distribution on your US return and claim a credit only for the allocable portion of German taxes paid on the 50% attributable to German sourced employment income.   For Form 1116 purposes, the entirety of IRA distributions - like all pension income (attributable to employment) - are items of general limit income.  Whatever passive character earnings on contributions may have had when earned within the IRA (interest, dividends, gain, rent, etc.) is lost when distributed; they together with the contributions are transmogrified into "pension" (general limit) income.         
  4. Double taxation of an Estate's income - AStG

      Actually, no. That is most certainly not what I am saying.   Rather, the situation of § 15 AStG taxation might better be described as:  "No money or thing of value was put at my power to dispose of anywhere in calendar 2021. Yet, despite the fact that I cannot spend it, pledge it or donate it, or even know how much it was or its source or its character, § 15 AStG says I must somehow compute it and declare it on my 2021 tax return (in calendar year 2022) and pay taxes on it."   The only saving grace with this preposterous situation is that, as noted above, the putative donee in many cases has absolutely no idea what the value of his "income" was in the year it accrued because, unless he is also the trustee/personal representative, he very likely has no control over the trust principle, its records, etc.   In short, he will in all likelihood be governed by something German tax law regards as perhaps its most sacred principle of all:  the Zuflußprinzip. (Violated in the extreme by § 15 AStG).  He'll honestly declare it when he actually gets it; when he actually knows what it is and how much and when - whether it be in the form of money sent to his cousin's account or a chicken added to his coop in Zimbabwe.   The FA is unlikely to be any the wiser and everyone - including the wretched overworked FA Beamter - will be grateful for that.   In the meantime, the issue that my post is actually concerned with is timing.  Specifically, regardless of whether the FA is taxing real or imaginary foreign source income in a given calendar year, what timing problems arise with respect to claiming a foreign tax credit on that income when the calendar tax year of actual/imaginary income taxed does not coincide with the year the foreign tax is actually paid (by the taxpayer) on that income?   Let's start with the most common example. Assume the following:   Taxpayer A, a US citizen resident in Germany, actually receives $1,000 of US-source dividends on his US brokerage account in calendar tax year 2021.  Following the general rule in the US, no US tax is withheld on these dividends when paid.  Taxpayer A made no US tax payments in 2021 from any other source (e.g. wage withholding, estimated taxes, etc.).    In 2022, A timely files a US tax return and computes a US tax liability for 2021 of $150 all of which is attributable to his $1,000 of US-source dividend income and he pays the tax in 2022.   Also in 2022, A timely files his German tax return, reports his US-source dividend income and claims a foreign tax credit against his Abgeltungsteuer liability of $150.   Q1:  Is A entitled to claim the credit even though he paid the tax in the calendar year following the tax year in which the income tax liability accrued?     Change the facts slightly:   In 2022, A procrastinates and files neither a US or German return for 2021. Nor does he file any extension requests in either country.   In early 2023 he finally gets around to filing his returns in the same sequence with the same result as in the example above (plus maybe a late filing/paying penalty or interest or both in either or both countries.)   Q2:  Is A entitled to claim the credit for 2021 foreign taxes on his late-filed 2021 German return even though he did not pay those taxes until calendar 2023?   Q3:  Would the answer to Q2 be different if A had received a filing extension and thus timely filed his 2021 German return?            
  5. New US withholding tax

      What you describe is generally characteristic of something popularly known in Germany as a "Zertifikat".   In the US such a security is known as a "contingent payment debt instrument" (CPDI). Compared to the popularity and prevalence of Zertifikaten in Germany, CPDIs are not widely used in the US retail security markets due to their onerous and hideously complex US tax consequences. (To get an idea just how complex see:   26 CFR § 1.1275-4 - Contingent payment debt instruments. | Electronic Code of Federal Regulations (e-CFR) | US Law | LII / Legal Information Institute (cornell.edu)   For the same reason, US taxpayers are well-advised to steer clear of foreign CPDIs (Zertifikaten).   Your Gazprom ADR is no different from any other ADR or common stock. It pays a dividend and its market value depends on the willingness of people to buy and sell it which - usually - depends upon the performance of the company's underlying business.   Right now, of course, OGZPY have been delisted, i.e. they cannot be traded on any US or western exchanges due to the sanctions against Russia which, naturally enough for securities for which there is no public market, diminishes their value.    
  6. Double taxation of an Estate's income - AStG

    @PandaMunich   OK. I am prepared to concede that a foreign "Vermögensmasse" to which § 15 AStG applies and one to which §3 and §7 ErbStG applies may be entirely different.  After all the one under §15 AStG has the added qualification of > 50% family ownership/beneficial interest, etc. and, of course, § 15 AStG is a conduit for income tax rather than inheritance tax.   That concession here on TT notwithstanding I would not be professionally embarassed to make my argument to the FGH should the opportunity present itself. (I am quite confident it never will.)   The combination of §15 AStG and the ErbStG might well theoretically lead to triple taxation:  first income tax paid by the foreign trust, then income taxed again in Germany when accrued and thirdly inheritance taxed when finally distributed.   As a practical matter - at least with respect to US estates and trusts - there will in most cases be only double taxation (German income and inheritance taxes) on income earned in a "family" trust/estate. That is because US trusts are exposed to a very severe rate of tax on their undistributed/undistributable income. They can avoid that tax by simply distributing it or accounting for it as Distributable Net Income (DNI).  When they do so, the US trust itself pays no tax on that trust income nor does it accrue any tax. Only the beneficiaries accrue the tax liability which is not actually owed until the year the trust income is actually distributed to them.  Because it is ultimately their foreign tax paid on their foreign capital income there should be no barrier to claiming a foreign tax credit under § 32d Abs. 1 even if the foreign tax is actually paid at in a later calendar tax year than when the income accrues to them for purposes of § 15 AStG.   Or is that being overly optimistic about how German tax law treats timing differences in connection with the foreign tax credit?      
  7. New US withholding tax

    Icahn Enterprises L.P. (NASDAQ:  IEP) is a publicly traded Master limited Partnership headquartered in Sunny Isles Beach, Florida, USA.   So far as I can see the use of "ADR" following Icahn Enterprises L.P.'s firm name appears only on foreign brokerage/financial info web sites.   IEP does not use the abbreviation "ADR" in association with its name on its own web page or in any of its SEC Filings.     Moreover, you will not find it listed on this ADR lookup site: American Depository Receipt Stocks/A Z Index - Markets Index (marketwatch.com) IEP's SEC filings refer to its securities as "Depositary Units Representing Limited Partner Interests"     I suspect that the term "depositary" has confused the operators of foreign financial web sites and, rather than use a different - and unfamiliar/(nonexistent) abbreviation (like e.g. DURLPI) have simply misused "ADR" to incorrectly describe the true nature of the security.   PS ADRs are not bonds. They are simply "naturalized" foreign equities. Their dividends are deemed foreign sourced under US tax law when paid and retain their character as dividends when paid through an ADR.     
  8. New US withholding tax

    I'm not sure whether there can be such a thing as an American Depository Receipt (ADR) for an American entity. ADRs are designed to allow foreign securities to trade on US exchanges - not the other way around.   The proceeds from trading options on publicly traded partnerships (PTP) should not be subject to the 10% withholding but I am uncertain whether that will be true for an ETF that invests in MLPs.  (NB:  due to statutory restrictions a US RIC may not hold more than 25% of its assets in limited partnership interests of any kind so US ETFs that invest solely in MLPs are non-existant.)   The 10% withholding tax is similar in purpose to the 10% withholding required on the price of US real estate purchased from a foreign owner.  If the transaction resulted in a taxable gain for which the actual tax is less than the amount withheld, the overpayment withheld is recouped on a tax return.  And, of course, if the gain was more than the 10%, the foreign seller would/should file a US tax return to compute and pay the additional amount.   In both instances - real estate gain and partnership interest gain - the gain is taxed at ordinary, graduated tax rates up to a maximum 37% marginal rate. Remember, the 10% is withheld on GROSS proceeds, not gain because the buyer typically has no idea what the foreign seller's actual gain might be.  Thus, the withholding might very well be much more (or far less) than the tax actually owed, thus making a US tax return to obtain a refund worth the cost.   And, FWIW a reminder:  German tax law generally treats PTPs as tax intransparent corporations.  Their cash distributions are thus taxed in Germany as dividends and their actual operating income/loss as reported on a K-1 is ignored.                  
  9. Double taxation of an Estate's income - AStG

    While not mentioned in § 15 of the AStG, the distinction - and possibly different tax treatment - between a foreign estate or trust that is simply taking a long time to wind up and a foreign estate/trust that is designed for continued existence (either indefinitely or for a term of years or until some future event) I believe can be found in the language added to § 3 Abs. 2 Nr. 1 and § 7 Abs. 1 Nr. 9 of the ErbStG back in 20xx(?):  ..."Vermögensmasse ausländischen Rechts, deren Zweck auf die Bindung von Vermögen gerichtet ist". . .,   In other words, a foreign estate/trust will be treated as fully transparent for inheritance/gift tax purposes if it is not for the purpose of binding assets for some - statutorily unspecified - length of time that would bring it within the definition quoted above.   §15 AStG refers only to a "Vermögensmasse" without the qualification of the language used in the ErbStG. But, since all the other entities it refers to all have in common the element of permanency, it would seem likely that § 15 AStG will also adopt and apply that criterion to foreign "Vermögensmasse".    I think there is a strong argument that unless the foreign "Stiftung" (i.e. trust or estate) is designed for some (statutorily unspecified) degree of permanency as described in § 3 and § 7 of the ErbStG, there can be no "Berechtigte" within the definition of § 15 AStG to whom income can be imputed. Most importantly the public policy underlying § 15 AStG: the discouragement of long-term tax deferral through family-owned/controlled foreign estates/trust and other structures has no application where the time of deferral - if any - is acceptably brief.        
  10. Question Re contracts on Form 8938

    Rest easy.   The reference is not to all instruments and contracts but to a "financial instrument or contract" and, specifically, those with a non-US issuer or counterparty. An example might be a futures or options contract or the like.   None of the activities/transactions described in your post falls within the definition of a financial instrument or contract for purposes of reporting using Form 8938.   Remember:  FATCA (Form 8938) requires reporting of specified foreign ASSETS not simply any transaction with a GF (Godless Furriner) involving money (although we're getting there.)  One of these days some dork in the bowels of the Treasury Department is going to opine that the chit you get from the dry cleaner to reclaim your laundry is a reportable foreign "financial account" for purposes of the BSA or FATCA.    
  11. Double taxation of an Estate's income - AStG

    @PandaMunich   Thanks for the explanation.   If I may summarize:   §15 imputes foreign trust income to a German taxpayer even if undistributed and even if the foreign trust is an intransparent, i.e. taxable entity in that foreign country.   §15 then declares that all of that imputed income - regardless of its actual character - should be taxable as if it was from capital asset (i.e. Abgeltungsteuer) under §32d.   § 15 then says that the portion of the imputed income that it has mischaracterized in order to make it taxable under § 32d will be entitled to a credit under § 34c but that the portion that actually was from capital assets will not be entitled to the §34c foreign tax credit.   The Finanzamt (and at least one commentator) then argues that because even though the imputed income is in fact capital in nature and is specifically included as an item of capital income taxable under § 32d - even though earned by a foreign entity and not actually received by the taxpayer - the foreign tax credit otherwise available under § 32d to specifically this type of income is not - contrary to the plain language of the statute - available to this type of income because the foreign income tax paid by the foreign entity on that income  which is not actually received but imputed to the taxpayer for purposes of imposing German tax under § 32d is not really paid by the taxpayer but rather by some intransparent foreign entity.   In other words the foreign entity is transparent for §32d tax purposes but not for §32d credit purposes - unless it was income that was mischaracterized as §32d income in the first place; and no treaty relief is available because we have to respect the intransparency of the foreign entity.   Makes perfectly good sense to me . . . .    Either that or I picked a bad day to go off my medication.   Merry Christmas, Panda.      
  12. Double taxation of an Estate's income - AStG

      Perhaps not specifically under the authority of § 15 (5) AStg but, arguably, that provision does not exclude a foreign tax credit under § 32d Abs. 1 EStG which appears to provide authority for a foreign tax credit independent of § 34c (1):   (1) 1Die Einkommensteuer für Einkünfte aus Kapitalvermögen, die nicht unter § 20 Absatz 8 fallen, beträgt 25 Prozent. 2Die Steuer nach Satz 1 vermindert sich um die nach Maßgabe des Absatzes 5 anrechenbaren ausländischen Steuern.   Read in conjunction with § 15 Abs. 8 AStG:   (8) 1Die nach Absatz 1 dem Stifter oder der bezugs- oder anfallsberechtigten Person zuzurechnenden Einkünfte gehören bei Personen, die ihre Einkünfte nicht nach dem Körperschaftsteuergesetz ermitteln, zu den Einkünften im Sinne des § 20 Absatz 1 Nummer 9 des Einkommensteuergesetzes   I see nothing in § 32d that excludes income from § 20 Abs. 1 Nr. 9 from enjoying the foreign tax credit provided for under § 32d Abs. 1 S.2.   And, now that I think about it, I see now why the AStG makes a reference to the credit allowed under § 34c since absent such a provision amounts that are NOT income from capital assets but which are lumped together by § 15 AStG and taxed under §20 Abs. 1 Nr. 9 as if they were might otherwise not be eligible for the foreign tax credit afforded by § 32d Abs. 1 S. 1.   In other words, the reference to the availability of the foreign tax credit under § 34c supplements rather than excludes the foreign tax credit available under § 32d Abs. 1.   Last but not least, there are the various provisions of any existing DBA to avoid just this kind of (possible) double taxation.    
  13. Double taxation of an Estate's income - AStG

      § 15 AStG (5) seems to specifically make taxes paid on trust income to the foreign country creditable against the tax imposed by §15 (1):   (5) 1Auf die Einkommen- oder Körperschaftsteuer des Stifters oder der bezugs- oder anfallsberechtigten Person werden die Steuern vom Einkommen angerechnet, die zu Lasten der ausländischen Stiftung auf die zuzurechnenden Einkünfte erhoben worden sind. 2Bei der Anrechnung sind die Vorschriften des § 34c Absatz 1 des Einkommensteuergesetzes und des § 26 Absatz 1 und 2 Satz 1 des Körperschaftsteuergesetzes entsprechend anzuwenden.
  14.   26 USC §861-865 (and the regulations thereunder)
  15.   Either/or is the correct short answer.   Here beginneth the long answer:   US TAX RULES:   The "sourcing rules" under US domestic tax law provide that capital gains from the sale of intangible personalty, e.g. shares of foreign or domestic stock, funds, bonds, etc. are sourced in the country in which the US citizen/LPR taxpayer is resident at the time the gain is realized.   However, if the country of residence (e.g. Germany) does not impose a tax of at least 10% on the gain thus realized, the gain will be sourced in the United States for a US Citizen or LPR.  A capital loss will be sourced similarly provided that if the transaction had produced a gain that gain woulda, coulda, shoulda been taxed by the resident country by at least 10%.   Germany-USA TREATY RULES:   If under the treaty Germany is granted the EXCLUSIVE right to tax a certain item of income earned by its resident (e.g. interest, gain from sale of intangible personalty, etc.) then if US domestic sourcing rules would consider such item of income "US sourced" the US citizen/LPR taxpayer would be unable to claim a credit for German taxes paid on that income because it is not "foreign sourced".  In other words, such item(s) of income would be subject to double taxation.    Art. 23 (discussed by Panda Munich above) solves that problem by overriding US sourcing rules to the extent necessary to avoid double taxation.  Such income is considered "treaty resourced" to Germany.   Where things get hairy is what happens when, as a result of the application of German stock loss carryforwards (Aktienverlusttopf) the gain in a particular year is not taxed in Germany at all?  Ditto as the result of a Allgemeinverlusttopf which may even eliminate German taxes on investment income items such as dividends and interest?  And don't forget about the good ol' US short and long-term gain carryforwards which could result in no gains for US tax purposes even as Germany is hitting them with 26.375%.  (That's where the US foreign tax credit carryforwards ride to the rescue.)   Fun stuff, no?