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Dr. Laura Snyder Explains The US Extraterritorial Tax Regime And How It Applies To Americans Abroad: Let The Senate Finance Committee Know How It Affects You!

April 2, 2021

April 2, 2021 - Dr. Laura Snyder - @TAPInternation


About “citizenship-based taxation”- The US extraterritorial tax regime


The United States has the following three distinct tax regimes:

1. Source – like all countries: All income sourced to the United States is subject to U.S. taxation on U.S. source income (regardless of the “tax residence” or citizenship of the taxpayer);

2. Residence – like all countries: All individuals who are resident in the United States are subject to U.S. tax on their worldwide income; and

3. Extra-territorial tax regime – unique to the United States: The United States imposes worldwide taxation on the non-U.S. source income of certain individuals, who are tax residents of other countries and do NOT reside in the United States. This includes U.S. citizens living outside the United States.

Americans abroad are generally in the third category and are subject to the extraterritorial tax regime. They are subject to worldwide taxation by both the United States and their country of residence. Americans abroad do NOT as a general principle benefit significantly from tax treaties. This is because, all U.S. tax treaties contain a “saving clause” designed to ensure that Americans abroad are in effect subject to double taxation.

Who Are Americans Abroad?

The short answer is that Americans abroad are U.S. citizens living outside the United States in other countries. They run the whole circumstantial and economic spectrum of humanity. They include the poorest of the poor. They include some wealthy people. They include a large number of middle-class people. They include the employed, the self-employed and they include the unemployed. They include individuals who run small businesses in their country of residence. Some of these small businesses are run through corporate structures in the country where they reside and are tax residents.

Although Americans abroad are Americans who live in other countries, they are NOT and do NOT view themselves as “living offshore”!


In order to let the US Senate Finance Committee know how the US Extraterritorial Tax Regime affects you, go here and select your template!


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