U.S.-European Union Dual Taxation Issues: Residency Determinations, Treaty Benefits, Digital Taxation

Description

The U.S. has income tax treaties with most European countries. These treaties help avoid double or excessive taxation for taxpayers with ties to both the U.S. and another country. No two treaties are the same, although most have common provisions. Lower withholding rates for certain nonresident income, definitions of permanent establishment (PE), limitation of benefit clauses to prevent treaty-shopping, and even tie-breaker rules are included in most treaties.

Applying U.S. income tax treaty provisions is complicated. The existence of a PE can permit a source country to tax a nonresident. However, most treaties were written before the advent of digital commerce. Lacking a concrete definition of PE, nonresidents are often subject to the U.S.' interpretation of what constitutes a PE.

Dual citizenship offers many rewards. The ability to travel freely, purchase property, and live and work in two countries is appealing. Some European countries offer residency by investment initiatives. One of the most successful programs has been Portugal's golden visa program (Autorizacao de Residencia para Atividade de Investimento or ARI). Portugal generated 7,500 new residents and 5.2 billion dollars as of March 2019. With substantially more taxpayers residing in the U.S. and Europe, foreign tax advisers need to know the tax benefits and concerns of this duality.

Listen as our panel of international tax experts explain U.S. income tax treaties with specific countries in Europe, how to avoid or lower double taxation, and the latest rules concerning taxation of digital commerce in the U.S. and Europe.