Since Withers partner and latest Hong Kong addition Erik Wallace arrived from London, he has been kept busy with an influx of enquiries surrounding US tax law.
“I don’t think I’ve ever been busier,” the specialist in US tax, probate and trust and estate planning told China Business Law Journal. Wallace said a deluge of enquiries prompted the move from the London office, from where he had assisted Asia-based clients on US tax matters for the past three years.
One of the biggest reasons for this is the US, via the Foreign Account Tax Compliance Act (FATCA), is getting tough on US passport holders and green card holders living abroad who have not been paying their US taxes.
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US citizens and green card holders are subject to US federal income tax on a worldwide basis regardless of where they live.
“The IRS is trying to locate these people and force them into compliance,” Wallace said.
Giving up that secondary US citizenship may sound like an easy exit option from this problem, but he said there are harsh rules in place if you have not been diligent with tax returns in the past five years, including a hefty exit tax.
He said clients were lining up for advice on getting back into compliance under the third voluntary disclosure programme introduced by the US since 2009 in advance of FATCA implementation, and for some, prior to expatriation.
In addition there has been a lot of year-end tax planning to be done. “An aspect of the fiscal cliff was the expiration of the former Bush administration’s US$5 million exemption from estate and gift tax on 1 January,” Wallace said. “A lot of clients were looking to lock in the exemption before it was scheduled to drop to only US$1 million.”
Marcus Dearle, Withers’ managing partner in Hong Kong, said: “Erik’s services will be invaluable to our clients in the region, from American expats and citizens through to green card holders and Asians owning US stock and real estate.”
Jay Krause, Withers’ head of wealth planning, Asia, added: “I am delighted to welcome Erik to the team in Asia as we anticipate a sustained increase in client demand for guidance and support around the US tax changes and the build-up to the implementation of FATCA.”
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