PRACTICE AREAS

Outbound Tax Planning Checklist

U.S. persons living or investing abroad — key planning and compliance considerations

The United States taxes its citizens and green card holders on worldwide income regardless of where they live or where the income is earned. A U.S. person who moves abroad, invests in a foreign company, holds a foreign portfolio, or maintains foreign financial accounts does not escape the U.S. tax system — they navigate two tax systems simultaneously. Without proactive planning, the result is double taxation, inefficient tax and corporate structures, unnecessarily complex accounting and tax reporting obligations, and penalty exposure, that worked in a purely domestic context but creates unexpected problems across borders.

This checklist covers the key outbound tax planning and compliance considerations for U.S. persons living abroad and U.S.-based investors with foreign holdings. It is not exhaustive — the analysis depends heavily on individual facts — but it identifies the issues that arise most frequently and carry the greatest consequences if left unaddressed.

Who should use this?

This checklist is for U.S. citizens and green card holders who live abroad or invest internationally from the United States — and for the attorneys, accountants, and advisors who work with them. It covers both the U.S. person who has relocated to a foreign country and the U.S.-based investor with foreign business interests, portfolios, or trusts.

Section 1

U.S. Tax Filing Obligations Abroad

U.S. citizens and green card holders must file U.S. tax returns and report worldwide income regardless of where they live. These obligations do not end upon departure from the United States.

Confirm that U.S. federal income tax returns are being filed annually — even if all income is foreign-source.

Failure to file carries significant penalties. The obligation continues until citizenship is formally renounced or the green card is relinquished — both of which have their own tax consequences.

Analyze whether any U.S. state continues to assert tax jurisdiction based on domicile, residency, or remaining connections to the state.

Some states — including California and New York — aggressively assert continuing tax jurisdiction over former residents. A formal domicile change analysis may be required.

Determine whether the Foreign Earned Income Exclusion (FEIE, Form 2555) applies to your earned income abroad — and whether to elect it or use the foreign tax credit instead.

The FEIE and the foreign tax credit interact in complex ways. Electing the FEIE on earned income may reduce available foreign tax credits. The optimal strategy depends on your income type, foreign tax rates, and future plans.

Analyze your social security obligations — including whether a totalization agreement with your country of residence eliminates double social security taxation.
Review whether your compensation arrangement — salary, self-employment income, or equity — is structured efficiently for dual-filing purposes.

Section 2

Foreign Tax Credit Planning

The foreign tax credit (FTC) is the primary mechanism for avoiding double taxation on foreign-source income. It requires active planning to be fully effective — it does not apply automatically in the most advantageous way.

Confirm that foreign taxes paid are being properly claimed as credits on your U.S. return — not simply deducted.

Electing the credit rather than the deduction is almost always more favorable. The election must be made annually.

Analyze your income across FTC baskets — passive, general, foreign branch, and others — to identify limitation issues and unused credit carryforwards.
Evaluate whether the high-tax exception to the PFIC or Subpart F rules applies to reduce U.S. inclusions on income already subject to high foreign tax.
Review carryforward and carryback credits from prior years — unused FTCs can be carried back one year and forward ten years.
Analyze the interaction between the FTC, NCTI inclusions, and Net Investment Income Tax (NIIT) — all of which require coordinated planning.
If you are relocating between countries, plan the transition year carefully — foreign tax credits can be lost or limited if the timing of income and taxes paid spans different tax years.

Section 3

Foreign Business Interests — CFC & Entity Classification

U.S. persons who own interests in foreign companies face reporting obligations and potential immediate U.S. taxation on undistributed income — even if the company never pays a dividend. The analysis begins with how the foreign entity is classified for U.S. tax purposes.

Determine the U.S. tax classification of each foreign entity you own — corporation, partnership, or disregarded entity.

The U.S. tax classification of a foreign entity is not always obvious and does not follow local law characterization. Under the check-the-box regulations, some foreign entities are ‘per se’ corporations, while others may elect their classification. The applicable regulations must be reviewed carefully.

Analyze whether any foreign corporation qualifies as a Controlled Foreign Corporation (CFC) — a foreign corporation in which U.S. shareholders own more than 50% of vote or value.
Identify Subpart F income within any CFC — passive income, related-party sales income, and certain other categories that must be included in U.S. gross income currently.
Model Net CFC Tested Income (NCTI) exposure — the replacement for GILTI under recent tax legislation — and evaluate available deductions and credits.

NCTI imposes a minimum tax on a CFC’s net tested income. Planning — including the use of high-tax elections and careful structuring of the CFC’s income — can reduce exposure.

Evaluate check-the-box elections for eligible foreign entities to simplify the structure and potentially eliminate CFC or PFIC classification.
Consider whether restructuring foreign entity ownership — including through holding companies or intermediate entities — reduces U.S. tax inclusion and compliance burden.
Confirm Form 5471 (foreign corporations), Form 8865 (foreign partnerships), or Form 8858 (foreign disregarded entities) filing obligations are being met.

Penalties for failure to file these forms begin at $10,000 per form per year. Reasonable cause exceptions exist but require documentation.

Section 4

Foreign Investment Portfolio — PFIC Analysis

Foreign mutual funds, ETFs, and most non-U.S. pooled investment vehicles are passive foreign investment companies (PFICs). The default PFIC regime is punitive — imposing tax and interest charges on distributions and dispositions as if income had accrued ratably over the holding period. Timely elections can significantly reduce the burden.

Step	Action	What to know
Identify	Identify all foreign mutual funds, ETFs, unit trusts, and other pooled investment vehicles in your portfolio — these are almost always PFICs.	Most non-U.S. pooled investment products fall under the PFIC regime by default.
QEF election	Determine whether a QEF (Qualified Electing Fund) election is available and whether the fund provides the required annual information statement.	A QEF election taxes PFIC income currently at ordinary rates, avoiding the punitive default regime. It requires the PFIC to provide an annual statement — many foreign funds do not, making the election unavailable.
MTM election	Evaluate whether a mark-to-market (MTM) election is preferable — treating annual appreciation as ordinary income rather than applying the default excess distribution rules.	Available only for PFIC stock that is regularly traded on a qualified exchange.
Default regime	For PFICs held without a timely election, analyze the default excess distribution rules and model the tax and interest charge on any planned distributions or dispositions.	Under the default rules, gain and excess distributions are spread over the holding period and taxed at the highest rate for each year, plus interest.
Dispose	Consider disposing of PFIC holdings and reinvesting in non-PFIC alternatives — U.S.-domiciled ETFs or direct stock holdings — to eliminate ongoing PFIC exposure.	A disposition triggers the PFIC charge once, but ends the annual compliance burden going forward.
Report	Confirm Form 8621 filing obligations — one form is required per PFIC per year. Even PFICs held with no distributions or dispositions may require annual reporting.	Missing Form 8621 can keep the statute of limitations open on the entire return.
Insurance & pensions	Assess whether any foreign life insurance, foreign annuity, or foreign pension product may be classified as a PFIC or have other adverse U.S. tax treatment.	Many foreign wrappers that are tax-favoured locally are not recognised as such under U.S. rules.

Section 5

Permanent Establishment & Business Structuring

U.S. business owners who relocate abroad while continuing to manage a U.S. business face permanent establishment risk — the risk that the foreign country will assert the right to tax U.S. business profits because management and control is exercised from within its borders.

Analyze whether your activities in the foreign country create a permanent establishment (PE) under the applicable tax treaty or domestic law of the foreign jurisdiction.

PE risk arises when a U.S. business owner habitually concludes contracts, makes key business decisions, or maintains a fixed place of business in the foreign country. Even working from home can create PE exposure in some jurisdictions.

Review your compensation arrangement — if you are an owner-employee, ensure W-2 compensation is set at an appropriate level for services rendered in the foreign country.
Evaluate whether the U.S. business entity should be restructured — or a separate foreign entity established — to properly reflect the division of activities between jurisdictions.
Assess transfer pricing considerations if the U.S. entity and any foreign entity engage in related-party transactions.
Coordinate with local counsel in the foreign country to understand local PE rules, registration requirements, and employer obligations that arise from your presence abroad.
Review whether your existing business contracts, service agreements, and intellectual property arrangements are structured appropriately for a cross-border operation.

Section 6

Foreign Trusts & Estate Planning

U.S. persons with connections to foreign trusts — as grantor, beneficiary, or trustee — face complex U.S. reporting obligations and potential income tax on trust distributions. Planning before distributions are made can significantly reduce exposure.

Identify all foreign trusts in which you have any connection — as grantor, beneficiary, or trustee.
Determine whether each trust is classified as a foreign grantor trust or a foreign non-grantor trust for U.S. tax purposes.

Foreign grantor trust status is generally more favorable for U.S. grantors — income is taxed to the grantor currently, and distributions to U.S. beneficiaries are tax-free. Foreign non-grantor trust distributions to U.S. beneficiaries may be subject to the throwback rules and interest charges.

If you are a U.S. beneficiary of a foreign non-grantor trust, analyze the DNI, UNI, and throwback tax exposure before requesting or accepting distributions.
Confirm Form 3520 and Form 3520-A filing obligations — required for U.S. persons with foreign grantor trust connections and for U.S. persons receiving distributions from foreign trusts.

Penalties for failure to file Forms 3520 and 3520-A begin at $10,000 per violation and can reach 35% of the gross value of trust assets or distributions.

Review your broader estate plan — as a U.S. person, your worldwide estate is subject to U.S. estate tax. Ensure your plan reflects this exposure and is coordinated with any foreign succession planning.
If you are making transfers to non-U.S. family members, analyze Section 2801 implications — gifts and bequests from covered expatriates to U.S. persons carry a separate transfer tax.

Section 7

Foreign Bank Accounts & Reporting Obligations

U.S. persons with foreign financial accounts must file FBAR and FATCA reports annually. These obligations apply to U.S.-based investors with foreign accounts as well as U.S. persons living abroad — the reporting requirement is not limited to those who have relocated.

List all foreign bank accounts, brokerage accounts, foreign pension accounts, and other foreign financial accounts — including accounts over which you have signature authority even if you do not own them.
File FBAR (FinCEN Form 114) annually if the aggregate value of foreign financial accounts exceeds $10,000 at any point during the calendar year.

The FBAR is filed separately from your tax return — directly with FinCEN by April 15, with an automatic extension to October 15. Willful failure to file carries penalties of up to the greater of $100,000 or 50% of the account balance per violation.

File Form 8938 (FATCA) with your U.S. tax return if specified foreign financial assets exceed applicable thresholds — $50,000 for single filers living in the U.S., higher thresholds for filers abroad.

FBAR and Form 8938 overlap but are not identical. Both may apply simultaneously. FBAR covers financial accounts; Form 8938 covers a broader range of specified foreign financial assets including foreign partnership interests and certain foreign trusts.

Confirm that foreign pension accounts are being reported — the U.S. tax treatment of foreign pension plans varies significantly by country and treaty, and reporting obligations differ accordingly.
If any prior years of FBAR or Form 8938 filing are missing, discuss remediation options with counsel — including the delinquent FBAR procedures and streamlined compliance programs.

Section 8

Treaty Planning

U.S. tax treaties can provide meaningful relief for U.S. persons abroad — but they do not eliminate U.S. worldwide taxation for citizens, and their benefits must be actively claimed. Understanding what a treaty does and does not provide is essential to outbound planning.

Identify the applicable U.S. income tax treaty — if one exists — with your country of residence or investment.
Analyze treaty-based reduced withholding rates on passive income — dividends, interest, and royalties paid from the treaty country to you as a U.S. person.
Understand the Savings Clause in the applicable treaty — most U.S. treaties preserve the U.S. right to tax its citizens as if the treaty did not exist, limiting treaty benefits for U.S. citizens.

Treaty tie-breaker rules — which determine residence for treaty purposes when a person is resident in both countries — are generally not available to U.S. citizens to escape U.S. worldwide taxation due to the Savings Clause. Non-citizen U.S. residents (including green card holders) may have more flexibility.

Identify treaty-based exceptions to the Savings Clause — certain provisions, such as relief from double taxation and pension articles, are preserved even for U.S. citizens.
If a treaty-based return position is taken, confirm that Form 8833 (Treaty-Based Return Position Disclosure) is filed with your U.S. tax return.
Analyze whether a U.S. estate tax treaty provides relief for assets in the treaty country — estate tax treaties are far less common than income tax treaties and operate differently.

Section 9

Coordination & Professional Engagement

Outbound tax planning requires coordination across U.S. and foreign advisors. The failure to coordinate — particularly between U.S. tax counsel, foreign tax advisors, and financial advisors — is one of the most common sources of missed planning opportunities and inadvertent non-compliance.

Engage U.S. international tax counsel with specific outbound experience — CFC, PFIC, FTC, and treaty planning require specialized knowledge not held by all U.S. tax practitioners.
Engage a local tax advisor in your country of residence or investment to analyze foreign tax obligations and coordinate dual-filing strategy.
Ensure your financial advisor or private banker is aware of the PFIC and CFC implications of your portfolio — many foreign-based financial advisors are not familiar with U.S. tax requirements.
If you own a U.S. business, ensure your U.S. business counsel and accountants are aware of the permanent establishment and entity structuring implications of your relocation.
Review your overall advisory team annually — as tax laws change (including the recent replacement of GILTI with NCTI), your planning strategy may need to be updated.
If you are considering eventual expatriation, begin the analysis well in advance — exit tax planning under Section 877A requires a multi-year runway to be fully effective.

Questions About Your U.S. Tax Obligations Abroad?

Concepción Global PLLC advises U.S. citizens and green card holders living and investing abroad on the full spectrum of U.S. outbound tax planning — from CFC and PFIC structuring to foreign tax credit optimization, treaty planning, and international information return compliance advisory. We work in English, Spanish, French, and Portuguese. Christine Alexis Concepción, Esq. caconcepcion
@concepcionlaw.com | +1.305.444.6669 201 South Biscayne Boulevard, Suite 2832, Miami, Florida 33131 concepcionlaw.com

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