Outbound Tax Planning
U.S. tax planning for American citizens and residents living, working, and investing abroad — and for closely held businesses with operations or owners across borders.
From portfolio restructuring to permanent establishment analysis, across Europe, Latin America, and beyond.
The U.S. Tax Obligation Follows You — Wherever You Go
The United States is one of only two countries in the world that taxes its citizens on worldwide income regardless of where they live. A U.S. citizen who moves anywhere in the world does not escape U.S. taxation — they simply add a foreign tax layer on top of it. Without careful planning, the result can be double taxation, complicated tax filings, inefficient cross-border structures, missed foreign tax credit opportunities, and compliance exposure that compounds over time.
Outbound tax planning addresses the full range of U.S. tax issues that arise when U.S. persons live, work, invest, or operate businesses outside the United States. It encompasses income tax planning, foreign tax credit optimization, the structuring of foreign business interests under the controlled foreign corporation (CFC) and passive foreign investment company (PFIC) regimes, treaty planning, and the ongoing compliance obligations that attach to U.S. persons with foreign financial accounts, entities, and trusts.
Effective outbound counsel must understand not only the U.S. tax rules but also the practical realities of clients living or investing abroad — including the interaction between U.S. and foreign tax systems, permanent establishment risk for business owners operating from abroad, and the dual-filing obligations that arise when two tax systems apply simultaneously. We advise U.S. persons living and investing abroad from initial planning through ongoing compliance.
A Structured Approach From Departure Planning Through Ongoing Compliance
A disciplined, phase-based methodology from initial outbound analysis through long-term planning and compliance.
Departure, Investment & Initial Planning
- Compensation and entity structuring for business owners abroad
- Permanent establishment risk assessment for business owners
- Foreign Earned Income Exclusion (Form 2555) eligibility analysis
- Foreign tax credit planning — direct and indirect credits
- Net investment income and NIIT exposure analysis for investors abroad
Ongoing Outbound Planning
- CFC analysis — Subpart F, NCTI (Net CFC Tested Income), and FDII planning
- PFIC analysis and restructuring — QEF and mark-to-market elections
- Foreign tax credit optimization and limitation planning
- Check-the-box elections for foreign entities
- Treaty-based planning for reduced withholding rates on passive income
- Foreign trust and estate planning for U.S. persons
Annual Compliance Advisory
- Advising on U.S. federal and state income tax return preparation
- FBAR (FinCEN Form 114) — advising on filing obligations
- Form 8938 (FATCA) — advising on compliance requirements
- Forms 5471, 8865, 8858, 8621 — advising on foreign entity reporting
- Forms 3520 / 3520-A — advising on foreign trust reporting obligations
- Coordination with return preparers and foreign tax advisors
Who We Advise
We advise U.S. persons across a broad range of outbound situations — from individuals who have recently relocated abroad to long-term expatriates with complex multi-jurisdictional lives.
U.S. Citizens Living Abroad
Americans who have relocated to Europe, Latin America, or elsewhere and need ongoing U.S. tax compliance, foreign tax credit planning, and coordination with their local tax advisors.
U.S. Business Owners Operating Abroad
Entrepreneurs and executives who have moved abroad while continuing to own or manage a U.S. business — requiring permanent establishment analysis, compensation structuring, and dual-filing compliance.
U.S. Investors with Foreign Portfolios
U.S. persons holding foreign mutual funds, ETFs, and other investment vehicles that may be classified as PFICs — requiring portfolio restructuring and ongoing Form 8621 advisory to avoid punitive tax treatment.
U.S. Persons with Foreign Business Interests
U.S. persons who own interests in foreign entities, requiring (i) potential restructuring; (ii) CFC and PFIC analysis; and (iii) international information return compliance advisory across their foreign holdings.
Dual-Resident Individuals
Individuals who are tax residents of both the United States and a foreign country — requiring treaty tie-breaker analysis (note: treaty tie-breaker rules are generally not available to U.S. citizens due to the Savings Clause in most U.S. tax treaties), coordinated filing strategies, and planning to minimize double taxation.
U.S. Persons with Foreign Trusts & Estates
U.S. grantors and beneficiaries of foreign trusts, and U.S. persons with interests in foreign estates — requiring trust classification, distribution planning, and Forms 3520 and 3520-A compliance.
Technical Depth Across the Full Outbound Tax Landscape
Depth across the U.S. tax provisions most consequential for U.S. persons living, working, and investing abroad.
Foreign Earned Income Exclusion & Housing
Analysis of FEIE eligibility under the physical presence and bona fide residence tests, Form 2555 preparation, and coordination with the foreign tax credit to minimize overall U.S. tax liability.
Foreign Tax Credit Planning
Optimization of direct and indirect foreign tax credits — including limitation planning across income baskets, carryforward strategies, and treaty-based credit analysis to eliminate double taxation.
CFC & NCTI Planning
Controlled foreign corporation (CFC) analysis for U.S. shareholders — identifying Subpart F income inclusions, modeling Net CFC Tested Income (NCTI) exposure, and planning FDII deductions for U.S. exporters of intangible income.
PFIC Analysis & Elections
Identification of passive foreign investment companies (PFICs) in client portfolios, QEF and mark-to-market election analysis, and ongoing Form 8621 compliance to avoid the default punitive PFIC regime.
Permanent Establishment & Business Structuring
Assessment of PE risk for U.S. business owners managing U.S. operations from abroad, compensation and entity restructuring to minimize exposure, and coordination with local counsel in the foreign jurisdiction.
Social Security & Totalization
Analysis of U.S. social security obligations for Americans working abroad and self-employed U.S. persons, including totalization agreement benefits available in countries with bilateral agreements with the United States.
Treaty Planning
Analysis of applicable U.S. income tax treaties — identifying reduced withholding rates, treaty-based exemptions, and treaty-based return positions (Form 8833) for dual-resident individuals.
International Information Returns
Advisory on all foreign reporting obligations — FBAR, Form 8938, Forms 5471, 5472, 8865, 8858, 8621, 3520, and 3520-A — with penalty abatement strategies for prior non-compliance.
Representative Matters
Select anonymized engagements. Prior results do not guarantee a similar outcome.
BUSINESS RELOCATION
United States / Spain
Counseled a U.S. citizen relocating a U.S.-based business to Spain on permanent establishment risk, entity restructuring, dual-filing obligations, W-2 compensation planning, and social security totalization — aligning the business structure with the individual’s new residency from the outset and coordinating with Spanish tax counsel on the local filing obligations.
INVESTMENT PORTFOLIO
United States / Belgium
Advised a U.S. citizen living in Belgium on restructuring a foreign investment portfolio to avoid PFIC classification, manage Net Investment Income Tax (NIIT) exposure, and satisfy ongoing Form 8621 compliance obligations — coordinating with a Belgian tax advisor on the dual-filing strategy.
COMPLIANCE REMEDIATION
United States / Belgium
Assisted a U.S. citizen residing in Belgium with amending a prior-year U.S. federal tax return to claim the Foreign Earned Income Exclusion (Form 2555) that had been omitted by a prior advisor — recovering a significant overpayment and bringing the client’s U.S. compliance position current for dual-filing in the United States and Belgium.
CFC PLANNING
United States / Europe
Advised a U.S. citizen with interests in multiple foreign corporations on CFC analysis, Subpart F income characterization, and NCTI planning — implementing check-the-box elections and restructuring foreign entity ownership to reduce U.S. tax inclusion and simplify the ongoing compliance footprint.
FOREIGN TRUST
United States / Latin America
Advised a U.S. person who was a beneficiary of a foreign non-grantor trust on the U.S. tax consequences of trust distributions — including DNI, UNI, and throwback tax analysis — and on Form 3520 reporting obligations and penalty exposure for prior years in which distributions had been received without reporting.
Frequently Asked Questions
Do U.S. citizens and green card holders living abroad still owe U.S. tax?
Yes. The United States taxes its citizens and lawful permanent residents (green card holders) on worldwide income regardless of where they live or where the income is earned. Unlike most countries, the U.S. tax obligation is based on citizenship and immigration status — not physical presence. A U.S. citizen or green card holder who has lived in France, Spain, or Brazil for decades remains fully subject to U.S. income tax, estate tax, and reporting obligations. The obligation ends only upon formal renunciation of citizenship or relinquishment of the green card — both of which trigger their own significant tax consequences.
I live in the U.S. and own an interest in a foreign company. Do I need to report it?
Almost certainly yes — and the reporting obligations are more extensive than most clients expect. A threshold question, however, is how the foreign entity is classified for U.S. tax purposes. The U.S. tax classification of a foreign entity is not always obvious and does not simply follow the entity’s local law characterization. Under the U.S. check-the-box regulations, certain foreign entities are classified as corporations by default (so-called ‘per se’ corporations), while others may be eligible to elect their classification as a corporation, partnership, or disregarded entity. The applicable regulations must be carefully reviewed to determine the correct U.S. classification — which in turn determines which reporting forms apply and whether the CFC or PFIC regime is implicated. Once classification is established, U.S. persons with interests in foreign corporations must file Form 5471 annually if they meet certain ownership thresholds. U.S. partners in foreign partnerships file Form 8865. Owners of foreign disregarded entities file Form 8858. Beyond the reporting obligation, ownership of a foreign corporation may trigger CFC status — requiring the U.S. shareholder to include Subpart F income and Net CFC Tested Income (NCTI) in U.S. gross income currently, even if no distribution is made. Penalties for failure to file these forms begin at $10,000 per form per year and can increase significantly with continued non-compliance.
What is a controlled foreign corporation (CFC) and how does it affect my U.S. tax?
A controlled foreign corporation is a foreign corporation in which U.S. shareholders collectively own more than 50% of the vote or value. U.S. shareholders of CFCs are subject to two key regimes. First, Subpart F requires current inclusion of certain categories of passive or easily movable income — regardless of whether the CFC distributes it. Second, the Net CFC Tested Income (NCTI) rules — which replaced GILTI under recent tax legislation — impose a minimum tax on the CFC’s net tested income. Without planning, a U.S. person who owns a profitable foreign business through a CFC can face material U.S. tax liability on income that never reaches their hands.
What is a PFIC and what are my planning options?
A passive foreign investment company (PFIC) is a foreign corporation that meets either an income test (75% or more of gross income is passive) or an asset test (50% or more of assets produce passive income). Most foreign mutual funds, ETFs, and pooled investment vehicles are PFICs. The default PFIC regime is punitive — imposing tax and interest charges on excess distributions and dispositions as if income had been earned ratably over the holding period. Two elections can significantly reduce the burden: a Qualified Electing Fund (QEF) election, which taxes PFIC income currently at ordinary rates; and a mark-to-market election, which treats annual appreciation as ordinary income. Both must be made in the first year of PFIC ownership to be fully effective. For U.S. persons moving abroad with existing foreign portfolios, pre-departure restructuring — including disposing of PFIC holdings before U.S. tax obligations attach — is often the cleanest solution.
Can I use a U.S. tax treaty to reduce my U.S. tax as a U.S. citizen living abroad?
Generally no — at least not to escape U.S. worldwide taxation. Most U.S. income tax treaties contain a Savings Clause that preserves the United States’ right to tax its own citizens as if the treaty did not exist. This means a U.S. citizen living in a treaty country cannot use the treaty’s tie-breaker provisions to be treated as a non-U.S. resident for U.S. tax purposes. Treaties can, however, provide meaningful relief in other ways — reducing withholding rates on passive income, eliminating double taxation through coordinated credit mechanisms, and addressing specific categories of income such as pensions, government pay, and certain business profits. Non-citizen U.S. residents — including green card holders — may have more treaty flexibility in certain circumstances, depending on the specific treaty and facts.
How does the foreign tax credit work and can it eliminate my U.S. tax?
The foreign tax credit (FTC) allows U.S. persons to offset U.S. tax liability with taxes paid to foreign governments on the same income — the primary mechanism for avoiding double taxation. The credit is subject to a limitation that prevents it from reducing U.S. tax below zero, and it is computed separately across different income baskets — passive, general, foreign branch, and others — which can limit its effectiveness in certain situations. With careful planning, the FTC can be optimized to substantially reduce or eliminate U.S. tax on foreign-source income. However, it interacts in complex ways with the PFIC and CFC regimes, NCTI inclusions, and the Net Investment Income Tax — all of which require coordinated analysis.
Outbound Tax Planning Checklist: U.S. Persons Living or Investing Abroad
A practical guide for U.S. citizens and residents with cross-border lives — whether you live abroad or invest internationally from the United States. Covers foreign tax credit planning, CFC and PFIC exposure, FBAR and Form 8938 obligations, foreign entity reporting, and coordination with your tax advisors.
The information on this page is provided for informational purposes only and does not constitute legal advice. No attorney-client relationship is formed by use of this website. All engagements are subject to a conflicts check and execution of an engagement letter. Prior results do not guarantee a similar outcome.