Blacktower FM - Issue 18 - 2026 Magazine - Flipbook - Page 70
DEUGBAACI YE D
L
ED
I TI ITOI O
NN
ECONOMICS
U.S. CONNECTED
INDIVIDUALS IN UAE
By Patrick Macdonald, Senior Financial Adviser at Blacktower Financial Management
With a growing number of U.S.
Na琀椀onals moving overseas to the
UAE for greater career opportuni琀椀es,
it is important to stay informed
about your obliga琀椀ons to the Internal
Revenue Service (IRS) and explore the
lesser-known opportuni琀椀es available
to you as a non-U.S. resident. These
include a mul琀椀tude of tax sheltering
solu琀椀ons for your wealth and exis琀椀ng
investments.
The U.S. is a very popular des琀椀na琀椀on
for investment opportuni琀椀es for
foreign investors and is home to some
of the largest and most pro昀椀table
organisa琀椀ons in the world. Almost all
investment funds and managers hold
some exposure to U.S. assets, given its
posi琀椀on as the largest market globally.
Similarly, we have found that many
individuals like to invest directly either
through a banking pla琀昀orm or some
form of online trading account from
anywhere in the world.
For this reason, it is essen琀椀al to
understand how the U.S. treats
individuals from a tax perspec琀椀ve. You
can be a na琀椀onal or foreign na琀椀onal; if
you are the la琀琀er, we must determine
what type of ‘alien’ you are. You can
be classi昀椀ed either as a “resident” or
a “non-resident” alien, and depending
upon which category you fall into, this
leads to di昀昀erent styles of taxa琀椀on.
An ‘alien’ in U.S. tax terminology is an
individual who is not a U.S. ci琀椀zen,
green card holder or U.S. tax resident.
THE U.S. “DEATH” TAX
Most countries have death, estate or
inheritance tax legisla琀椀on, and how
70
that applies to the individual is speci昀椀c
to their country of domicile. This is not
to be confused with residence (which
considers income tax implica琀椀ons
whilst you are alive).
However, most governments globally
impose a death tax on assets held
in their country, regardless of the
owner's domicile or residence status
and in many cases the holding
structure. Holding U.S. situs assets
such as property (real estate), art,
classic vehicles or direct shares in U.S.
companies falls under the U.S. Federal
estate tax radar and can be subject to
tax upon your death. And, for nonU.S. domiciled individuals, the estate
tax typically applies only to U.S. situs
property, which includes tangible and
intangible property owned and stock
issued by U.S. persons or companies.
At the date of your death, the U.S.
adopts a fair market value of the
assets, which is the basis for the tax
calcula琀椀on. In essence, as a nondomicile and/or non-resident alien
holding assets in the U.S. like stock/
property through any form of structure
(Trust/Company) you will be liable to
estate taxes.
The U.S. does provide a tax-free
allowance of $60,000 before any
U.S. estate tax is applied for foreign
na琀椀onals. This collec琀椀ve 昀椀gure applies
to the total estate value and not on
a per-asset or per-holding basis. Any
amount exceeding this threshold is
taxed at a top rate of 40%.
More crucially, any tax due must be
paid before the asset(s) can pass to
the next genera琀椀on/bene昀椀ciaries. The
Executor of the estate is personally
liable to pay the estate taxes if
assets are passed before the estate
tax is se琀琀led. These assets include
speci昀椀cally U.S. real estate, stocks and
any deposit accounts also referred to
as situs assets.
The List of Assets Subject to Estate
and Gi昀琀 Taxes Are:
•
•
•
•
U.S. Real Estate
Stocks of U.S. Corpora琀椀ons (for
U.S. Estate Tax Only). For gi昀琀
tax purposes, stock of a U.S.
Corpora琀椀on is an intangible asset
and is therefore not subject to
U.S. gi昀琀 tax
Deposits with U.S. Investment
Companies
Deposits in U.S. Commercial
Banks or Savings and Loans
connected with a U.S. Trade or
Business
THE IMPORTANCE OF EFFECTIVE
PLANNING AND SOLUTIONS
Individuals must take advice and
plan accordingly if they own U.S.
situs assets. Almost all interna琀椀onal
investors will hold these assets within
their por琀昀olios in some form. Most are
unaware that they are exposed to this
tax regardless of their interna琀椀onal
a昀昀airs and holding structures.
Other than cu琀�ng all 昀椀nancial 琀椀es
with the U.S., a poten琀椀al solu琀椀on
to mi琀椀gate this tax could be the use
of Private Placement Life Insurance
(PPLI). This is a specialised policy
that has been an e昀昀ec琀椀ve planning
