[piker]

It's not that it has punitive taxes for expats, it's just that as a US citizen, the US doesn't care where you live -- you're subject to US tax. It has rules for everyone that prohibit deferring income taxes which implicate non-US tax-opaque entities, but that's not so much of a capital gains concern as a timing issue.

It's much simpler in many ways, although it creates its own issues with juggling tax treaties and realization timing.

Forcing you to pay a tax on unrealized gains is anathema to the US system, and would definitely burden founders to the extent they'd be well advised not to form in that jurisdiction in the first place.

[LadyCailin]

PFIC taxation, of which some pension accounts qualify, as well as all mutual funds and ETFs, is absolutely punitive, and does in fact charge taxes on unrealized gains. Even if you don't have any PFICs, or even owe taxes to the US, the fact that you need to pay an accountant ~$500+, just to file the taxes, is in my opinion punitive as well.

[piker]

Well there are actual realizations in the ETF and mutual fund context, and the market has simply decided that structure still works for the commingled investments of US taxpayers. PFIC taxation I concede is a head-scratcher, but it's somewhat orthogonal to the capital gains issue. The big take home is that the US wants tax on all of your income, and it doesn't want you hiding any of that offshore. I'm an expat who deals personally with the last issue, and again I agree it's quite frustrating, but that's not what punitive means. That's just the type of frustration that arises when one is required to synchronize one or more complex systems.