# Qualified Dividends?



## engine987 (Mar 6, 2015)

I hold joint US/UK citizenship but was born and am resident in the UK. I'm an automotive design consultant and I started my own limited company - I'm the only employee. Like many consultants/contractors, I pay myself a small salary and a large amount of dividends each month. As I have to file a US tax return, I'm trying to find out whether the dividends I receive are qualified or ordinary for US tax purposes. 

I've had a look on the Internet but explanations are not very clear for my circumstances. I started my company in mid-Dec 2018 and started trading on 1 Jan 2019; I take a dividend towards the end of each month. Can anyone give me a definitive answer as to whether I can consider my dividends as qualified?


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## nyclon (Apr 3, 2011)

I've moved your post to the tax forum where you should get more input.


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## Nononymous (Jul 12, 2011)

If you have UK citizenship and UK birthplace, you can keep yourself entirely out of the US tax system - don't disclose US citizenship to banks, don't file US tax returns.

If you have US financial ties, business or family, then perhaps it makes sense to be in the US tax system. Most often it does not, as there is no risk of punishment for failing to file.


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## engine987 (Mar 6, 2015)

Thanks!


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## Nononymous (Jul 12, 2011)

If you need to know more about extricating yourself from US tax obligations, ask here or head on over to the Isaac Brock Society (a Canadian organization). With a UK birthplace it will be very easy for you to avoid FATCA reporting. If you have family or business reasons to maintain US ties, it could be more complicated.


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## engine987 (Mar 6, 2015)

Thank you. Unfortunately, I am a US citizen so cannot skip the obligations.


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## Nononymous (Jul 12, 2011)

engine987 said:


> Thank you. Unfortunately, I am a US citizen so cannot skip the obligations.


Of course you can. Global compliance rates are under 10 percent. The IRS has severely limited resources to look for non-compliant citizens abroad, and no ability to collect taxes and penalties (with very limited exceptions in five countries only, but not for dual citizens). Unless you are extremely wealthy and somehow known to them, they will leave you alone. 

If you have family ties like expected inheritance from the US, that may complicate matters. Similarly, if your career involves working for US clients and travel (entry with a US passport) that may also complicate matters.

But if you are living and working in the UK, there is no reason for you to submit US tax returns every year. You can avoid FATCA reporting by opening bank accounts with your UK passport showing UK birthplace - do not disclose US citizenship when asked. That's really it, nothing more to do, you are quite perfectly safe.

If you have disclosed US persons status to a UK bank, and have been filing, then it's a little trickier. You would need to move to a new bank (without disclosing) and stop sending in tax returns. The IRS would likely never trouble you further.


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## engine987 (Mar 6, 2015)

Again, thank you for the info. In spite of the onerous obligation surrounding the submission of tax returns, I may be travelling to or working in the US at some point in the future.


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## Nononymous (Jul 12, 2011)

engine987 said:


> Again, thank you for the info. In spite of the onerous obligation surrounding the submission of tax returns, I may be travelling to or working in the US at some point in the future.


I would cross that bridge when I come to it, personally. 

For travel to the US you can enter on a UK passport; if you'd prefer to use a US passport there is currently no requirement to be tax compliant to obtain or renew, though the application form does request your Social Security Number. 

If you plan on moving to the US, you can become compliant then. The only reason to get busy now is that you need to demonstrate five years' compliance to sponsor a spouse for a green card.

In the end it's everyone's personal decision, but be aware that there is currently no risk to your not filing US tax returns; even better if your banks are not aware of US person status, so that there is no FATCA reporting.

Note also that even in the UK some banks have denied investment and other services to US-person customers. So you may want to ensure that banks never know. It is greatly to your advantage that you were born in the UK; dual citizens with a US birthplace have really struggled with banking in some European countries.


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## 255 (Sep 8, 2018)

engine987 -- From Investopedia: "Requirements for Qualified Dividends 
Qualifying foreign companies 
A foreign corporation qualifies for the special tax treatment if it meets one of the following three conditions: the company is incorporated in a U.S. possession, the corporation is eligible for the benefits of a comprehensive income tax treaty with the United States or the stock is readily tradable on an established securities market in the United States. A foreign corporation is not qualified if it is considered a passive foreign investment company."
Cheers, 255


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