傳之所愛
承之所衷

The Streamlined Filing Compliance Procedure is a voluntary disclosure program offered by the IRS specifically for U.S. taxpayers (including U.S. citizens, green card holders, and tax residents) who have long failed to report foreign income or foreign financial assets. It provides a "reduced-penalty" or "penalty-free" path back into compliance.

The core purpose of this program is to allow taxpayers whose non-compliance was non-willful to return to a compliant state through a streamlined process.

Through the Streamlined procedure, you are not required to file all historical years without limit. The IRS only requires the following:

• 3 years of federal individual income tax returns (Form 1040 or 1040X).
• 6 years of Foreign Bank Account Reports (FBAR, FinCEN Form 114).
• A signed non-willfulness certification (Form 14653 or 14654), explaining in detail the reasons for prior non-compliance.

The U.S. annual tax filing is not a single form that covers everything. It is made up of three distinct systems: individual income tax returns, foreign financial asset reports, and state & local taxes.

As long as you qualify as a U.S. tax resident — whether you live in the U.S. or in Taiwan — you are required by law to complete the following three key obligations each year:

This is the primary return that every U.S. taxpayer must file. The U.S. operates under worldwide income taxation — meaning all income earned anywhere in the world must be reported.

• Common income types: W-2 wages, dividends and capital gains from U.S. and Taiwan stocks, Taiwan rental income, bank interest, and freelance income.
• Common accompanying schedules:
  • Schedule B: Interest and dividends.
  • Schedule D: Capital gains and losses from stocks, real estate, and other assets.

To prevent offshore tax evasion, the U.S. government requires taxpayers to honestly disclose all foreign accounts. This typically involves two forms:

1. FBAR (FinCEN Form 114): If the aggregate maximum annual balance of all your financial accounts outside the U.S. (deposits, securities, cash-value insurance policies) exceeds $10,000, you must file separately with the U.S. Treasury.
2. FATCA (Form 8938): An attachment to Form 1040. Reporting thresholds are higher than FBAR and cover foreign financial assets including bank accounts, cash-value policies, and equity in unlisted companies. Thresholds vary by residency and filing status.

In addition to federal taxes, if you live, work, or earn income in a specific U.S. state (e.g., rental property in California or a salary from a New York company), you are generally also required to file that state's personal income tax return.

For Taiwanese nationals facing U.S. tax obligations, the most critical first step is determining your tax status. The difference is enormous — it determines whether you're taxed on worldwide income or only U.S.-source income.

We generally divide situations into two categories:

1. Taiwan-based U.S. stock investor: Classified as a Non-Resident Alien (NRA) under U.S. tax law.
2. Worker relocating to the U.S.: Once holding an H-1B, L-1, or similar work visa and passing the Substantial Presence Test, you become a U.S. Tax Resident (US Person).

If you invest in U.S. stocks through a Taiwan brokerage and have filed a W-8BEN form, here are the key tax points:

1. Dividends — 30% Withholding Tax

   Dividends paid by U.S. companies to foreign nationals are subject to a mandatory 30% withholding tax (since Taiwan and the U.S. currently have no substantive tax treaty, Taiwan investors cannot enjoy the reduced 10%–15% rates available to Japanese or Chinese investors). The broker withholds it directly — no self-reporting required.

2. Capital Gains — 0% Tax

   Capital gains earned by Taiwanese investors from buying and selling U.S. stocks are completely exempt from U.S. tax (0%)!

Once you work in the U.S. on a work visa, spend at least 31 days in the current year, and meet the 183-day threshold under the Substantial Presence Test over three years, you legally become a U.S. tax resident — and your tax environment changes dramatically:

For the past three decades, Cayman Islands, BVI, and other tax havens served as the go-to jurisdictions for offshore trusts due to their secrecy and zero tax rates. However, as the global anti-tax-avoidance wave has swept the world, the myth of offshore secrecy has collapsed.

High-net-worth families now increasingly favor U.S. trusts in specific states (Nevada, South Dakota, Delaware) — not out of trend-following, but for four compelling advantages: privacy regulations, legal stability, asset control, and tax compliance.

• The Fatal Flaw of Offshore Islands: Cayman, BVI, Bermuda, and similar jurisdictions have all joined CRS (Common Reporting Standard). This means trust asset information, settlor identities, and beneficiary identities are automatically exchanged with the beneficiaries' home tax authorities (e.g., Taiwan or China) every year. Offshore trusts are essentially transparent to tax authorities.
• The U.S. Trust Advantage: The U.S. has refused to join CRS. It uses its own FATCA to collect information globally — but does not proactively exchange non-U.S. clients' information held within U.S. trusts with other countries. Assets held in U.S. trusts enjoy the highest level of privacy protection available anywhere in the world.

• The Crisis of Offshore Islands: Caribbean jurisdictions constantly face EU blacklist/greylist sanctions, forcing frequent regulatory changes (e.g., new "Economic Substance Laws"), causing compliance costs to surge and structures to become unstable. In a major geopolitical conflict, these small jurisdictions have no meaningful defensive capability.
• U.S. Trust Stability: The U.S. possesses the world's most powerful financial and military sovereignty. Trust laws in specific states (South Dakota, Nevada) are backed by constitutional-level state laws and centuries of federal judicial precedent. Their legal predictability, stability, and resistance to external litigation are unmatched by any offshore jurisdiction.

How long a trust can survive determines how many generations it can serve:

• Traditional Offshore Islands: Typically subject to the "Rule Against Perpetuities" (e.g., maximum 100 or 150 years). When the trust expires, it must be dissolved and assets distributed — triggering substantial tax liability.
• Specific U.S. States: South Dakota and Nevada have abolished the Rule Against Perpetuities. Dynasty Trusts established in these states can exist permanently (even up to 360 years or indefinitely). Your family's wealth can remain locked within the trust structure for generations, compounding internally while minimizing estate tax risk.

• The Limitation of VISTA Trusts: While BVI developed the VISTA trust to allow settlors to retain voting rights over company shares, its regulatory flexibility remains constrained by the British common law framework.
• The Flexibility of U.S. Directed Trusts: The U.S. pioneered the world's most sophisticated "Directed Trust" regulations. It splits the traditional trustee role into four distinct functions:
  1. Administrative Trustee: Responsible only for regulatory compliance and day-to-day administration.
  2. Trust Protector: The most powerful role in the trust — can add or remove beneficiaries, direct trust division, change trustees, and more.
  3. Investment Committee: Staffed by you or your designated professionals, with full authority over how trust assets are invested — the trust company has no right to interfere.
  4. Distribution Committee: Decides when and how distributions are made to beneficiaries.
  This completely resolves the ultimate anxiety of Asian entrepreneurs: "Giving control of my assets to a foreign trust company is unsafe — I can't manage it myself."

If your only estate planning goal is to avoid probate, a standard revocable trust is sufficient. But if you want to reduce exposure to the 40% U.S. estate tax, or protect assets from future creditors, lawsuits, or a child's divorcing spouse, then an Irrevocable Trust is the only option.

Its fundamental core logic is: "Complete Divestiture of Ownership." Once you transfer U.S. real estate, U.S. stocks, or cash into an irrevocable trust, you are no longer the legal owner of those assets. Because a U.S. Irrevocable Trust is a separate legal entity, the IRS cannot impose estate tax at your death, and creditors cannot pursue assets held within it.

1. Tax Risk Mitigation: Once assets are transferred, ownership is relinquished. Upon the death of a non-U.S. settlor, the risk of U.S. estate tax on those assets is substantially reduced.
2. Asset Protection: The trust includes a "Spendthrift Clause." Because beneficiaries have no direct control over the trust, when they face lawsuits, debt crises, or divorce proceedings, trust assets are fully shielded by law — creditors cannot seek repayment from trust assets.
3. Dynasty Trust: Under Nevada law, the trust can exist for hundreds of years, achieving true multi-generational wealth transfer.
4. Probate Avoidance: Upon the settlor's death, the trust continues to operate normally. Assets do not need to go through months of court liquidation — beneficiaries can continue to receive trust benefits without interruption.