US estate tax on US shares: the “tax trap” for non-US residents
Do you live in Dubai or the GCC and own shares in a US company — perhaps via an employee scheme? Do you know these assets can be subject to a huge tax bill when you die? If not, it’s time to look at the US federal estate tax regime for non-US citizens and how you may be able to shield assets against it.

Why this is common in the Middle East
It’s very common for investors who are not US citizens or green card holders to own shares in US companies, such as those listed in the S&P 500. There are also many US corporations operating in the Middle East who reward employees with vested company shares as part of remuneration.

Over time these holdings can increase significantly in value, so it’s important to be aware of lesser-known US tax traps for non-US citizens — and this is a big one.

The key concept: “US situs” assets
The issue for non-US citizens (or non-US domiciled persons) arises on death — not a subject many of us care to think about, but in this instance we certainly should. It’s all to do with owning what are known as US situs assets.

“Situs” is defined as the place to which, for purposes of legal jurisdiction or taxation, a property belongs. For this topic, that can cover US company shares — even if they’re held in non-US accounts, such as a custody platform in Europe, or traded on exchanges outside the US.

So what’s the fuss?
If you own US situs shares or assets — irrespective of the fact you may never have lived in the US — upon your death as a non-US citizen, those shares can be liable to US estate (death) taxes of up to 40%.

There is an allowance, but it’s only $60,000, and values in excess of that figure are potentially exposed to the tax.

How planning may help
If you have loved ones or other beneficiaries you wish to leave assets to, there are financial and estate planning tools that may help ensure the IRS does not take a large portion of your legacy. We can use effective and flexible arrangements to help shield assets from this tax and protect your shares.

What’s more, there may be no need to sell them — shares can sometimes be relocated using an in-specie transfer from your current broker or platform directly into a more beneficial holding vehicle. The aim is to ring-fence assets so beneficiaries can receive their value, while you retain control during your lifetime.

A note on treaties
As a footnote, the US does have estate tax treaties with a handful of countries which may help to reduce the death-tax effect in certain cases. However, it depends on your individual situation, so it’s sensible to get a full review.

Next steps
My name is Patrick Macdonald. You can find my contact details below. Please do get in touch, and thank you for watching — I’ll see you in the next one.