Dunhill, who runs his own financial advice business in the Belgian capital, believes any American taxpayer who owns more than 10% of a non-US business could be liable if they don’t plan effectively.
The tax has been widely reported but only in the context of giants like Google and Apple, at which the levy is specifically targeted.
At the end of September, Apple held $250bn (€202bn, £180bn) offshore, according to Bloomberg. It has since pledged to bring $200bn back to US soil.
Caught in the net
Dunhill, however, believes expats will be an unwitting by-catch of the 45th president’s efforts to bring offshore profits home.
"I get the impression this could be a much bigger problem than we originally thought."
“The repatriation rules were designed to persuade the large corporations such as Apple and Google to bring their large profits back to the US but they could affect many smaller firms as well,” he explained.
“As opposed to the current local tax rates, the one-time repatriation tax of 15.5% on the profits businesses have accumulated overseas could affect companies whether they decide to bring the funds home or not.
“The new tax would impact all US citizens or green card holders that have more than 10% of a ‘controlled foreign corporation’, (CFC) and they will be forced to pay this tax within eight years. A CFC is an overseas business in which US shareholders control more than 50% of the voting rights.”
The tax is an additional burden to US citizens living abroad who must report their earnings regardless of their domicile. They also face the Foreign Account Tax Compliance Act (Fatca), which has seen some financial institutions refuse to service US clients due to the onerous reporting requirements and risk being hit with a 30% withholding tax.
Dunhill told International Adviser: “In Belgium, this will actually impact many of our clients working as consultants making over €60,000 (£53,509, $73,928) have set themselves up as limited companies.
“I get the impression this could be a much bigger problem than we originally thought.”
Those affected by the new measure which came into effect late last year are advised to contact a specialist accountant.