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Lev, Tax Advisor
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Experience:  Taxes, Immigration, Labor Relations
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I reside in the US as a green card holder, am a UK citizen

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I reside in the US as a green card holder, am a UK citizen but am non-domiciled from a UK tax perspective. I hold some investments in the UK that I expect to sell in the near term. I have two questions relating to this:
1) I believe that any capital gain on the investments will only be taxable in the US due to my non-domiciled status in the UK and the UK/US tax treaty. Is this correct?
2) One of my investments is within an Individual Savings Account (ISA) an investment vehicle that makes all capital gains and income tax free (similar to a Roth IRA). While the UK government treats this as tax free, is it safe to assume that the US government would expect taxes to be paid on any capital gain?
Thanks in advance for any assistance.
Submitted: 6 years ago.
Category: Tax
Expert:  Lev replied 6 years ago.


You are correct that as a green card holder you generally is considered an US resident for tax purposes and all your income worldwide is taxable in the US.


If the same income is taxable in the US and abroad - you will be able to claim a credit for foreign taxes paid on your US tax return.



The distribution from Individual Savings Account (ISA) is treated as a pension income. Your contributions are part of your Cost basis and only earnings are included into taxable income.


As a general rule, the pension/annuity articles of most tax treaties allow the country of residence (as determined by the residency article) to tax the pension or annuity under its domestic laws. This is true unless a treaty provision specifically amends that treatment.

US-UK tax treaty specifically exclude pensions paid from public funds, but not the type of payment you mentioned.

You may review tax treaty here -

and here are nice comments -


Let me know if you need any help.


Customer: replied 6 years ago.



thanks for your reply and apologies for the delayed response. I'm clear on part 1 of your answer but wasn't entirely sure about point 2 so was hoping to clarify further....

I have read elsewhere that ISAs are treated as "Passive Foreign Investment Companies" rather than pension income as you mention - do you have any information relating to this please?

Thanks for any clarification,

Expert:  Lev replied 6 years ago.

An Individual Savings Account (ISA) is designed for the purpose of retirement savings with a favorable tax status for UK residents - similar to IRA accounts in the US (to be more précised - Roth IRA).


Thus the US-UK tax treaty - each Contracting State recognizes a pension scheme established in the other Contracting State - see also the tax treaty document referenced above - Article 18 Pension Schemes - which covers ISA accounts.

So if you transfer funds from your ISA into another ISA under UK rules - that will not trigger a taxable event in the US. See for instance this Memorandum which disallows transfers from UK tax deferred account into the US tax deferred account -


I am aware of discussions (while I disagree that it is correct - unfortunately - there is no guarantee that in case of audit the IRS agent will take my side...) in which ISAs are treated as PFICs - for instance -


Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience: Taxes, Immigration, Labor Relations
Lev and other Tax Specialists are ready to help you
Customer: replied 6 years ago.
Thanks for your help.

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