Building An Expat Empire: One Tax Practitioner’s Story

Tax Notes International contributing editor Nana Ama Sarfo talks with Virginia La Torre Jeker, a U.S. tax attorney based in Dubai, about establishing her tax practice abroad, the challenge of balancing family life with career, and recent international tax issues.

This post has been edited for clarity.

Nana Ama Sarfo: Hi, Virginia. It’s great to have you on the podcast.

Virginia La Torre Jeker: Thanks for having me. I’m delighted to be here.

Nana Ama Sarfo: We are very lucky today to have this opportunity to sit down with you and discuss your career and your career lessons, especially since so many people know you for the tax advisory work that you do for Americans abroad and for foreign nationals regarding U.S. tax issues. This conversation is a continuation of a recent profile of you that we ran in Tax Notes.

For those who haven’t yet had a chance to read the piece or are just becoming acquainted with you, I’m hoping that you can tell us a little about your international career journey, the countries in which you have worked, and the roles that you have held over the years.

Virginia La Torre Jeker: Sure. It goes way back to 1983, when I started my tax law career with Willkie Farr & Gallagher LLP in New York City. A scant two years later, I met the man who would later become my husband. Tony was a Swiss national, and we met literally six weeks before he was scheduled to return to Europe. He had been on a short work program in the U.S. with one of the Swiss banks and we fell madly in love. We decided we wanted to get married. For the first time ever, I got a U.S. passport.

That changed my life. Tony didn’t really want to live in the U.S., so we had to find a country where we could both be happy with our work. The headhunters I spoke to had strongly recommended I look in Asia, especially Hong Kong. We started to look around what was available in Hong Kong for each of us.

We were very lucky. Tony got the perfect position with the Swiss bank he was with to head up the far east office there. I was very lucky landing a job with Coudert Brothers, which was an American law firm at the time with international offices. I worked for Coudert for about a year. When I became pregnant and was having my son, I knew that being a full-time tax attorney was not going to be in the cards for me.

I decided I wanted a position as a U.S. tax attorney that was part-time flex time so I could raise my son. I know now it doesn’t sound like it’s very unique, but at the time it was extremely unique. Finding that was quite a task. It didn’t happen all at once. Remember, we’re talking about the late 1980s. We had no internet then. This idea of flex time, part-time, and women doing these things was not really in the cards.

I was very lucky and found a very interesting position with Deloitte Touche. The partner in the tax department was also an attorney who wanted someone who could speak the same language. The accountants have their forms and numbers, but attorneys deal with statutes, code language, memoranda, and research. She wanted someone who could handle that aspect of U.S. tax. Luckily, that was me.

After starting off with my work with Deloitte, I moved on and branched out, working for other organizations, such as a trust company, smaller tax advisory firms, or smaller law firms, where they needed someone to handle certain aspects of the work, but they couldn’t really have somebody full time. I started to work with HSBC in their tax department. I was helping some of the Swiss banks with their tax issues. It all seamlessly seemed to fall together over the years, building that chapter of my life. That lasted for 15 years while we were in Hong Kong.

Later on, we left Hong Kong in 2001, and I left honestly kicking and screaming. I absolutely adored my life in Hong Kong, but sadly my husband developed a pollution-related asthma due to a lot of the factory work going on in China. From a health perspective, we knew we couldn’t stay.

We were then in the position we were in back in 1986, when we got married and said, “Where will we live?” That was déjà vu happening again. We had to look for a new place. My husband had worked at some point in Bahrain, so I said, “What about Bahrain?” I had liked Bahrain. He said, “Yeah, Bahrain would be fine, but I don’t know that you’ll find tax work there.” One of our friends who had worked in Bahrain and also worked in Dubai, suggested Dubai. I had never heard of Dubai. Where is Dubai? Of course, now Dubai is well on the map, so everyone knows where Dubai is.

When we came to Dubai in 2001, we came on our own. We had no company backing us up and no employer sending us here. We were starting from scratch. That in itself has been an amazing journey because it was a little bit more difficult to build up my name and reputation in Dubai.

Back then, we literally had only a handful of skyscrapers that we called landmarks. If you wanted to meet someone, you would always say, “Well, let’s meet near the . . . World Trade Center building,” and then you would have an idea where they were. Other than a few buildings, everything was just palm trees. Dubai is so very different today.

I was doing some building up of my career in Dubai because it took a bit of a longer time here. I was teaching as an adjunct professor of law at some of the American universities while I was building up my practice. In due time, of course, it all fell together, especially when we had the UBS scandal with Bradley Birkenfeld, and then later on the enactment of the Foreign Account Tax Compliance Act. People were desperate for U.S. tax help and advice. And there I was, sitting in the prime location.

Nana Ama Sarfo: Let’s talk a little about Dubai. Why did you decide to open your own firm in Dubai? And can you speak about any challenges that you faced in becoming an entrepreneur and practicing law in your new cultural environment?

Virginia La Torre Jeker: As I said, it did take time to build up my name and reputation in the Dubai region. When we came here in 2001, U.S. tax was not a big issue for people overseas, and the United Arab Emirates is a tax-free jurisdiction. People had no understanding or appreciation of the fact that U.S. tax is really all pervasive and far reaching. They started to appreciate this more when we had the UBS scandal and Bradley Birkenfeld, and then later the enactment of FATCA.

That’s when people started to wake up and my expertise became in greater demand. Because the workload was increasing so much, I decided, “Let me see about opening my own business.” Doing that here is not that easy. You’ve got to comply with a lot of different rules and regulations. It was much easier for me in those earlier days to just be an employee of another firm instead of opening up my own practice.

But as time went on, I decided it’s really better to have my own practice and just go forward that way, because then you’re not beholden to anyone. 

In the early days, female professionals were very few and far between in the Middle East. That is changing and has changed over the past 19 years that I’ve been here. The culture and attitudes toward women in the Middle East has been developing and it’s not been without its challenges.

As a professional, I felt like I was constantly proving myself. In certain meetings, I would feel the respect wasn’t really there because I was a woman. That has changed very dramatically. I’m very happy to see that because I think that women are an extremely fantastic asset, especially here in the Middle East, where they have wonderful education opportunities. They can add so much to a business. I’m happy to see that that’s changing.

Nana Ama Sarfo: When I think about your career, one word comes to mind: prolific. You’ve worn multiple hats over the course of your career. Aside from practicing law, you’ve taught in universities, you are an extremely well-known blogger, and you’ve also written three children’s books. Did you always intend to have such a diverse career? What is your advice for practitioners who may want to follow a similar path and also want a varied, but interconnected career?

Virginia La Torre Jeker: I definitely have worn multiple hats. I’ve always really enjoyed learning. I’ve always loved to write. I’ve always enjoyed exploring. In a certain way, I think I’ve always been a bit of a rebel and I’ve always enjoyed acting as a mentor and sharing knowledge. If you take all of those different facets, it only seemed natural to me to undertake various endeavors and rise to certain challenges.

It all started when I married a foreigner. That wasn’t done back in the early 1980s. I left the United States to move to a foreign country and started from scratch. I won’t say that it was easy, but I wasn’t afraid to do it to the degree that I wouldn’t go forward with the plan.

Writing the children’s books for my son came out of the fact that there were not really any books for children about Hong Kong and the culture and the festivals we celebrated while living there. I wanted him to always have those memories of where he was born and grew up. I decided, “Well, I’ll have to write my own books for him.” Everyone loved them. My friends wanted copies, so I decided I would publish them on my own. Again, this was in the early 1990s, so we didn’t even have internet. Finding out about the topics I was writing about, for example, the Chinese festivals, was a big chore. I couldn’t just go to Google and plug in a few search words. I would speak to a lot of elderly Chinese people and they would tell me what the significance of various festivals were and so forth.

I had that love of learning. I’ve always had that. I always loved teaching. When I was in the UAE and had the opportunity to teach at the university and teach law, I jumped at that. I’ve always been writing articles from way back about tax, and it was a good way to get my name known while we were in Hong Kong. I continued that when we moved to the UAE.

Then, when we were big into the internet, the blog was the perfect way to satisfy my love of learning, writing, and sharing information. Of course, all of these things have helped to get my name well known in the international tax community and have helped to establish my reputation.

Nana Ama Sarfo: That’s really wonderful. Taking a step back and looking at the big picture here, what do you wish you had known when you were just starting your career?

Virginia La Torre Jeker: I really wished I had understood that there is no such thing as a perfect work-life/motherhood balance. I struggled with that a lot back in the early days when we had our son. I absolutely love tax law. I didn’t want to give that up, but yet I also wanted to be a good mom. I didn’t want to be a mom that never saw my son and didn’t raise him. When you want to do two things and you want to do them well, it’s not that easy.

I think it’s a disservice to women to let them think they will have a perfect work-life balance. I tell you it doesn’t exist. I don’t think that I lack something; that I couldn’t find it. I think it just isn’t there.

Compromises will always have to be made, and women have to stop feeling guilty about that. We just do the best we can. I wish I’d known that 30 years ago, but it has slowly sunk in over time.

Whenever I counsel younger women today who are embarking on their careers and maybe are mothers as well, I think that’s the best thing I can tell them. I always get this sigh of relief. “Is it really that way, Virginia? Is it?” I’ll say, “Yes, it is. Don’t beat yourself up because you’re not getting the perfect balance because it’s not there. It doesn’t exist.”

Some days it’ll be great. Other days it’s going to be terribly difficult and you’re going to feel guilty. You’ve got to just try and stop beating yourself up with negative thoughts because you didn’t do everything perfectly in motherhood or your work life. 

Nana Ama Sarfo: That’s really honest advice. Thank you very much for that.

Pivoting in a different direction, you do a lot of work with a group of people who are commonly known as “accidental Americans.” I’m hoping that you can explain for us what that term means and why this group of people has been garnering more attention within the tax world. Could you also explain some of the most common tax issues affecting that group of clients?

Virginia La Torre Jeker: The “accidental American” is someone who was usually born in the United States or otherwise acquires U.S. citizenship by happenstance. If someone is born in the United States, it doesn’t matter that their parents are not American. Once you are born in America, you are automatically a United States citizen unless there’s an exception, like if your parents were in the diplomatic service. But let’s put those people aside and just take your average person.

If you’re born in the U.S., you automatically become an American citizen. Many of the people that I deal with were born in the U.S., but left when they were infants. They left and never thought about anything about America again. Well, they are U.S. citizens.

The other way someone can be a United States citizen, even if he is born outside of the United States, is at birth. This will typically happen if at least one parent is a U.S. citizen and that parent has lived in the United States for a certain period of time.

I’ll take my son as an example. My husband is a Swiss national. I was an American citizen. We were living in Hong Kong. Our son Mark was born in Hong Kong. When he was born, he was automatically a U.S. citizen because my U.S. citizenship was basically passed down to him because I had lived in the United States for a certain number of years. That alone makes the child, even if he is born outside of America, a U.S. citizen.

We have these people who are U.S. citizens by happenstance. That does not take away their obligation to pay tax and deal with all of the U.S. tax laws in the same way as the U.S. citizen who lives in New York City.

Even though the person is living overseas and is working for a non-U.S. employer, has foreign income, has no U.S. income whatsoever, he is still responsible to pay tax on that income. Our system is based on worldwide income.

If you are a citizen, you are responsible to pay tax on everything you earned, no matter where it’s earned. For the person who is living abroad, such as this “accidental American” or any American who’s living overseas, there are certain very tricky rules that we have in place that prejudice the person who is abroad.

For example, think of a person living in a foreign country who happens to be an American citizen. Do you think he is investing in U.S. mutual funds? No. That guy is looking at foreign funds because he’s in a foreign country. What about his life insurance? Do you think he is going to a U.S. life insurance provider? No. He’s going to the insurance provider where he lives. These kinds of investments cause all sorts of U.S. tax problems for people. They can actually kill the investment.

If you have a foreign life insurance policy, for example, it could be treated as something called a passive foreign investment company investment. It will totally destroy your life; let me put it that way.

I think getting into the tax nitty–gritty might be a little bit too heavy for people, but the problems they face are real. Even the simple matter of acquiring assets. They may think when they pass away that they have nothing to do with America. But if you are a U.S. citizen, your estate tax is based on the fair market value of all of the assets you own, every place in the world. It can be a maximum of a 40 percent hit.

People who are living, for example, in Saudi Arabia and have perhaps inherited family businesses and so forth, when they pass on, their estate tax for the U.S. will be based on their worldwide assets.

They’re clueless about all of this, of course, until they come and see me. Sometimes ignorance is bliss, but most of the time, it really isn’t. I tell all of my clients that when there’s any connection with the United States, they have to be very, very careful and make sure that they understand the rules.

Nana Ama Sarfo: Accidental Americans aside, you have also flagged that foreign nationals need to be aware of U.S. tax issues. We’re talking about people who have never traveled to the U.S. or have only done so briefly. Why is that the case? What are some unexpected ways in which U.S. tax liability may arise for these individuals?

Virginia La Torre Jeker: Right. You’re talking now about if the person was completely a foreigner. What can happen to him vis-à-vis the U.S. tax system? Well, I joke around, but it’s pretty serious. I tell all of my foreign clients that they can’t even breathe American air without consulting me first because it may have U.S. tax consequences. Maybe if I give you a few examples, it will help.

You have your typical foreign family. They often do want to invest in the U.S. stock market, and do so. Sometimes they may even have a U.S. brokerage account and engage in very active trading. Once you have U.S. assets, such as U.S. corporate stocks, you will have a U.S. estate tax problem exposure down the road. If you were a foreign person, you have an exemption amount of only $60,000 USD. Once you have U.S. cited assets that go over that $60,000 amount, you will be subjecting your estate to this estate tax. For any amount that’s over $1 million, the rate will be 40 percent.

If you think of the foreign person who really likes to travel to the U.S. from time to time and wants to have a penthouse apartment in New York, he is clearly going to be over that $60,000 mark. We have people that do not really understand that when they are investing in the United States. They need proper tax advice. I have a lot of foreign families that need that kind of advice.

We also have the typical student who is studying in the United States. We have wonderful universities in the U.S. and many foreigners want to study there. What we typically see happen is the parents will send the child, the student, into the U.S. They’ll send funds to cover the tuition, books, rent, entertainment, and so forth.

What that parent does not know is that he has now exposed himself to something called our U.S. gift tax. That gift tax can be assessed at a rate of 40 percent as well as the maximum. That simple act, the parent thinking they’re taking care of their child at university, can cause the foreign parent to have this gift tax exposure.

The other area where I see the foreign family running into problems with the U.S. tax regime is the family will often have a business that they’ve been running in the foreign country, and they’re thinking of succession planning. They start giving shares in the company to the younger generation. It’s quite often the case that some of those people in the younger generation will start to study in America. They may later obtain a green card or U.S. citizenship.

Once that person has obtained U.S. status, they have just exposed the family to the IRS learning all about the foreign business. That’s because the U.S. tax system requires a lot of information reporting about foreign assets that are owned by U.S. people. Once you get one person in the family who becomes a U.S. green card holder or citizen, or spends a lot of time there and meets the substantial presence test for U.S. tax residency, you are then exposing the rest of the family assets to at least information reporting.

Those are just some of the typical areas that we see. All of these can be planned for and taken care of. You can do tax planning to make sure that these problems won’t arise. But if you don’t know the problem is there, then of course you won’t be fixing it before it happens.

The best advice I have for people who are foreigners is that they really need to be very aware of anything with the United States. I’ve actually prepared a checklist for my clients. It goes on for several pages, asking them about any contact with the United States, and that will often help people understand, “Oh, I’ve got a U.S. tax issue.”

The simple thing of having a brokerage account confuses people because they say, “Well, I know that if I have a U.S. bank account and I pass away, there is no estate tax on the bank deposit.” That’s true, but that’s not the same rule if they have cash in a brokerage account. That is not the same as having it in a bank in a deposit. The cash sitting in the brokerage account is subject to U.S. estate tax.

I see many, many people with cash in a brokerage account, certainly exceeding $60,000, which is the only exemption amount the foreigner will get. Yes, the U.S. tax laws have a very, very long reach and people need to be aware.

Nana Ama Sarfo: You have also written quite a bit about how Sharia law and U.S. tax law intersect. Why is this an important issue and why do you think that it needs more attention from the IRS?

Virginia La Torre Jeker: People have to understand that as tax professionals, we are faced with various kinds of transactions all over the world. Because of the way the U.S. tax system works, that it’s based on citizenship and worldwide assets, we have to be very aware of what’s going on for our clients on an international level. I think the topic of Sharia law and U.S. tax should not be viewed as a matter of religion because this will only stymie constructive discourse about the matter. I think the entire topic really has to be viewed from a very professional standpoint.

Right now we have absolutely no guidance from the IRS, the U.S. courts, nor the U.S. Congress on how to deal with the issues that arise when Sharia law and U.S. tax law intersect.

People have to understand that principles of Sharia are followed in financial transactions on a daily basis in the United States. You have U.S. multinationals engaging in Sharia financial transactions directly and indirectly through their foreign subsidiaries and affiliates. You have U.S. financial institutions with Islamic finance department. You have companies like General Electric, Goldman Sachs, and even the World Bank issuing a commonly used instrument in Islamic finance called Sukkot. This is going on day in and day out.

You have major financial firms like Fidelity that are active participants in the supermarket. You have the average Muslim American in the U.S. buying a home with a Sharia compliant mortgage. Or he’s a student, and he’s taking out student debt, which is Sharia compliant, so he can attend school. It’s not something that’s so mysterious that you don’t see it happening.

People have to look at it in a very realistic way and say, “Wow, this is going on every day in America, but we don’t know how to deal with it from a tax perspective.” That isn’t good. We do need some action on the part of the U.S. to guide the tax professionals and taxpayers in remaining compliant when Sharia impacts their transaction. Very few people seem to have a grasp of that.

I don’t want to say I’m the only person writing about it, but I think I’m one of a handful that has any idea these issues arise and is bringing it to the forefront writing about it and letting people know that we do need guidance. I think it’s a sad thing. If you go onto the IRS website and you look for some help, there’s absolutely nothing. It impacts lives and transactions every day. It’s time for more attention.

Nana Ama Sarfo: Before we go, can you share with us some of your greatest career lessons and your advice for aspiring tax practitioners?

Virginia La Torre Jeker: When I work with younger tax professionals, I see this happen a lot. I think that this needs to be corrected in a sense. The IRC, the Treasury regulations, the IRS revenue rulings, and so forth are complicated. They’re very difficult to understand. People want to bypass them a lot of the time. They want to find an article on Google that will explain things.

You can’t do that as a tax professional. You can’t rely on the rehash. You’ve got to go to the source. That means you’ve got to go to the IRC. You’ve got to plow through the Treasury regulations. You’ve got to look at the legislative history. Yes, it is more difficult, but there is absolutely no substitute for that.

Speaking of substitute, my other advice for anyone aspiring to do anything is that there is absolutely no substitute for adequate preparation. I can’t emphasize that enough. Cutting corners won’t really work with U.S. tax. If you’re the kind of person that doesn’t like detail, and doesn’t like to really dig in and research, then maybe U.S. tax is not the area for you.

But it is an area that’s fascinating. It’s always changing. You will always be challenged. As I said, it enabled me to move everywhere in the world. I’ve had a global career thanks to U.S. tax.

Nana Ama Sarfo: Virginia, it is a delight to speak with you as always. Thank you so much for your generous advice and for coming on the podcast.

Virginia La Torre Jeker: I’ve enjoyed every minute. I look forward to speaking to you again.