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Definitions of PEP and US Tax Residents

Politically Exposed Person (PEP)


A politically exposed person (PEP) is an individual who holds a prominent public position or office, such as a head of state, senior government official, senior executive of a state-owned corporation, or a high-ranking military officer. PEPs may also include their family members and close associates. Due to their positions of power and influence, PEPs may be at a higher risk of involvement in corruption or other illicit activities.In the context of financial services, PEPs are considered to be higher-risk clients and are subject to enhanced due diligence and monitoring by financial institutions to prevent money laundering, fraud and other financial crimes. Banks and other financial institutions are required to identify and assess the risk associated with PEPs, and may be subject to regulatory penalties if they fail to do so.


U.S TAX resident


U.S. person tax refers to the federal income tax system in the United States, which applies to U.S. citizens and resident aliens. U.S. citizens and resident aliens are taxed on their worldwide income, regardless of where it is earned. U.S. citizens and resident aliens are also subject to U.S. estate and gift taxes on their worldwide assets.U.S. citizens and resident aliens are required to file a tax return with the Internal Revenue Service (IRS) every year, reporting their income and claiming any deductions or credits to which they are entitled. The tax rate on U.S. citizens and resident aliens is progressive, meaning that the higher the income, the higher the tax rate. The tax rates for the current year can be found on the IRS website.The definition of a U.S. person can be more extensive than just a U.S. citizen or resident alien, and can include U.S. entities such as corporations, partnerships, and trusts.It’s important to note that the U.S. has agreements with certain countries to avoid double taxation, that means that citizens or residents of those countries that are also U.S. persons may have some exemptions or credit on their foreign taxes paid.