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Ireland Disagrees with EU's Decission That it Needs To Collect €13 Billion in Tax From Apple

On October 18, 2013 we posted Ireland to Close Highly Criticized Loophole, but Create an Even Bigger One where we discussed that Ireland said it planned to shut down a much-criticized tax arrangement used by Apple Inc to shelter over $40 billion from taxation, but will leave open an even bigger loophole that means the computer giant is unlikely to pay any more tax. The highly criticized arrangement has become known in the tax avoidance industry as the "double Irish". this arrangement has been used by Google, Microsoft & Apple, just to name a few. 

 
Now according to Law360, Ireland’s new finance minister rejected demands from the European Union’s competition watchdog to collect €13 billion ($15.3 billion) in back taxes from Apple Inc., saying in an interview published August 16, 2017 that the technology giant did not receive any special tax benefits compared to other businesses.

Paschal Donohoe, who has been serving as Ireland’s minister for finance and public expenditure and reform, told the German newspaper Frankfurter Allgemeine that he disagrees with the European Commission’s August 2016 ruling, which concluded that Apple had entered into a sweetheart tax deal with the Irish government to “substantially and artificially” lower its taxes.

Donohoe said that Ireland is Not Blocking the Global Fight Against TaxEvasion, but there is only so much
the EU can Achieve on its Own in this area.
 
 

“We are not the Global Tax Collector for Everyone Else,”
he said.

Both Ireland and Apple have appealed the commission’s decision, which found that two tax rulings Ireland had issued to Apple in 1991 and 2007, allowing the software giant to allocate almost all of its sales profits to “head offices” that existed only on paper, were in violation of the EU’s state aid rules.

Under the EU's unique state aid system, national tax authorities are barred from giving benefits to some companies that are not available to others, and member states cannot treat multinational companies more favorably than standalone companies.

The commission said that the allocation of profits to head offices, with no employees or physical locations, allowed Apple’s effective corporate tax rate to go down from 1 percent in 2003 to 0.005 percent in 2014 on the profits of the Irish-incorporated subsidiary Apple Sales International.
 

The commission’s investigations into Apple’s tax arrangements, as well as those of Starbucks Corp., had previously drawn the ire of the Obama administration, which complained that the commission appeared to be unfairly targeting U.S. businesses and that American taxpayers may end up having to foot the bill for foreign tax credits that the companies may be able to claim following a retroactive imposition of taxes.

A U.S. government has filed an application to intervene in Apple’s suit so that it can have its say on the retroactive application of state aid rules to the company.

Need Tax Efficient Tax Planning?

 

Contact the Tax Lawyers at 
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Read more at: Tax Times blog

Issues Concerning Filing a Form 706NA?

On September 23, 2015, we posted "Some Nonresidents with U.S. Assets Must File Estate Tax Returns" where we discussed that deceased nonresidents who were not American citizens are subject to U.S. estate taxation with respect to their U.S.-situated assets.
 
Many foreigners owning property or assets in the United States are in violation of 706-NA filing requirements because of a number of misunderstandings. The basic rule is pretty clear-if a foreign decedent has assets in the United States with a gross value in excess of $60,000, the estate is supposed to file a tax return with the Internal Revenue Service. 
Many people think of numerous reasons not to file. The main one relates to mortgages or liens against the US property. Assume that a property in Florida is worth $150,000 and there is a $100,000 mortgage held by Bank of X. The owner of the property dies. Is a 706-NA required? Yes-you are not permitted to net the mortgage against the fair market value of the property. The only way you can do this is if the person who owns the property is a German domiciliary in which case the value can be netted on the tax return. This is a peculiarity of the German- United States estate tax convention. Cyst The deceased German domiciliary must still file the tax return because the gross value of the property, the criteria for filing a tax return, is still met. 

 

Other people look to tax treaties to avoid filing the tax returns even when the assets exceed $60,000. What most people do not realize is that in order to take advantage of a tax treaty, one needs to file a federal estate tax return and include a form 8833 with the return explaining the application of the treaty to this particular estate. If you fail to file the 706-NA, you would still technically owe tax on any US situs asset with a gross value in excess of $60,000.

 
Let's make it very simple for everyone- if you represent a foreign client with assets in the United States  with a gross value exceeding $60,000, you are required to file a federal estate tax.

Without the filing of the tax return, you are unable to take advantage of deductions, credits, and treaties benefits which might aid you in reducing the gross federal tax to a point of zero. Additionally, I might add, your client's estate is not in compliance with federal estate tax laws if no 706-NA is filed

 Have a US Estate Tax Problem?
 

Estate Tax Problems Require
an Experienced Estate Tax Attorney
 
 
Contact the Tax Lawyers at
Marini & Associates, P.A.
 
 for a FREE Tax Consultation Contact US at
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243).

Robert S. Blumenfeld  - 
 Estate Tax Counsel
Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.

 

Read more at: Tax Times blog

How Does CRS & FATCA Affect US Taxpayers?

On May 26, 2017 we posted Last Chance To Come Clean ... Automatic Exchange of Information Reporting Is Imminent! where we discussed that CRS participating jurisdictions began to exchange information in 2017 and returns where required to be submitted by May 31, 2017, including Crown Dependencies and Overseas Territories.

We also provided a List of countries who have agreed to share information.  Financial institutions, for example, banks, building societies, insurance companies, investment companies, will provide information on non-UK residents with financial accounts and investments in the UK to HM Revenue & Customs (HMRC). HMRC will share this information with the relevant countries. Information for financial institutions.

Hovever, the U.S. has not signed on to CRS, so the US does not receive information pursuant to CRS! 
 

Instead, the U.S. receives information pursuant to the IGAs executed under FATCA, another form of automatic exchange of information.   

Under FATCA, foreign jurisdictions generally report:

  1. Name,
  2. Address,
  3. Taxpayer identification number (TIN),
  4. Account number,
  5. Account balance or value,
  6. Gross amounts paid to the account in the year and
  7. Total gross proceeds paid or credited to the account. 


Under CRS, the signatories receive similar information, as well as, date and place of birth of the individual account holders. 

For entity accounts where one or more controlling persons are reportable persons, CRS require the institution to report the:

    1. Name,
    2. Address,
    3. Country(s) of residence, and
    4. TIN of the entity.

as well as the: 

    1. Name,
    2. Address,
    3. Country(s) of residence,
    4. TIN and
    5. The date and place of birth of each reportable person. 
FATCA is Just One Source of Information for the U.S. !

Other options include:

  1. Specific requests for information (requests pursuant to tax treaties, TIEAs, MLATs, etc.),
  2. Simultaneous exchanges,
  3. Spontaneous exchanges, and
  4. Informal exchanges, etc.

So what is the impact of CRS on US Taxpayer's Foreign Investments?

  1. Unless and until the US signs on to the OCED CRS reporting regime, the is no automatic reporting of information to the IRS from treaty partners who have received information from 3rd countries pursuant to CRS .
  2. The US will get its automatic information solely from FATCA and IGAs with each individual country and
  3. During actual tax audits or criminal prosecutions , the IRS can use specific requests for information (requests pursuant to tax treaties, TIEAs, MLATs, etc.), simultaneous exchanges, spontaneous exchanges, informal exchanges, etc.

Deciding which tool to use often depends on the nature of the IRS investigation and the particular facts and circumstances of the case.  For example, MLATs are generally used to gather and exchange information in Criminal Investigations.

So while things have changed a lot in the past several years (FATCA, CRS, BEPS, etc.), unless and until the US signs on to CRS, which currently appears unlikely, it will have to look exclusively to FATCA and their IGAs with each separate country, which should be more than sufficient, to obtain information regarding foreign holdings of US taxpayers.

Despite the fact that the US does not participate in CRS and that US companies are not in scope of CRS, US companies and their subsidiaries, certainly the ones that are based in or have accounts or investments in countries which participate in CRS, will have to be classified and documented for CRS purpose. So CRS does impact US companies who have subsidiaries or branches in tax favorable countries.

US companies should reevaluate their current structures to determine whether they will be able to defend their royalty stripped out to Luxembourg from others CRS member nations, their interest, strip out to Ireland from other CRS member nations and other tax favorable payments from CRS member nations , which were prior to CRS, unknown by the country where the payments were being made and deducted.

 

Since there is no CRS equivalent of W-9/W-8-Ben-E documentation, US companies will have to deal with a variety of forms in various foreign languages and processes to make their subsidiaries CRS compliant. 

Whether the US will ever join CRS is doubtful but what is certain is that promoting tax transparency and new international standards is a global priority and finding ‘somewhere to hide’ is becoming increasingly difficult for those who continue to try to outwit the authorities! 

Need FATCA or CRS Help?
 

 
  Want to Know if the OVDP Program is Right for You?
 
 
Contact the Tax Lawyers at 
Marini& Associates, P.A.  
 
 
for a FREE Tax Consultation
Toll Free at 888-8TaxAid (888) 882-9243

 

 

 

 
 
 
 

 

 

 

 

 

Read more at: Tax Times blog

Disregarded Entities Are Not Always Disregarded

Under the check the box rules, entities owned by one person can often be disregarded for federal tax purposes. Such entities are referred to as "disregarded entities." 

As time has progressed since the passage of the check the box rules, the IRS has created more and more exceptions to the disregarded treatment. The following is a summary of the principal exceptions, but is not intended to be exhaustive. If any readers think we have missed anything major, please feel free to comment to this posting.

  1. Status is modified if the single owner of the entity is a bank. Treas. Regs. Section 301.7701-2(c)(2) (iii). 

  2. Status is modified for certain tax liabilities. Treas. Regs. Section 301.7701-2(c)(2)(iii). These include: (1) federal tax liabilities of the entity with respect to any taxable period for which the entity was not disregarded; (2) federal tax liabilities of any other entity for which the entity is liable; and (3) refunds or credits of federal tax. 

  3. Disregarded status ignored or modified for taxes imposed under Subtitle - Employment Taxes and Collection of Income Tax (Chapters 21, 22, 23, 23A 24, and 25 of the Code) and taxes imposed under Subtitle A including Chapter 2 - Tax on SelffEmployment Income. Treas. Regs. Section 301.7701-2(c) (2) (iv) (A). 

  4. Status is modified for certain excise taxes, as described in Treas.Regs. Section 301.7701-2(c)(2J(v). Although liability for excise taxes isn't dependent on an entity's classification, an entity's classification is relevant for certain tax administration purposes, such as determining the proper location for filing a notice of federal tax lien and the place for hand-carrying a return under Code Section 6091

  5. Conduit financing proposed regulations will treat a disregarded entity as separate from its single member. Code Section 7701 (I).

  6. Special rules will apply in hybrid situations. Hybrid situations are circumstances where an entity is not disregarded in one jurisdiction but is disregarded in another.
  7.  Final regulations (TD 9796) that treat domestic disregarded entities wholly owned, directly or indirectly, by foreign persons  as domestic corporations solely for purposes of making them subject to the reporting requirements under Internal Revenue Code, Section 6038A that apply to 25% foreign-owned domestic corporations.

 
Have a Tax Problem?  
 




 
Contact the Tax Lawyers at
Marini & Associates, P.A.
 for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243).
 
 

 

Read more at: Tax Times blog