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Monthly Archives: October 2015

The 1st Swiss Asset Management Firm To Turn Over Names of US Clients Over to the IRS!

October 7, 2015

On September 21, 2015 we posted "Oh Oh, We Are Half Way There ... 50 Swiss Banks Are Turning Over Their US Client's Names... Living on a Prayer?" where we discussed that the number of Swiss banks that have entered deferred prosecution agreements with the U.S. government keeps growing.
 
Now Finacor SA, a Swiss Asset Management Firm, has reached a resolution with the department through a non-prosecution agreement. 

Finacor submitted a Letter of Intent to participate as a Category 2 bank in the department’s Swiss Bank Program.
 
Although it was ultimately determined that Finacor was not eligible for the Swiss Bank Program due to its structure largely as an asset management firm, the firm is required under today’s agreement to fully comply with the obligations imposed under the terms of that program. Under the terms of the agreement, Finacor is required to:
  • Make a complete disclosure of its cross-border activities; 
  • Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest; 
  • Cooperate in treaty requests for account information; 
  • Provide detailed information regarding other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed; 
  • Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and 
  • Pay a penalty of $295,000.

Finacor agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Finacor for tax-related criminal offenses.

"The American Public can expect that we will
Use All of the Information ... to Vigorously Pursue Individual U.S. Taxpayers who Illegally Conceal Assets Offshore..."
said Chief Richard Weber of IRS-Criminal Investigation (CI).
 
Finacor opened asset management accounts in clients' names at custodial banks, including UBS AG, the DOJ said. The firm also held fiduciary accounts in its own name at custodian banks for customers, providing them another layer of anonymity, the department said. Finacor sent checks to the U.S. in amount below $10,000 in order to avoid reporting requirements and used code words for money transfers to conceal the repatriation of assets into the U.S., the DOJ said.

Since August of 2008, Finacor managed 11 U.S. accounts with total assets under management as high as $14.6 million, the DOJ said.

 
The IRS keeps updating its list of foreign banks where the holders of these offshore accounts are subject to a 50% (rather than 27.5%) penalty in the IRS’s Offshore Voluntary Disclosure Program (OVDP). This penalty is based on the highest account balance measured over up to eight years. 
 
The complete list is as follows, as of 10/1/15: 
  1. UBS AG (effective 8/4/14)
  2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd. (effective 8/4/14)
  3. Wegelin & Co. (effective 8/4/14)
  4. Liechtensteinische Landesbank AG (effective 8/4/14)
  5. Zurcher Kantonalbank (effective 8/4/14)
  6. swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG (effective 8/4/14)
  7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates (effective 8/4/14)
  8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd. (effective 8/4/14)
  9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India) (effective 8/4/14)
  10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates (effective 8/4/14)
  11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
  12. Bank Leumi le-Israel B.M., the Bank Leumi le-Israel Trust Compay Ltd., Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
  13. BSI SA (effective 3/30/15)
  14. Vadian Bank AG (effective 5/8/15)
  15. Finter Bank Zurich AG (effective 5/15/15)
  16. Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
  17. MediBank AG (effective 5/28/15)
  18. LBBW (Schweiz) AG (effective 5/28/15)
  19. Scobag Privatbank AG (effective 5/28/15)
  20. Rothschild Bank AG (effective 6/3/15)
  21. Banca Credinvest SA (effective 6/3/15)
  22. Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
  23. Berner Kantonalbank AG (effective 6/9/15)
  24. Bank Linth LLB AG (effective 6/19/15)
  25. Bank Sparhafen Zurich AG (effective 6/19/15)
  26. Ersparniskasse Schaffhausen AG (effective 6/26/15)
  27. Privatbank Von Graffenried AG (effective 7/2/15)
  28. Banque Pasche SA (effective 7/9/15)
  29. ARVEST Privatbank AG (effective 7/9/15)
  30. Mercantil Bank (Schweiz) AG (effective 7/16/15)
  31. Banque Cantonale Neuchateloise (effective 7/16/15)
  32. Nidwaldner Kantonalbank (effective 7/16/15)
  33. SB Saanen Bank AG (effective 7/23/15)
  34. Privatbank Bellerive AG (effective 7/23/15)
  35. PKB Privatbank AG (effective 7/30/15)
  36. Falcon Private Bank AG (effective 7/30/15)
  37. Credito Privato Commerciale in liquidazione SA (effective 7/30/15)
  38. Bank EKI Genossenschaft (effective 8/3/15)
  39. Privatbank Reichmuth & Co. (effective 8/6/15)
  40. Banque Cantonale du Jura SA (effective 8/6/15)
  41. Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA (effective 8/6/15)
  42. bank zweiplus ag (effective 8/20/15)
  43. Banca dello Stato del Cantone Ticino (effective 8/20/15)
  44. Hypothekarbank Lenzburg AG (effective 8/27/15)
  45. Schroder & Co. Bank AG (effective 9/3/15)
  46. Valiant Bank AG (effective 9/10/15)
  47. Bank La Roche & Co AG (effective 9/15/15)
  48. Belize Bank International Limited, Belize Bank Limited, Belize Corporate Services Limited, their predecessors, subsidiaries, and affiliates (effective 9/16/15)
  49. St. Galler Kantonalbank AG (effective 9/17/15)
  50. E. Gutzwiller & Cie, Banquiers (effective 9/17/15)
  51. Migros Bank AG (effective 9/25/15)
  52. Graubundner Katonalbank (effective 9/25/15)
  53. BHF-Bank (Schweiz) AG (effective 10/1/15)
  54. Finacor SA (effective 10/1/15)
Outside of these banks, the norm within the OVDP remains 27.5%. That is far better than prosecution or much bigger civil penalties. Some taxpayers can opt for the easier and less costly Streamlined program. This list does not impact the Streamlined programs because you must be non-willful to qualify. All of this is part of the June 2014 improvements to the OVDP, which sparked new interest in cleaning up offshore accounts.
With roughly 96 Swiss banks taking the DOJ deal and FATCA requiring the entire world to report to the IRS resulting in increasing disclosures, everyone American is eventually going to be discovered.

Banks worldwide want to know if there US clients are compliant with the IRS.

Within the OVDP, people who pre-cleared before the various effective dates are generally safe from the higher 50% penalty. As additional banks are added to the list, only those American taxpayers that request pre-clearance before their bank is listed, will get the 27 1/2% OVDP penalty. The 50% penalty now applies to all taxpayers with accounts at financial institutions or with facilitators which are named, are cooperating or are identified in a court filing such as a John Doe summons.

Although the 50% penalty is high, willful civil violations can result in tax, penalties and interest totaling 325% of the highest balance in the account for the  most recent six years period. Recent guidance suggests that the IRS could be more lenient in the future, but the IRS’s definition of leniency can still make the OVDP a very good deal that provides certainty.
 

Do You Have Undeclared Income from a Swiss Bank or
Swiss Asset Management Company,
 Who Is Handing Over Names to the IRS?
 
 
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
at: www.TaxAid.us or www.TaxLaw.ms or
Toll Free at 888-8TaxAid (888) 882-9243
 
 
 
 

 
 

Read more at: Tax Times blog

CFC'S Need to Be Aware of The 60-Day Limitation on the 30-Day Exception for Obligations of Related U.S. Persons!

October 6, 2015

Some U.S. companies have significant earnings offshore in their Controlled Foreign Corporations (CFCs) that have not been distributed as dividends. To avoid taxable dividend distributions of the Earnings and Profits (E&P) back to the U.S. Parent (USP), some companies may attempt to use short term loans from the CFCs to related U.S. group companies to achieve economic repatriation of the foreign earnings.

The IRS has established a Practice Unit to examine the short term loan exclusion from the definition of U.S. Property, and whether such loans may trigger an income inclusion under IRC Section 951. It looks both at the issue of whether the relatively "mechanical" rules for the short term loan exception are met as well as at the more complex issue of whether a series of short term loans is being used in an attempt to circumvent IRC Section 951.

Whether the requirements of Notice 88-108 or Notice 2008-91 are satisfied with respect to the obligation of the related U.S. person. If not, for IRC Section 956 purposes, the obligation will be considered to be acquired by the CFC as of the obligation’s origination date and will be U.S. property if held by the CFC on a quarter end.

A loan to a related U.S. person held by a CFC at the end of a quarter may not trigger an inclusion under Subpart F if the loan is repaid within 30 days from the time it is incurred (“30-day exception”). This exception applies only if the CFC does not hold for 60 or more days during its taxable year any obligations of related U.S. persons that would be subject to IRC §956 (“60-day limitation”). Generally, if a CFC holds an obligation of a related U.S. person at the end of a quarter of the CFC’s tax year, the CFC will be considered to hold U.S. property. However, pursuant to certain Notices issued by the IRS, short term obligations of a related U.S. person may be excluded from the definition of US property. For the short term loan exception to apply to a CFC’s tax years ending before October 4, 2008 and beginning on or after January 1, 2011:

  1. The obligation of the related U.S. person must be collected by the CFC within 30 days from the time the obligation is incurred (excluding the date of issuance, and including the date of repayment); and

  2. The CFC must hold obligations of related U.S. persons for less than 60 days during the CFC’s tax year.

Whether the related US person executes and repays each obligation to its CFC as a separate, independent transaction. If not, multiple obligations may be collapsed into a single obligation for purposes of IRC Section 956.

Certain judicial doctrines may be relevant to the analysis of whether an obligation is excluded under the short-term loan exception. For instance, in order for the short-term loan exception to apply to an obligation, the substance of the obligation must match its form, and the obligation must not be one step in a series of related steps in a unified transaction.
 
If it is determined that a series of obligations constitute successive roll-overs of a single obligation, then the periods of disinvestment will be ignored for purposes of testing the 30/60 day and 60/180 day rules of Notice 88-108 and Notice 2008-91, respectively.

 

 
 
 
Have a Tax Problem?
 


Contact the Tax Lawyers at
Marini & Associates, P.A.

 for a FREE Tax Consultation Contact US at

www.TaxAid.us or www.TaxLaw.ms

or Toll Free at 888-8TaxAid (888 882-9243).

Read more at: Tax Times blog

Swiss Banker Who Testified Against UBS’ Raymond Weil Avoids Prison

October 6, 2015

A Swiss banker, Hansruedi Schumacher, who cooperated extensively in the United States' unsuccessful prosecution of former high-ranking UBS AG executive Raoul Weil received unsupervised probation in his Swiss homeland and a $150,000 fine on October 5, 2015 in a Florida federal court for his role in helping U.S. clients evade taxes.

The prosecutors' sentencing memorandum indicated that the sentencing guidelines called for a prison term of 57 to 71 months and a fine ranging from $10,000 to $100,000.

Schumacher, who also worked at Neue Zuercher Bank and once ran the cross-border business for UBS, was indicted in August 2009 on a charge of helping U.S. citizens evade taxes on UBS and NZB accounts; pled guilty in April, just before he was set to go on trial. His case was part of an extensive crackdown against Swiss banks in the mid-2000s, according to defense filings.

Despite his offenses, Schumacher's “willingness to come forward and subject himself to U.S. jurisdiction and cooperate, when he had no pressure to do so, cannot be overvalued,” prosecutors said in their motion for downward departure from those guidelines. “Although charged with a crime, he could have remained in his native country for the remainder of his life free from any danger that the Swiss government would extradite him.”

Schumacher returned to the U.S. in October 2014 to face a 2009 indictment and appeared later that month as a key prosecution witness in Ex UBS Executive Raymond Weil's trial in Fort Lauderdale, Florida, under an agreement that his testimony could not be used against him in his case as long as it was truthful.

 

Do You Have Undeclared Income from One
of the Swiss Banks Who Are Currently
Delivering Names to the IRS?

Do You Value Your Freedom?
 

 

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


Sources:

Bloomberg
Law360

Read more at: Tax Times blog

FATCA – U.S. Began Reciprocal Automatic Exchange of Tax Information On Sept. 30, 2015!

October 2, 2015

The Internal Revenue Service announced the exchange of financial account information with certain foreign tax administrations, meeting a key Sept. 30 milestone related to FATCA, the Foreign Account Tax Compliance Act.

To achieve this, the IRS successfully and timely developed the information system infrastructure, procedures, and data use and confidentiality safeguards to protect taxpayer data while facilitating reciprocal automatic exchange of tax information with certain foreign jurisdiction tax administrators as specified under the intergovernmental agreements (IGAs) implementing FATCA.

"Meeting the Sept. 30 deadline is a major milestone in IRS efforts to combat offshore tax evasion through FATCA and the intergovernmental agreements," said IRS Commissioner John Koskinen. 
 
 
 "FATCA is an important tool against offshore tax evasion, and this is a significant step in the process. The IRS appreciates the assistance of our counterparts in other jurisdictions who have helped to make this  possible."


This information exchange is part of the IRS’s overall efforts to implement FATCA, enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts or foreign entities. FATCA generally requires withholding agents to withhold on certain payments made to foreign financial institutions (FFIs) unless such FFIs agree to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

In response to the enactment of FATCA and other jurisdictions’ interest in facilitating and participating in the exchange of financial account information, the U.S. government entered into a number of bilateral IGAs that set the groundwork for cooperation between the jurisdictions in this area. Certain IGAs not only enable the IRS to receive this information from FFIs, but enable more efficient exchange by allowing a foreign jurisdiction tax administration to gather the specified information and provide it to the IRS. 

And some IGAs also require the IRS to reciprocally exchange certain information about accounts maintained by residents of foreign jurisdictions in U.S. financial institutions with their jurisdictions’ tax authorities.

Under these reciprocal IGAs, the first exchange had to take place by September 30, giving the IRS a deadline to put in place a process to facilitate this data exchange.

The information now available provides
the United States and Partner Jurisdictions
an improved means of verifying the
Tax Compliance of Taxpayers using
Offshore Banking and Investment Facilities
 
 
& Improves Detection of those who 
Attempt to Evade Reporting
the existence of offshore accounts &
the income attributable to those accounts.

The IRS will only engage in reciprocal exchange with foreign jurisdictions that, among other requirements, meet the IRS’s stringent safeguard, privacy, and technical standards.  Before exchanging with a particular jurisdiction, the United States conducted detailed reviews of that jurisdiction’s laws and infrastructure concerning the use and protection of taxpayer data, cyber-security capabilities, as well as security practices and procedures.

“This groundbreaking effort has fundamentally altered our relationship with tax authorities around the world, giving us all a much stronger hand in fighting illegal tax avoidance and leveling the playing field,” Koskinen said.

Meeting this deadline reflects a significant international collaboration and partnership with dozens of jurisdictions around the world. The capacity for reciprocal automatic exchange builds on numerous accomplishments including the following:

  • Development of a consistent data reporting format, or schema, and the agreement to use this format by all jurisdictions;
  • Establishment of the details and procedures required to assure data confidentiality;
  • Creation of a data transmission system to meet high standards for encryption and security; and
  • Cooperation with foreign jurisdiction tax administrations to achieve the timely implementation of this exchange.
Koskinen noted the risks of
Hiding Money Offshore are Growing
and the potential rewards are shrinking!

 

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP), which is open until otherwise announced.

Do You Have Undeclared Income from Offshore Banks 
Who Are Handing Over Names to the IRS?
 
 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
at: www.TaxAid.us or www.TaxLaw.ms or
Toll Free at 888-8TaxAid (888) 882-9243

Read more at: Tax Times blog

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