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Monthly Archives: June 2016

HM Treasury Published a List of 41 Countries Which Are Committed to Share Beneficial Ownership Information

June 15, 2016

 

We previously posted on April 25, 2016 that Over 20 Countries Join UK-led Pilot for Automatic Data Sharing! where we discussed the international expansion of a UK-led deal to automatically share information on the ultimate owners of companies as over 20 jurisdictions, including British crown dependencies, overseas territories and EU member states sign up.

Now HM Treasury has published a list of 41 countries which have committed to sharing beneficial ownership information. 

Shortly after the leak of the “Panama Papers,” the G5 countries, spearheaded efforts to take such collective action, unveiling a new agreement to do so at the International Monetary Fund (IMF) meeting in Washington, D.C. in April 2016. 

Belgium, Bermuda, Cayman Islands, Cyprus, Gibraltar, Isle of Man, Jersey, Luxembourg, Malta and Netherlands, are countries where many trusts and companies are established for worldwide tax planning based upon their favorable local tax laws and there confidentiality laws; have also joined the list of other countries that have agreed to take collective action on increasing beneficial ownership transparency, including disclosing the real person associated with each company or trust. 

The list include the following countries which support the initiative for Automatic Exchange of Information on Beneficial Ownership:

  1. Afghanistan

  2. Anguilla

  3. Austria

  4. Belgium

  5. Bermuda

  6. Bulgaria

  7. Cayman Islands

  8. Croatia

  9. Cyprus

  10. Czech Republic

  11. Denmark

  12. Estonia

  13. Finland

  14. France

  15. Gibraltar

  16. Germany

  17. Greece

  18. Hungary

  19. Iceland

  20. India

  21. Ireland

  22. Isle of Man

  23. Italy

  24. Jersey

  25. Latvia

  26. Lithuania

  27. Luxembourg

  28. Malta

  29. Mexico

  30. Montserrat

  31. Netherlands

  32. Nigeria

  33. Poland

  34. Portugal

  35. Romania

  36. Slovakia

  37. Slovenia

  38. Spain

  39. Sweden

  40. United Arab Emirates

  41. United Kingdom

The next stage will be for the development of a global standard for this exchange.  

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FBARs Must be Filed by June 30 through the BSA E-Filing System

June 6, 2016

For 2015, FBARs must be electronically filed by June 30 through the BSA E-Filing System using the electronic FinCEN Form 114, which supersedes the now-obsolete paper Treasury Department Form 90-22.1.
The IRS now has an FBAR Reference Guide on IRS.gov., this Guide is provided to educate and assist U.S. persons who have the obligation to file the FBAR; and for the tax professionals who prepare and electronically file FBAR reports on behalf of their clients. This Guide also supports IRS examiners in their efforts to consistently and fairly administer the FBAR examination and penalty programs.
Who Must File the FBAR?
A United States person must file an FBAR if that person has a financial interest in or signature authority over any financial account(s) outside of the United States and the aggregate maximum value of the account(s) exceeds $10,000 at any time during the calendar year. 
Who is a United States Person?
A "United States person" means: 
  • A citizen or resident of the United States;
  • An entity created or organized in the United States or under the laws of the United States. The term "entity" includes but is not limited to, a corporation, partnership, and limited liability company;
  • A trust formed under the laws of the United States; or
  • An estate formed under the laws of the United States.
Disregarded Entities: Entities that are United States persons and are disregarded for tax purposes may be required to file an FBAR. The federal tax treatment of an entity does not affect the entity’s requirement to file an FBAR. FBARs are required under a Bank Secrecy Act provision of Title 31 and not under any provisions of the Internal Revenue Code.

United States Resident: A United States resident is an alien residing in the United States. To determine if the filer is a resident of the United States, apply the residency tests in 26 U.S.C. § 7701(b). When applying the § 7701(b) residency tests use the following definition of United States: United States includes the States, the District of Columbia, all United States territories and possessions (e.g., American Samoa, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, Guam, and the United States Virgin Islands), and the Indian lands as defined in the Indian Gaming Regulatory Act.

Example: Matt is a citizen of Argentina. He has been physically present in the United States every day of the last three years. Because Matt is considered a resident by application of the rules under 26 U.S.C. § 7701(b), he is required to file an FBAR.

Example: Kyle is a permanent legal resident of the United States. Kyle is a citizen of the United Kingdom. Under a tax treaty, Kyle is a tax resident of the United Kingdom and elects to be taxed as a resident of the United Kingdom. Kyle is required to file an FBAR. Tax treaties with the United States do not affect FBAR filing obligations.

 Financial Account 
Financial account includes the following types of accounts:
  • Bank accounts such as savings accounts, checking accounts, and time deposits,
  • Securities accounts such as brokerage accounts and securities derivatives or other financial instruments accounts,
  • Commodity futures or options accounts,
  • Insurance policies with a cash value (such as a whole life insurance policy),
  • Mutual funds or similar pooled funds (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions), 
  • Any other accounts maintained in a foreign financial institution or with a person performing the services of a financial institution.
Example: A Canadian Registered Retirement Savings Plan (RRSP), Canadian Tax-Free Savings Account (TFSA), Mexican individual retirement accounts (Fondos para el Retiro) and Mexican Administradoras de Fondos para el Retiro (AFORE) are foreign financial accounts reportable on the FBAR.
Example: Foreign hedge funds and private equity funds are not reportable on the FBAR. The FBAR regulations issued by FinCEN on February 24, 2011 do no require the reporting of these funds at this time.
A financial account is foreign when it is located outside of the United States, which includes the following places:
o United States, including the District of Columbia;
o United States territories and possessions, such as: 
  • Commonwealth Northern Mariana Islands
  • District of Columbia
  • American Samoa
  • Guam
  • Commonwealth of Puerto Rico
  • United States Virgin Islands 
  • Trust Territories of the Pacific Islands 
  • Indian lands as defined in the Indian Gaming Regulatory Act.
Typically, a financial account that is maintained with a financial institution located outside of the United States is a foreign financial account.
Example: An account maintained with a branch of a United States bank that is physically located in Germany is a foreign financial account.
Example: An account maintained with a branch of a French bank that is physically located in Texas is not a foreign financial account.

Example: Ed, a United States citizen, purchased securities of a French company through a securities broker located in New York. Ed is not required to report these securities because he purchased the securities through a financial institution located in the United States. 
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June 15 Deadline Nears for Taxpayers Living Abroad!

June 6, 2016

US Taxpayers living abroad qualifying for an automatic two-month extension must file their 2014 federal income tax returns by Monday, June 15, 2015according to the Internal Revenue Service.

The June 15 deadline applies to U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular April 15 due date.

To use the two-month extension, taxpayers must attach a statement to their tax return explaining which of these two situations applies. See U.S. Citizens and Resident Aliens Abroad for more information.

Taxpayers who cannot meet the June 15 deadline can get an automatic extension until Oct. 15, 2015. This is an extension of time to file, not an extension of time to pay. Interest, currently at the rate of three percent per year compounded daily, applies to any payment made after April 15, 2015. In some cases, a late payment penalty, usually 0.5 percent per month, applies to payments made after June 15, 2015.

Taxpayers abroad, regardless of income, can use Free File to request a tax-filing extension. Alternatively, eligible taxpayers can download and file Form 4868, available on IRS.gov.

In some cases, an additional extension beyond Oct. 15 may be available. Additional extension of time for taxpayers out of the country. In addition to the 6-month extension, taxpayers who are out of the country can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). To request this extension, you must send the Internal Revenue Service a letter explaining the reasons why you need the additional 2 months. 

Details are in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. In addition, members of the military and others serving in Afghanistan and other combat zone localities normally have until at least 180 days after they leave the combat zone to file their returns and pay any taxes due. For details, see Extension of Deadlines in Publication 3, Armed Forces Tax Guide.

Federal law requires U.S. Citizens and Resident Aliens to report any Worldwide Income, including income from foreign trusts and foreign bank and securities accounts on their federal income tax return.

Additionally, U.S. persons with foreign accounts whose aggregate value exceeded $10,000 at any time during 2014 must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

Form 114 replaces TD F 90-22.1, the FBAR form used in the past. It is due to the  Department by Tuesday, June 30, 2015 must be filed electronically, and is only available online through the Treasury BSA E-Filing System website. This June 30 due date cannot be extended and tax extensions do not extend the FBAR filing due date. For details on FBAR requirements, see Report of Foreign Bank and Financial Accounts (FBAR).

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A US ForeignTax Issue
or FBAR Report?

 

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An Analysis of >1,000 American-Based Mossack Fonseca Companies Further Supports That The US Is a New Tax Haven

June 3, 2016

We previously posted US The New Tax Haven? and European Group Discloses The Role Of The US As A "Tax Haven" & The Implications For Europe where we discussed that some international families are moving their assets out of traditional offshore jurisdictions and into trusts in certain states of the US.

Now a USA TODAY analysis of more than 1,000 American-based companies registered by Mossack Fonseca, the law firm at the heart of the Panama Papers leak, casts the United States openly into the role as an offshore haven of corporate secrecy for wealthy business operations across the globe.

The analysis found that both Nevada and Wyoming have become secretive havens much like Bermuda and Switzerland have long been and at least 150 companies set up by Mossack Fonseca in those states have ties to major corruption scandals in Brazil and Argentina.

The corporate records of 1,000-plus Nevada business entities linked to the Panamanian law firm reveal layers of secretive ownership, with few having humans' names behind them, and most tracing back to a tiny number of overseas addresses from Bangkok high rises to post offices on tiny island nations. Only 100 of the Nevada-born corporations have officers with addresses in this country: 90 in Nevada, 9 in Florida and 1in Delaware. 

The financial records show more than 600 of the companies' corporate officers are listed at one of just two addresses in the world, one in Panama and the other Seychelles, a small Indian Ocean archipelago. The addresses, in both countries, are the same as Mossack Fonseca's headquarters.

For about 700 of the American shell companies, the corporate officers are business entities rather than people, meaning no individual is linked to the Nevada firm in state records.

The Nevada corporations have also been brought into the separate sprawling nationwide corruption investigation by Brazilian officials, dubbed “Operation Car Wash,” which centers on allegations involving the state oil company Petrobras. The names of least 45 Nevada-based companies and two Wyoming-based companies linked to Mossack Fonseca are listed in investigative documents connected to the Brazil investigation published online by Brazilian prosecutors. Among the documents made public by prosecutors is a slide presentation from Mossack Fonseca’s Brazil office featuring a pie chart of locations it has set up companies. 

Yet another of the Nevada companies, Cross Trading LLC, is involved in a federal criminal case in the U.S. District Court in New York involving officials at FIFA, soccer’s world governing body. The federal criminal complaint alleges a $5 million wire transfer was made from the Miami Bank account of a sports management company to a Swiss bank account held by Cross Trading as part of a set of alleged bribes related to international soccer tournaments.


Wyoming Secretary of State’s Office announced it conducted a review in response to the Panama Papers leak and found companies registered by an audit of M.F. Corporate Services Wyoming LLC “failed to maintain the required statutory information for performing the duties of a registered agent under Wyoming law.”  While the Wyoming investigation is ongoing, Nevada officials have remained quiet about the data leak.

Patricia Amunategui, who runs Mossack Fonseca’s corporation registration operations in Las Vegas and Wyoming, said in a 2014 deposition that very little is required of foreign businesses who want to register a corporation in Nevada. “Under the Nevada law, they don’t ask you any more,” she said, “just the name and (whether or not) the original of the company is in good standing.”

In our previous post US The New Tax Haven? we discuss that some advisors discuss what type of trust can avoid both FATCA and GATCA reporting, including GATCA reporting if the US is treated as a Participating Jurisdiction and the assets do not even have to be located in the US. Since this structure requires a US-resident trustee, the trust could also be structured to avoid US taxation.

America seems not to feel bound by the global rules being crafted as a result of its own war on tax-dodging. It is also failing to tackle the anonymous shell companies often used to hide money. The Tax Justice Network, a lobby group, calls the United States one of the world’s top three “secrecy jurisdictions”, behind Switzerland and Hong Kong.

No one knows how much undeclared money is stashed in these US Structures. Estimates range from a couple of trillion dollars to $30 trillion. What is clear is that America’s share is growing.

Need Legal Advise? 

 

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).
 


 

 

 

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