Yearly Archives: 2017

Now Taxes Without Borders posted Inbound and Outbound U.S. Tax Planning – What’s Left After the MLI? where they discuss that despite these possible changes, a number of interesting planning opportunities appear to remain and while the MLI goes a long way toward curbing the types of abusive structures it was designed to eliminate; since not all countries have signed the MLI or consistently adopted similar treaty provisions on a bilateral basis, many such structures appear to remain viable.

For example, the possible inclusion of an anti-triangular provision from the MLI in a particular treaty could prevent treaty benefits from being available (and thus result in increased withholding tax) where payments are made to a third-country permanent establishment (PE) and that PE is not subject to a sufficient rate of tax. 

Many existing structures also could be adversely affected by the inclusion of certain new elimination of double taxation provisions contained in the MLI.  Under these provisions, an exemption may be denied in the home country for income that “may be taxed” in the treaty partner country, with a credit being provided instead for the tax paid on such income in the other country (which may often be zero or a de minimis amount).

 

On  July 6, 2016 we posted Argentina and Barcelona Soccer Player Leo Messi Handed Jail Term in Spain for Tax Fraud  where we discussed that a Spanish court on July 6, 2016 sentenced the Argentine soccer superstar Lionel Messi to 21 months in jail after he was found guilty of tax fraud for using offshore companies to avoid paying Spanish taxes on advertising contracts.

Under Spanish law, a tax prison sentence under two years can be served under probation, meaning Messi and his father are very unlikely to go to jail. Mr. Messi was also fined about 2.1 million euros, or $2.3 million, by the court.

Messi had hoped that his appeal to Spain's Supreme Court would clear his name. But the convictions of both Messi and his father were upheld. So were their prison sentences.

Barcelona on Wednesday issued a statement in support of their star forward, saying that they feel Messi is not criminally responsible for the tax fraud.

Some of the lessons for US Taxpayers from this Spanish case are obvious:

1. Be accountable and be transparent.
2. One of the biggest themes is accountability.
• Even people with complex affairs who rely on professionals and trusted advisers to handle their affairs may not be able to entirely avoid responsibility.
3. Signing a tax return, for example, requires some accountability.

One of Messi's primary defenses in the trial was that he simply did not understand. He said that he signed many documents without reading their contents. Such a defense may not work in the U.S. either.

According to the IRS, the test is whether there was a voluntary, intentional violation of a known legal duty. Willfulness is shown by your knowledge of reporting requirements and your conscious choice not to comply.

1. Willfulness means you acted with knowledge that your conduct was unlawful, a voluntary, intentional, violation of a known legal duty.
2. You may not have meant any harm or to cheat anyone, but that may not be enough.
3. The failure to learn of filing requirements, coupled with efforts to conceal, may mean a violation was willful.
4. Even willful blindness may be enough, a kind of conscious effort to avoid learning about reporting requirements. Prosecutors had suggested this in Messi's case.

• Hiding things always looks bad.
• Spanish prosecutors wisely focused on the Messis' secrecy.
• The names of the beneficial owners of companies were hidden.
• The Messi's had companies registered in the UK, Switzerland, Uruguay and Belize.  

Some of the primary charges against Messi and his father involved their use of these shell companies. They were designed to avoid taxes on 4.16 million euros of Messi’s income from image rights. It did not help that Messi's name came up in the Panama Papers.

Accountability and Transparency are likely to be universal lessons to be gleamed from this case and remember:

• If you don't understand, ask.
• If something is being covered up, ask why.
• If there is a good reason to hide ownership from the public, at least make very sure that the ownership is not hidden from the government.

Forbes

ESPN FC

On June 1, 2017, the United States District Court for the District of Columbia upheld the Internal Revenue Service’s authority to require the use of a Preparer Tax Identification Number (PTIN), but enjoined the IRS from charging a user fee for the issuance and renewal of PTINs.

As a result of this order, PTIN registration and renewal is currently suspended and tax preparers should be getting a refund check for their previous payments as the court ordered "a full refund of all PTIN fees paid."

The Court did not find that the PTIN requirement for tax preparers was unlawful. It found quite the opposite, saying there is a "rational connection" between the regulations and the stated reasons for the regulations ("effective administration and oversight"). The Court agreed that the IRS could continue to require the use of PTINs for tax preparers.

However, the Court did bar IRS from charging PTIN fees to tax preparers, with Judge Royce C. Lamberth, writing in Adam Steele, et al. v. United States of America, that "all fees that the defendant has charged to class members to issue and renew a PTIN ... are hereby declared unlawful." The Court also ordered that the IRS has to provide "a full refund of all PTIN fees paid."

While the IRS may still issue PTINs, the IRS has, for now, shut down the issuance of all PTINs, including renewals. The IRS, working with the Department of Justice, is considering how to proceed.

The case is Adam Steele v. U.S. (USDC for DC Circuit - Case No. 14-cv-1523-RCL).

 

Sources:

Forbes
AccountingToday
Rubin on Tax