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97 Offshore Banks Are Turning Over Your Names To The IRS – What Are Your Waiting For?

May 26, 2016

The IRS keeps updating its list of foreign banks which are turning over the names of their US Account Holders, who are now 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. 

On March 9, 2016 the Justice Department Announced that Cayman National Securities Ltd. (CNS) and Cayman National Trust Co. Ltd.(CNT) are the 96th & 97th Offshore Banks to reached a resolution under the department’s Offshore Bank Program.
Under the program, banks are required to:
  • Make a complete disclosure of their 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 as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
  • Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
  • Pay appropriate penalties.

From at least 2001 through 2011, CNS and CNT, which are both located in Grand Cayman and organized under the laws of the Cayman Islands, assisted certain U.S. taxpayers in evading their U.S. tax obligations to the IRS, and otherwise hiding accounts held at CNS and CNT from the IRS (hereinafter, “undeclared accounts”).  CNS and CNT did so by knowingly opening and maintaining undeclared accounts for U.S. taxpayers at CNS and CNT.  Specifically, and among other things, in furtherance of a scheme to help U.S. taxpayers hide assets from the IRS and evade taxes:

  • CNS and CNT opened, and/or encouraged many U.S. taxpayer-clients to open, accounts held in the name of sham Caymanian companies and trusts (collectively, “structures”), thereby helping U.S. taxpayers conceal their beneficial ownership of the accounts.
  • CNS and CNT treated these sham Caymanian structures as the account holders and allowed the U.S. beneficial owners of the accounts to trade in U.S. securities.
  • CNS failed to disclose to the IRS the identities of the U.S. beneficial owners who were trading in U.S. securities, in contravention of CNS’s obligations under its Qualified Intermediary Agreement (“QI”) with the IRS.
  • After learning about the investigation of Swiss bank UBS AG (“UBS”), in or about 2008, for assisting U.S. taxpayers to evade their U.S. tax obligations, CNS and CNT continued to knowingly maintain undeclared accounts for U.S. taxpayer-clients, and did not begin to engage in any significant remedial efforts with respect to those accounts until 2011 and 2012.

            The sham Caymanian structures that CNT set up for U.S. taxpayer-clients included trusts, which were nominally controlled by CNT trust officers, but which in fact were controlled by the U.S. taxpayer-clients; managed companies, for which CNT ostensibly provided direction and management services, but which in truth were shell companies that served only to hold the assets of the U.S. taxpayer-clients; and registered office companies, which were shell companies for which CNT simply supplied a Caymanian mailing address.  CNS treated these sham Caymanian structures as the account holders and then permitted the U.S. taxpayer-clients to trade in U.S. securities, without requiring them to submit Form W-9s, which are IRS forms that identify individuals as U.S. taxpayers, as CNS was obligated to do under its QI obligations for accounts held by U.S. persons that held U.S. securities.  CNS and CNT agreed to maintain these structures for U.S. taxpayer-clients after many of them expressed concern that their accounts would be detected by the IRS.

          At their high-water mark in 2009, CNS and CNT had approximately $137 million in assets under management relating to undeclared accounts held by U.S. taxpayer-clients.  From 2001 through 2011, CNS and CNT earned over $3.4 million in gross revenues from the undeclared U.S. taxpayer accounts that they maintained.

         As part of their plea agreements, CNS and CNT have agreed to cooperate fully with the Office’s investigation of the companies’ criminal conduct. 

To date, CNS and CNT have already made substantial efforts to cooperate with that investigation, including by:

  1. facilitating interviews that the Office conducted of CNS and CNT employees, including top level executives;
  2. voluntarily producing documents in response to the Office’s requests;
  3. providing, in response to a treaty request, unredacted client files for approximately 20 percent of the U.S. taxpayer-clients who maintained accounts at CNS and CNT; and
  4. committing to assist in responding to a treaty request that is expected to result in the production of unredacted client files for approximately 90 to 95 percent of the U.S. taxpayer-clients who maintained accounts at CNS and CNT. 

The complete list of Offshore Banks which are turning over the names of their US Account Holders, who are now subject to a 50% (rather than 27.5%) penalty in the IRS’s Offshore Voluntary Disclosure Program (OVDP)is as of 3/9/16: 

  1. UBS AG
  2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
  3. Wegelin & Co.
  4. Liechtensteinische Landesbank AG
  5. Zurcher Kantonalbank
  6. swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
  7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
  8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
  9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
  10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
  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 Company 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 10/6/15)
  55. Schaffhauser Kantonalbank (effective 10/8/15)
  56. BBVA Suiza S.A. (effective 10/16/15)
  57. Piguet Galland & Cie SA (effective 10/23/15)
  58. Luzerner Kantonalbank AG (effective 10/29/15)
  59. Habib Bank AG Zurich (effective 10/29/15)
  60. Banque Heritage SA (effective 10/29/15)
  61. Hyposwiss Private Bank Genève S.A. (effective 10/29/15)
  62. Banque Bonhôte & Cie SA (effective 11/3/15)
  63. Banque Internationale a Luxembourg (Suisse) SA (effective 11/12/15)
  64. Zuger Kantonalbank (effective 11/12/15)
  65. Standard Chartered Bank (Switzerland) SA, en liquidation (effective 11/13/15)
  66. Maerki Baumann & Co. AG (effective 11/17/15)
  67. BNP Paribas (Suisse) SA (effective 11/19/15)
  68. KBL (Switzerland) Ltd. (effective 11/19/15)
  69. Bank CIC (Switzerland) Ltd. (effective 11/19/15)
  70. Privatbank IHAG Zürich AG (effective 11/24/15)
  71. Deutsche Bank (Suisse) SA (effective 11/24/15)
  72. EFG Bank AG (effective 12/3/15)
  73. EFG Bank European Financial Group SA, Geneva (effective 12/3/15)
  74. Aargauische Kantonalbank (effective 12/8/15)
  75. Cornèr Banca SA (effective 12/10/15)
  76. Bank Coop AG (effective 12/10/15)
  77. Crédit Agricole (Suisse) SA (effective 12/15/15)
  78. Dreyfus Sons & Co Ltd, Banquiers (effective 12/15/15)
  79. Baumann & Cie, Banquiers (effective 12/15/15)
  80. Bordier & Cie Switzerland (effective 12/17/15)
  81. PBZ Verwaltungs AG (effective 12/17/15)
  82. PostFinance AG (effective 12/17/15)
  83. Edmond de Rothschild (Suisse) SA (effective 12/18/15)
  84. Edmond de Rothschild (Lugano) SA (effective 12/18/15)
  85. Bank J. Safra Sarasin AG (effective 12/23/15)
  86. Coutts & Co Ltd (effective 12/23/15)
  87. Gonet & Cie (effective 12/23/15)
  88. Banque Cantonal du Valais (effective 12/23/15)
  89. Banque Cantonale Vaudoise (effective 12/23/15)
  90. Bank Lombard Odier & Co Ltd (effective 12/31/15)
  91. DZ Privatbank (Schweiz) AG (effective 12/31/15)
  92. Union Bancaire Privée , USP SA (effective 1/6/16)
  93. PHZ Privat - und Handelsbank Zürich AG reorganized as Leodan Privatbank AG (effective 1/25/16)
  94. Hyposwiss Privatbank AG reorganized as HSZH Verwaltungs AG (effective 1/27/16)
  95. Bank Julius Baer & Co., Ltd (effective 2/4/16)
  96. Cayman National Securities Ltd. (effective 3/9/16)
  97. Cayman National Trust Co. Ltd. (effective 3/9/16)

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, including taxpayers with accounts at one of the 97 Swiss Banks listed abover 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.
 
  1. With roughly 97 Swiss banks taking the DOJ deal and 
  2. FATCA requiring the entire world to report to the IRS
it is inevitable that this increased disclosure, will result in Every American eventually being 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 one of 
these Offshore Banks or

 Management Companies?
 
 
Is Your Name Being Handed Over 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

Offshore Banks Liability For Client's Tax Evasion

May 24, 2016

According to Law360 Offshore Tax Havens and Nominee Entities pose a significant regulatory and compliance risks to international financial institutions.

Regulatory authorities around the world, including the U.S. Department of Justice, intensified their investigations into offshore tax havens after the April 3, 2016, publication of names associated with the Panamanian law firm Mossack Fonseca, widely known as the “Panama Papers,” and the firestorm of public outcry.

International financial institutions frequently open accounts in the name of offshore entities. In order to combat the risks of facilitating tax evasion, most financial institutions apply rigorous “know your client” and new client adoption procedures. Even with these processes in place, financial institutions retain limited insight into a client’s true intentions.

While account opening documentation usually includes language admonishing that the account holder solely is responsible for the tax compliance of the assets held in the account, the trend in international enforcement is to question the sufficiency of such clauses.

Regulatory regimes such as the U.S. FATCA and the Organization for Economic Cooperation and Development’s Common Reporting Standard require financial institutions to report information on their account holders to tax authorities. Institutions that fail to implement the reporting schemes carefully and thoroughly face significant automatic withholding of payments from source jurisdictions and potential loss of access to dollar markets.

Financial institutions no longer can afford simply to delegate responsibility for tax compliance of accounts they hold for their clients. Banks and financial institutions that preemptively conduct rigorous risk assessments of offshore entity accounts and implement stricter compliance and oversight measures will be the best prepared to answer when the DOJ or another regulatory authority comes calling.

Does Your Financial Institution Have U.S. Taxpayers
With "Unreported Income" From Offshore Accounts?

Do You Need Them Come Clean NOW before
Their Illegal Activity is Identified! 

 
 
 
 We Can Counsel Them
on Which OVDP Program
is Right for Them?

 
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

U.S. Citizen's Capital Gains Taxable Under U.S.-Israel Treaty According to US Tax Court

May 24, 2016

The Tax Court has concluded that a "pro se" taxpayer who was a U.S. citizen and permanent Israel resident was taxable on his capital gains.

Although the taxpayer argued that such gain was excluded from U.S. tax under one provision of the U.S.-Israel income tax treaty, it was nonetheless taxable under the treaty's “saving clause.” Cole, TC Summary Opinion 2016-22.

Article 15, paragraph 1, of the Convention between the Government of the United States of America and the Government of Israel with Respect to Taxes on Income, U.S.-Israel, Nov. 20, 1975 provides that “[a] resident of one of the Contracting States shall be exempt from tax by the other Contracting State on gains from the sale, exchange, or other disposition of capital assets.”

The U.S.-Israel income tax treaty includes a “saving clause” Article 6, paragraph 3, of the treaty provides that “[n]otwithstanding any provisions of this Convention except paragraph (4), a Contracting State may tax its residents and its citizens as if this Convention had not come into effect.”

After moving to Israel in 2009, Elazar Cole, a U.S. citizen, became a permanent resident of Israel in 2010. As a result of moving to Israel, he qualified for a 10-year Israeli “tax holiday,” which exempted him from Israeli tax on non-Israeli-source capital gain income.

Mr. Cole purchased 3,000 shares of stock in Neogen Corporation (Neogen), a Michigan incorporated entity. In 2010, he sold this stock and realized $114,947 of long-term capital gain.

On his 2010 Form 1040, U.S. Individual Income Tax Return, Mr. Cole reported the $157,012 of proceeds from the sale of Neogen stock on Schedule D, Capital Gains and Losses. However, he did not include any of the proceeds in his taxable income. On audit, IRS determined a $13,212 deficiency and a $2,642 accuracy-related penalty under Code Sec. 6662(a).

The Tax Court held that Mr. Cole had to recognize the $114,947 long-term capital gain of attributable to his sale of Neogen stock. He wasn't entitled to exclude the proceeds from his sale of this stock from U.S. taxation under Article 15, paragraph 1, of the U.S.–Israel income tax treaty. The Court found that the proceeds were subject to U.S. federal income tax under the U.S.-Israel income tax treaty's saving clause.

The Court stated that the saving clause did not nullify the treaty; it only nullified the benefits provided by certain provisions to current citizens and certain former residents and citizens. The U.S.–Israel income tax treaty provided that certain of its Articles took precedence over the saving clause—but Article 15 wasn't among them.

In addition, the saving clause applied only to current citizens and certain former residents and citizens of a Contracting State who currently resided in the Other Contracting State.

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).
 
 


 

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European Group Discloses The Role Of The US As A “Tax Haven” & The Implications For Europe

May 24, 2016

On February 23, 2016, we posted US The New Tax Haven? 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.

We also discussed that some level of secrecy is still available in the US because Washington has not signed up to the OECD Common Reporting Standard (CRS) for international information exchange, preferring instead its own Foreign Account Tax Compliance Act (FATCA).

By resisting new Global Disclosure Standards,
the U.S. is creating a Hot New Market,
becoming the Go-To Place to
Stash Foreign Wealth.

 

Everyone from London lawyers to Swiss trust companies are getting in on the act, helping the world's rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.
 
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.

The Economist adds that 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 offshore. Estimates range from a couple of trillion dollars to $30 trillion. What is clear is that America’s share is growing.  
  

Now The Greens-European Free Alliance (EFA) group, a small political group in the European Parliament, has commissioned a new report The Role of the US as a Tax Haven and the Implications for Europe which also describes why the U.S. is “becoming the biggest tax haven on the planet.”

The report claims that U.S. loopholes allow anonymous companies in certain states and that the U.S. has not joined the trend to implement the multilateral automatic exchange of information under the Common Reporting Standard (CRS), but instead, has implemented the Foreign Account Tax Compliance Act (FATCA).
 
The report the claims that: 
  1. The U.S. is becoming one of the biggest tax havens, precisely because its legislation has loopholes when it comes to knowing who owns and control companies. The U.S. is a major financial centre but the transparency of its legal framework is not consistent with the responsibility involved in being a major financial hub.
    • Indeed, an investigation in 2012 found that creating an anonymous shell company is easier in the U.S. than in the rest of the world and states like Wyoming, Delaware and Nevada are among the most likely to supply untraceable shell companies to foreign clients.
    • Incorporation of companies in the U.S. is governed by state law and requires the filing of a corporate governance document.

      • However, many states promoting the creation of corporations by non-residents do not require filing even basic ownership information.
      • Arkansas, Mississippi, Colorado, Missouri, Delaware, New York, Indiana, Ohio, Iowa, Oklahoma, Maryland, Pennsylvania, Michigan, and Virginia do not require to identify either shareholders or managers.
    • New measures announced by President Obama last week to increase financial transparency are not ambitious enough (and will – for some – require Congress’ approval) to close the current gaps in US laws, which allow bad actors to deliberately use U.S. companies to hide money laundering, tax evasion and other illicit financial activities. 
  2. In addition to these loopholes, the U.S. hasn’t fully committed to automatic exchange of tax information with other countries, according to the new international standards developed by the Organisation for Economic Cooperation and Development (OECD).
    •  Instead, the U.S. decided to sign a series of bilateral agreements with namely European countries but the exchange of tax information is not done through an equal partnership.
    • EU countries have to provide more tax information to the U.S. than this country is sending to Member States. This can create a strong incentive for those trying to hide from tax authorities to move their assets to the U.S., with less chance to be reported to EU authorities. 
  3. In 2015, the U.S. was ranked the third top jurisdiction of the Tax Justice Network's Financial Secrecy Index, which analyses the legal framework of jurisdictions in terms of banking secrecy, ownership registration of companies, trusts, foundations and partnerships, compliance with international anti-money laundering recommendations, etc.
    • According to the Index, the U.S. holds almost 20% of the global market share of financial services for non-residents. Foreign assets in the U.S. amounted to $16,745 billion in 2013, almost double than the U.K. (second highest). In 2014 foreign direct investment in the U.S. reached $2.900 billion with almost 60% coming from the European Union (EU) ($325 billion of these EU-originating investments corresponded to depositary institutions, finance and insurance).
  4. The U.S. will receive the maximum scope of information from the EU and from many other countries (pursuant to IGAs), but will only send limited information to most EU countries, and no information whatsoever to Austria, Bulgaria, Switzerland and many other countries that either signed a Model 2 IGA, Model 1 B or that did not manage to sign a IGA 1 A at all (like Argentina, which did sign the MCAA).
    • Even though the U.S. signed more than 100 IGAs, U.S. experts disagree on the validity of IGAs pursuant to U.S. domestic laws.
Need International Legal Advise? 

 

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

for a FREE 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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