International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Friday, October 6, 2017

IRS Announces FATCA Reporting Delays for US and Foreign Financial Institutions

Notice 2017-46 provides guidance for financial institutions required to collect taxpayer identification numbers (TINs) and dates of birth under temporary regulations under Chapter 3 or a Model 1 Intergovernmental Agreement (IGA) as follows:

            (1) With respect to foreign financial institutions (FFIs), this notice provides that FFIs in Model 1 IGA jurisdictions will not be in significant non-compliance with an applicable IGA during 2017, 2018, and 2019 solely as a result of a failure to report U.S. TINs for preexisting accounts, provided the FFI reports the account holder’s date of birth, makes annual requests for the TIN, and searches its electronic records for missing U.S. TINs before reporting information on 2017.

            (2) With respect to U.S. financial institutions, this notice delays the start date of the requirement to collect foreign TINs for account holders to January 1, 2018, provides a phase-in period for obtaining foreign TINs from account holders documented prior to January 1, 2018, and narrows the circumstances in which a foreign TIN is required. 

Taxpayers may rely on the provisions of this notice prior to the issuance of amendments to the temporary Chapter 3 regulations reflecting the notice.

Notice 2017-46 will be in IRB 2017-41, dated October 10, 2017.

Current Status of FATCA an CRS (Sept 2017 edition) https://ssrn.com/abstract=3045459

October 6, 2017 in GATCA | Permalink | Comments (0)

Wednesday, September 27, 2017

First automatic Common Reporting Standard exchanges between 49 jurisdictions set to take place this month; now over 2000 bilateral exchange relationships in place

In 2014, the OECD and the G20 approved the Common Reporting Standard (CRS), which will be the basis for the automatic annual exchange of information on offshore financial accounts to the tax authorities of the residence country of account holders. At present, 102 jurisdictions have publicly committed to implement the CRS, with 49 being committed to start exchanges this month and a further 53 taking up exchanges in September 2018.

The successful implementation of the CRS requires both domestic legislation to ensure that financial institutions correctly identify and report accounts held by non-residents, and an Book cover international legal framework for the automatic exchange of CRS information. The preferred route to put the international legal framework in place is through the CRS Multilateral Competent Authority Agreement (CRS MCAA), which defines the scope, timing, format and conditions for the exchange of CRS information and is based on the multilateral Convention on Mutual Administrative Assistance in Tax Matters, the prime instrument for cooperation in tax matters. At present, 95 jurisdictions have signed the CRS MCAA.

While the CRS MCAA is a multilateral agreement, exchange relationships for CRS information are bilateral in nature and are activated when both jurisdictions have the domestic framework for CRS exchange in place and have listed each other as intended exchange partners.

Today, we are pleased to announce that another series of bilateral exchange relationships was established under the CRS MCAA. In total, there are now over 2000 bilateral relationships for the automatic exchange of CRS information in place across the globe. The full list of automatic exchange relationships that are currently in place under the CRS MCAA is available online.

With first exchanges for jurisdictions committed to a 2017 timeline now being only weeks away, all 49 have now activated their exchange relationships under the CRS MCAA and the network of bilateral exchange relationships (also including those established through the EU DAC2 Directive and bilateral agreements) now covers over 99% of the total number of possible exchange relationships. In addition, 20 of the 53 jurisdictions committed to first exchanges in 2018 have already put the international legal requirements in place to commence exchanges under the CRS MCAA next year. A further activation round for jurisdictions committed to a 2018 timeline is scheduled to take place in November 2017 which will allow the remaining jurisdictions to nominate the partners with which they will undertake automatic exchanges of CRS information.

Today's wave of activations of bilateral exchange relationships is a key milestone for the successful and timely implementation of the CRS in the 49 jurisdictions committed to first exchanges this month and marks the delivery on their political commitment to fight tax evasion.

September 27, 2017 in GATCA | Permalink | Comments (0)

Monday, September 18, 2017

Brunei Darussalam is 113 country to sign GATCA convention to share bank account information

Her Excellency Datin Paduka Malai Halimah Malai Yussof, Ambassador Extraordinary and Plenipotentiary of Brunei Darussalam to France, signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in the presence of OECD Deputy Secretary-General, Mr. Masamichi Kono. Brunei Darussalam is becoming the 113rd jurisdiction to join the Convention.
 
The Convention is the most powerful instrument for international tax cooperation. It provides for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees extensive safeguards for the protection of taxpayers' rights.

September 18, 2017 in GATCA | Permalink | Comments (0)

Wednesday, August 23, 2017

Is your financial center above water?

The public, especially the BVI Financial Institutions that have reporting obligations to be satisfied in the year 2017 are being notified that the authority’s email and the web-based portal the BVI Financial Account Reporting System (BVIFARS) are down, as a result of the Tropical Wave that affected the Territory last week.  See the news flash.

The authority is therefore extending the reporting deadline for the year 2017 from Friday, August 18 to Friday, September 1. 

 The extension is for those persons and financial institutions who will be reporting under the following arrangements:

  1. The Common Reporting Standards (CRS); and
  2. The Agreement between the Government of the British Virgin Islands and the Government of the United Kingdom of Great Britain and Northern Ireland to improve international tax compliance (UK CDOT).

The authority said that it is working to get its systems back online as soon as possible.

August 23, 2017 in GATCA | Permalink | Comments (0)

Tuesday, August 22, 2017

Global Forum releases second round of compliance ratings on tax transparency for 10 jurisdictions

The Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) published the first 10 outcomes of a new and enhanced peer review process aimed at assessing compliance with international standards for the exchange of information on request between tax authorities. 

The new round of peer reviews – launched in mid-2016 – follows a six-year process during which the Global Forum assessed the legal and regulatory framework for information exchange (Phase 1) as well as the actual practices and procedures (Phase 2) in 119 jurisdictions worldwide.

The Global Forum’s new peer review process combines the Phase 1 and Phase 2 elements into a single undertaking, with new focus on an assessment of the availability of and access by tax authorities to beneficial ownership information of all legal entities and arrangements, in line with the Financial Action Task Force international standard.  

The Global Forum reviewed exchange of information practices through combined peer review reports in ten jurisdictions Three jurisdictions – IrelandMauritius and Norway –  received an overall rating of “Compliant.” Six others – AustraliaBermudaCanadaCayman IslandsGermany and Qatar were rated “Largely Compliant.” Jamaica was rated “Partially Compliant,” leading the Global Forum to launch a supplementary report on follow-up measures to ensure a higher level of compliance.

Global Forum members are working together to monitor and review implementation of the international standard for the automatic exchange of financial account information, under the Common Reporting Standard (CRS), which will start in September 2017. The monitoring and review process is intended to ensure the effective and timely delivery of commitments made, the confidentiality of information exchanged and to identify areas where support is needed.  

The Global Forum is assisting developing country members to ensure that they can also receive the benefits of the ongoing global move to automatic exchange of financial account information. 

For additional information on the Global Forum peer review process, and to read all reports to date, go to: http://www.oecd-ilibrary.org/taxation/global-forum-on-transparency-and-exchange-of-information-for-tax-purposes-peer-reviews_2219469x.

August 22, 2017 in GATCA | Permalink | Comments (0)

Monday, August 21, 2017

The Beneficial Ownership of Legal Persons (Guernsey) Law, 2017 In Effect and Registry Now Recording UBOs

The Beneficial Ownership of Legal Persons (Guernsey) Law 2017 came into force on 15 August, and the associated limited-access electronic registry service is now live. It imposes a statutory duty on resident agents to keep an up-to-date record of the beneficial owners of legal entities for which they are responsible, essentially setting a 25 % threshold for beneficial ownership.  EXPLANATORY MEMORANDUM

The Law establishes the Office of the Registrar of Beneficial Ownership of Legal Persons, sets out the powers and functions of the Registrar, and imposes new duties on beneficial owners of legal persons and resident agents relating to the provision of information. The Law also makes appropriate amendments to the "relevant legal person Laws" - ie the Companies (Guernsey) Law, 2008, the Limited Liability Partnerships (Guernsey) Law, 2013 and the Foundations (Guernsey) Law, 2012 - and makes amendments to other legislation to ensure that the Guernsey Financial Services Commission has appropriate supervisory powers in respect of persons it regulates.

Part 1 of the Law establishes the Office of the Registrar and sets out the Registrar's functions. Part 2 sets out the duties of resident agents and beneficial owners to collect and disclose information. These duties expand on existing duties in the relevant legal persons Laws (eg Part XXIX of the Companies Law). The duties are enforced by a civil penalties regime and, in respect of resident agents, criminal offences. Part 3 amends the existing resident agent and beneficial ownership provisions in the relevant legal person Laws, making them consistent with the duties under Part 2 and the functions of the Registrar. Part 4 is concerned with the enforcement of the provisions, including a range of flexible civil sanctions consistent with those in the Companies Law, such as the power to issue private reprimands. The general provisions at Part 5 include providing for the meaning of 'beneficial owner' and related expressions to be defined by regulations.

Schedule 1 makes standard provision in respect of the Office of the Registrar. Schedule 2 sets out in more detail the general powers of the Registrar to disclose, and obtain, information, as well as the duty on him to keep information secure and confidential; the powers to disclose are consistent with powers in existing legislation such as the Disclosure Law. Also in Schedule 2 is an express power for the GFSC and the Economic Crime Division of the Customs and Immigration Service to inspect the Register for the purposes of carrying out their functions. Schedule 3 sets out amendments to the Foundations Law and Schedule 4 sets out amendments to other enactments, made for the broad purpose of ensuring that the GFSC has suitable supervisory powers in respect of persons it regulates.

August 21, 2017 in AML, GATCA | Permalink | Comments (0)

Wednesday, August 16, 2017

Swiss Asset Management Firm Trades Client Accounts and Info of US Tax Evaders for Leniency In Its Criminal Investigation

Prime Partners SA Will Pay $5 Million in Forfeiture and Restitution; Receives Non-Prosecution Agreement As a Result of its Extraordinary Cooperation

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division, and James D. Robnett, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that Prime Partners SA (“Prime Partners”) entered into a non-prosecution agreement (“NPA”) with the U.S. Attorney’s Office and agreed to pay $5 million to the United States for assisting U.S. taxpayer-clients in opening and maintaining undeclared foreign bank accounts from 2001 through 2010. The NPA was based on Prime Partners’ extraordinary cooperation, including its voluntary production of approximately 175 client files for non-compliant U.S. taxpayer-clients, and provides that Prime Partners will not be criminally prosecuted. The NPA requires Prime Partners to forfeit $4.32 million to the United States, representing certain fees that it earned by assisting its U.S. taxpayer-clients in opening and maintaining these undeclared accounts, and to pay $680,000 in restitution to the IRS, representing the approximate unpaid taxes arising from the tax evasion by Prime Partners’ U.S. taxpayer-clients.

Acting Manhattan U.S. Attorney Joon H. Kim said: “Prime Partners admits to helping its clients conceal their ownership of foreign bank accounts to avoid their U.S. tax obligations. They created sham entities and even counseled their clients to use pay phones and prepaid debit cards to avoid detection of their tax fraud scheme. The resolution of this matter through a non-prosecution agreement, along with forfeiture and restitution, reflects the extraordinary cooperation provided by Prime Partners to our investigation. It should serve as proof that cooperation has tangible benefits. We will continue to pursue financial services firms around the world that help their clients evade U.S. taxes.”

Acting Deputy Assistant Attorney General Stuart M. Goldberg said: “The message is clear to those using foreign bank accounts to engage in schemes to evade U.S. taxes – you can no longer assume your ‘secret’ accounts will remain concealed, no matter where they are located. In our ongoing investigations, we will continue to draw on information from a variety of sources and to provide substantial credit to those around the globe who provide full and timely cooperation regarding the identity of U.S. tax cheats and the phony trusts and shell companies they seek to hide behind.”

IRS-CI Special Agent in Charge James D. Robnett said: “Today’s NPA signals the continued erosion of the tax secrecy safe havens that helped facilitate this criminal activity at a significant cost to the US taxpayer. IRS-CI is focused on tracking funds of individuals hiding income offshore and will continue to investigate international tax evasion.”

As part of the NPA, Prime Partners admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct. Specifically, Prime Partners admitted that it knew certain U.S. taxpayers were maintaining undeclared foreign bank accounts with the assistance of Prime Partners in order to evade their U.S. tax obligations, in violation of U.S. law. Prime Partners acknowledged that it helped certain U.S. taxpayer-clients conceal from the IRS their beneficial ownership of undeclared assets maintained in foreign bank accounts by, among other things:

(i) creating sham entities, which had no business purpose, that served as the nominal account holders for the accounts;

(ii) advising U.S. taxpayer-clients not to retain their account statements, to call Prime Partners collect from pay phones, and to destroy any faxes they received from Prime Partners;

(iii) providing U.S. taxpayer-clients with prepaid debit cards, which were funded with money from the clients’ undeclared accounts; and

(iv) facilitating cash transfers in the United States between U.S. taxpayer-clients with undeclared accounts.

The NPA recognizes that, in early 2009, Prime Partners voluntarily implemented a series of remedial measures to stop assisting U.S. taxpayers in evading federal income taxes. The NPA further recognizes the extraordinary cooperation of Prime Partners, including its voluntary production of approximately 175 client files for non-compliant U.S. taxpayers, which included the identities of those U.S. taxpayers.

As part of the NPA, Prime Partners has agreed to forfeit $4.32 million to the United States, representing a portion of the gross revenues from services that it provided to U.S. taxpayers with undeclared foreign bank accounts from 2001 through 2010. In connection with this forfeiture, Prime Partners has agreed not to contest a civil forfeiture action to be filed by the United States.

The U.S. Attorney’s Office entered into the NPA based on factors including:

  • Prime Partners’ voluntary and extraordinary cooperation, including its voluntary production of account files containing the identities of U.S. taxpayer-clients;
  • Prime Partners’ voluntary implementation of various remedial measures beginning in or around early 2009, before the investigation of its conduct began;
  • Prime Partners’ willingness to continue to cooperate to the extent permitted by applicable law; and
  • Prime Partners’ representation – based on an investigation by outside counsel, the results of which have been reviewed by the U.S. Attorney’s Office and the Tax Division – that the misconduct under investigation did not, and does not, extend beyond that described in the Statement of Facts.

The NPA requires Prime Partners to continue to cooperate with the United States for at least three years from the date of the agreement. In the event that Prime Partners violates the NPA, the U.S. Attorney’s Office may prosecute Prime Partners.

Mr. Kim thanked the IRS for its outstanding work in the investigation of this matter and the Tax Division of the Department of Justice for its assistance in the investigation.

August 16, 2017 in GATCA | Permalink | Comments (0)

Saturday, August 12, 2017

IRS Begins Issuing Notices to Taxpayers whose ITINs Expire by End of 2017

The Internal Revenue Service began mailing letters this month to more than 1 million taxpayers with expiring Individual Taxpayer ‎Identification Numbers and urges recipients to Irs_logorenew them as quickly as possible to avoid tax refund and processing delays.

ITINs with middle digits 70, 71, 72 or 80 are set to expire at the end of 2017. The notice being mailed -- CP-48 Notices, You must renew your Individual Taxpayer Identification Number (ITIN) to file your U.S. tax return -- explains the steps taxpayers need to take to renew the ITIN if it will be included on a U.S. tax return filed in 2018.

The notices will be issued over a five-week period beginning in early August. Taxpayers who receive the notice but have acted to renew their ITIN do not need to take further steps unless another family member is affected.

“We urge people who receive this letter to renew their ITIN as quickly as possible to avoid tax refund and processing delays next year,” said IRS Commissioner John Koskinen. “Taking steps now and renewing early will make things go much more smoothly for ITIN holders when it comes time to file their taxes.”

Under the Protecting Americans from Tax Hikes (PATH) Act, ITINs that have not been used on a federal tax return at least once in the last three consecutive years will expire Dec. 31, 2017, and as mentioned above, ITINs with middle digits 70, 71, 72 or 80 will also expire at the end of the year. Affected taxpayers who expect to file a tax return in 2018 must submit a renewal application.

As a reminder, ITINs with middle digits 78 and 79 that expired at the end of last year can be renewed at any time.

Who Needs an ITIN?

ITINs are used by people who have tax filing or income reporting obligations under U.S. law but are not eligible for a Social Security number (SSN). ITIN holders should visit the ITIN information page on IRS.gov and take a few minutes to understand the guidelines.

Who Should Renew an ITIN?

Taxpayers with ITINs set to expire and who need to file a tax return in 2018 must submit a renewal application. Others do not need to take any action.

  • ITINs with middle digits 70, 71, 72, or 80 (For example: 9NN-70-NNNN) need to be renewed if the taxpayer will have a filing requirement in 2018.

  • Taxpayers whose ITINs expired due to lack of use should only renew their ITIN if they will have a filing requirement in 2018.

  • Taxpayers who are eligible for, or who have, an SSN should not renew their ITIN, but should notify IRS both of their SSN and previous ITIN, so that their accounts can be merged.

  • Taxpayers whose ITINs have middle digits 78 or 79 that have expired should renew their ITIN if they will have a filing requirement in 2018.

Family Option Remains Available

Taxpayers with an ITIN with middle digits 70, 71, 72, 78, 79 or 80 have the option to renew ITINs for their entire family at the same time. Those who have received a renewal letter from the IRS can choose to renew the family’s ITINs together even if family members have an ITIN with middle digits other than 70, 71, 72, 78, 79 or 80. Family members include the tax filer, spouse and any dependents claimed on the tax return.

How to Renew an ITIN

To renew an ITIN, taxpayers must complete a Form W-7 and submit all required documentation; taxpayers are not required to attach a federal tax return.

The IRS is currently accepting ITIN renewals. There are three ways to submit the W-7 application package:

  • Mail the Form W-7, along with original identification documents or copies certified by the issuing agency, to the IRS address listed on the Form W-7 instructions. The IRS will review the identification documents and return them within 60 days.|

  • Taxpayers have the option to work with Certified Acceptance Agents(CAAs) 
    authorized by the IRS to help them apply for an ITIN. CAAs can certify all identification documents for primary and secondary taxpayers and certify that an ITIN application is correct before submitting it to the IRS for processing. A CAA can also certify passports and birth certificates for dependents. This saves taxpayers from mailing original documents to the IRS.

  • In advance, taxpayers can call and make an appointment at a designated IRS Taxpayer Assistance Center instead of mailing original identification documents to the IRS.

Avoid Common Errors Now; Prevent Delays Next Year

Several common errors can delay some ITIN renewal applications. The mistakes generally center on missing information and/or insufficient supporting documentation. Here are a few examples of mistakes taxpayers should avoid:

  • Filing with an expired ITIN. Federal returns that are submitted in 2018 with an expired ITIN will be processed. However, exemptions and/or certain tax credits will be disallowed. Taxpayers will receive a notice in the mail advising them of the change to their tax return and their need to renew their ITIN. Once the ITIN is renewed, any applicable exemptions and credits will be restored and any refunds will be issued.

  • Missing a reason for applying.  A reason for needing the ITIN must be selected on the Form W-7. 

  • Missing a complete foreign address. When renewing an ITIN, if Reason B (non-resident alien) is marked, the taxpayer must include a complete foreign address on their Form W-7. 

  • Mailing incorrect identification documents. Taxpayers mailing their ITIN renewal applications must include original identification documents or certified copies by the issuing agency and any other required attachments. They must also include the ITIN assigned to them and the name under which it was issued in 6e-f.

Taxpayers should review the Form W-7 instructions for detailed information and carefully check their package before submitting it.

As a reminder, the IRS no longer accepts passports that do not have a date of entry into the U.S. as a stand-alone identification document for dependents from a country other than Canada or Mexico, or dependents of U.S. military personnel overseas. The dependent’s passport must have a date of entry stamp, otherwise the following additional documents to prove U.S. residency are required:

  • U.S. medical records for dependents under age 6,
  • U.S. school records for dependents under age 18, and
  • U.S. school records (if a student), rental statements, bank statements or utility bills listing the applicant’s name and U.S. address, if over age 18

IRS Encourages More Applicants for the Acceptance Agent Program to Expand ITIN Services

To increase the availability of ITIN services nationwide, particularly in communities with high ITIN usage, the IRS is actively recruiting Certified Acceptance Agents. Applications are now accepted year-round. Interested individuals, community outreach partners and volunteers at tax preparation sites are encouraged to review program changes and requirements.

The IRS continues to work with partner groups and others in the ITIN community to share information about these important changes. To assist taxpayers, the IRS has a variety of informational materials, including flyers and fact sheets available in several languages on the ITIN information page on IRS.gov.

August 12, 2017 in GATCA | Permalink | Comments (0)

Saturday, July 29, 2017

California Resident Indicted for Impeding the Internal Revenue Laws and Filing False Tax Returns that Did Not Report Secret German and Israeli Accounts

Allegedly Hid $20 Million in Offshore Accounts at the Same Time Falsely Claiming the Earned Income Tax Credit on His Tax Returns

A Beverly Hills, California resident was indicted by a federal grand jury in the Central District of California for corruptly endeavoring to impede the Irs_logointernal revenue laws, filing false tax returns, filing false reports regarding his offshore bank accounts and making false statements to a federal agent, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Acting U.S. Attorney Sandra R. Brown for the Central District of California.

The indictment charges that from 2006 through 2014, Teymour Khoubian impeded the administration of the internal revenue laws. According to the indictment, Khoubian filed false individual tax returns with the Internal Revenue Service (IRS) for tax years 2005 through 2010 that did not report his financial interest in multiple Israeli and German bank accounts or the interest income that he earned from those accounts. He also allegedly falsely claimed refundable tax credits to which he was not entitled, including the Earned Income Tax Credit, which is intended for low-to moderate-income working individuals. In 2008, Khoubian is alleged to have held approximately $20 million in assets in his undisclosed accounts. The indictment charges that Khoubian also filed a false 2011 tax return that underreported the interest income he earned from his Israeli accounts and continued to fail to disclose that he held an account in Germany. Khoubian is also alleged to have filed false 2012 and 2013 Reports of Foreign Bank and Financial Accounts forms (FBARs) with the U.S. Department of Treasury that concealed his German account. U.S. citizens, resident aliens, and permanent legal residents with a foreign financial interest in or signatory authority over a foreign financial account worth more than $10,000 are required to file an FBAR disclosing the account.

In addition to filing false tax returns and FBARs, Khoubian allegedly provided his German bank with a copy of his Iranian passport and a residential address located in Israel to prevent the bank from disclosing the account to the IRS. He also allegedly sent a letter to Bank Leumi falsely claiming he was living in Iran when, in fact, he resided in Beverly Hills, California.

Khoubian is also charged with making false statements to an IRS Criminal Investigation (CI) special agent – denying that he owned an account in Germany between 2005 and 2010, stating that the German account was closed, when it was in fact still open, and stating that the funds had been transferred to the United States, when Khoubian had allegedly transferred over $600,000 from his German account to his accounts in Israel.

If convicted, Khoubian faces a statutory maximum sentence of three years in prison for corruptly endeavoring to impede the internal revenue laws and each count of filing a false return and five years in prison for each count of filing a false FBAR and making a false statement. He also faces a period of supervised release, restitution and monetary penalties.

The charges contained in the indictment are only allegations. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

Acting Deputy Assistant Attorney General Goldberg and Acting U.S. Attorney Brown thanked special agents of IRS CI, who conducted the investigation, and Trial Attorneys Christopher S. Strauss and Ellen M. Quattrucci of the Tax Division and Assistant U.S. Attorney Robert Conte, who are prosecuting this case.

July 29, 2017 in GATCA | Permalink | Comments (0)

Tuesday, July 25, 2017

Former Credit Suisse Banker Pleads Guilty to Conspiring with U.S. Taxpayers and Other Swiss Bankers to Defraud the United States

A citizen and resident of Switzerland pleaded guilty today to conspiring to defraud the United States in connection with her Irs_logowork as the head of a team of bankers for Credit Suisse AG, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente for the Eastern District of Virginia.

According to the statement of facts and the plea agreement, Susanne D. Rüegg Meier, admitted that from 2002 through 2011, while working as the team head of the Zurich Team of Credit Suisse’s North American desk in Switzerland, she participated in a wide-ranging conspiracy to aid and assist U.S. taxpayers in evading their income taxes by concealing assets and income in secret Swiss bank accounts. Rüegg Meier was responsible for supervising the servicing of accounts involving over 1,000 to 1,500 client relationships. She was also personally responsible for handling the accounts of approximately 140 to 150 clients, about 95 percent of whom were U.S. persons residing primarily in New York, Chicago and Florida, which held assets under management totaling approximately $400 million. Rüegg Meier admitted that the tax loss associated with her criminal conduct was between $3.5 and $9.5 million.

Rüegg Meier assisted many U.S. clients in utilizing their Credit Suisse accounts to evade their U.S. income taxes and to facilitate concealment of their undeclared financial accounts from the U.S. Department of the Treasury and the Internal Revenue Service (IRS). She took the following steps to assist clients in hiding their Swiss accounts: retaining in Switzerland all mail related to the account; structuring withdrawals in the forms of multiple checks each payable in amounts less than $10,000 that were sent by courier to clients in the United States and arranging for U.S. customers to withdraw cash from their Credit Suisse accounts at Credit Suisse locations outside Switzerland, such as the Bahamas. Moreover, Rüegg Meier admitted that approximately 20 to 30 of her U.S. clients concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities or other structures that were frequently created in the form of foreign partnerships, trusts, corporations or foundations.

Between 2002 and 2008, Rüegg Meier traveled approximately twice per year to the United States to meet with clients. Among other places, Rüegg Meier met clients in the Credit Suisse New York representative office. To prepare for the trips, Rüegg Meier would obtain “travel” account statements that contained no Credit Suisse logos or customer information, as well as business cards that bore no Credit Suisse logos and had an alternative street address for her office, in order to assist her in concealing the nature and purpose of her business.

After Credit Suisse began closing U.S. customers’ accounts in 2008, Rüegg Meier assisted the clients in keeping their assets concealed. For example, when one U.S. customer was informed that the bank planned to close his account, Rüegg Meier assisted the customer in closing the account by withdrawing approximately $1 million in cash. Rüegg Meier advised the client to find another bank simply by walking along the street in Zurich and locating a bank that would be willing to open an account for the client. The customer placed the cash into a paper bag and exited the bank. Rüegg Meier also recommended that a few U.S. clients open new accounts at other specific banks, such as Bank Frey and Wegelin & Co., and transfer their assets from their Credit Suisse accounts to the new accounts.

Credit Suisse pleaded guilty in May 2014 for conspiring to aid and assist taxpayers in filing false returns, and was sentenced in November 2014 to pay more than $2 billion in fines and restitution.

Sentencing is scheduled for Sept. 8. Rüegg Meier faces a statutory maximum sentence of five years in prison. She also faces a period of supervised release, restitution and monetary penalties.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Boente commended special agents of IRS Criminal Investigation, who conducted the investigation, and Senior Litigation Counsel Mark F. Daly and Trial Attorney Robert J. Boudreau of the Tax Division and Assistant U.S. Attorney Mark Lytle of the Eastern District of Virginia, who are prosecuting this case.

July 25, 2017 in GATCA | Permalink | Comments (0)

Sunday, July 16, 2017

OECD reports major progress reported towards a fairer and more effective international tax system

Countries are making major progress towards the goal of creating a fairer and more effective international tax system, including increasing efforts to close down loopholes, improve OECDtransparency and ensure that multinational enterprises pay tax where they carry out their activities, according to a new OECD report.

The latest Report from OECD Secretary-General Angel Gurría to G20 Leaders  describes the continuing fight against tax avoidance and tax evasion as one of the major success stories of the G20, founded on enhanced international co-operation.  The report, released today, updates progress in key areas of OECD-G20 tax work, including movement towards automatic exchange of information between tax authorities and implementation of key measures to address tax avoidance by multinationals.

“Tax issues have been a key priority of the G20 since its inception, and 2017 is the year of implementation,” Mr Gurría said. “In the midst of the backlash against globalisation, we need to deliver on an agenda of inclusive growth. The work of the G20 and the OECD to repair and improve the international tax system so everyone pays their fair share remains one of the most important responses to these challenges, as well as one which is having a concrete impact.”

The report to G20 Leaders highlights progress in each of the areas where OECD has been mandated to boost international co-operation on tax issues.  This includes ongoing movement towards greater transparency, principally through the work of the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes, which now includes 142 members and is managing worldwide implementation of the Common Reporting Standard and the first automatic exchanges of financial account information (AEOI), to take place in September 2017.

Global Forum members have established close to 2 000 bilateral exchange relationships for AEOI. “These efforts are already paying off, with 500 000 people having disclosed offshore assets and around EUR 85 billion in additional tax revenue identified as a result of voluntary compliance mechanisms and offshore investigations,” Mr Gurría said.

Implementation also continues on measures to reduce tax avoidance by multinational enterprises under the G20/OECD Base Erosion and Profit Shifting (BEPS) Project. 101 countries and jurisdictions are now working on an equal footing to set standards and monitor implementation via the OECD/G20 Inclusive Framework on BEPS. The OECD has established a peer review process to assess implementation of the BEPS minimum standards and work continues on pending issues including transfer pricing.

At the same time, countries are considering measures to enhance tax certainty based on the joint OECD-IMF report  to G20 Finance Ministers  in March, as well as progressing discussions on the complex issues around taxation of the digital economy. An interim report on taxation of the digital economy will be delivered by the OECD/G20 Inclusive Framework on BEPS in early 2018, followed by a final report in 2020.

July 16, 2017 in GATCA, OECD | Permalink | Comments (0)

Saturday, July 15, 2017

IRS Publishes New FAQs on FFI Agreement Renewal

The IRS published new FAQs on FFI Agreement Renewal. The FAQs can be found in the Registration Update section on the FATCA – FAQs General page. Treasury-Dept.-Seal-of-the-IRS

Qualified Intermediaries/Withholding Foreign Partnerships/Withholding Foreign Trusts

Q4. Section 1.01 of Rev. Proc. 2017-15 addresses the treatment of any home office (as defined in section 2.43 of Rev. Proc. 2017-15) or branch (whether or not a disregarded entity) that wants to be a QDD (each home office or branch, a prospective QDD).  Each prospective QDD must separately qualify, apply, and be approved for QDD status, including meeting the eligible entity requirements as if it were a separate entity.  If a prospective QI has a branch that is a prospective QDD, the branch may apply for QDD status even if the prospective QI (apart from such branch) is not an eligible entity.  A home office can apply for QDD status as part of the standard QI application.  In order to apply for QDD status for a branch on the QI System, the following steps must be taken:

Q8. How does an applicant provide the description of the types of transactions for applications submitted in 2017?
Q9. How does an applicant provide the approximate value of transactions by account holder type for applications submitted in 2017?

Q12. When submitting an application in 2017, should the applicant address non-delta one transactions when completing section 3?

Registration Update

Q10What happens if I am an entity that entered into the FFI agreement contained in Revenue Procedure 2014-38 before January 1, 2017, but I do not renew my FFI agreement by July 31, 2017?

General Compliance

Q21. Is a beneficial owner withholding certificate invalid under  Treas. Reg. §1.1441-1T(e)(2)(ii)(B) (published on January 6, 2017, in TD 9808) during calendar year 2017 if it does not include a foreign TIN or date of birth for the beneficial owner identified on the certificate?

Q4. Section 1.01 of Rev. Proc. 2017-15 addresses the treatment of any home office (as defined in section 2.43 of Rev. Proc. 2017-15) or branch (whether or not a disregarded entity) that wants to be a QDD (each home office or branch, a prospective QDD).  Each prospective QDD must separately qualify, apply, and be approved for QDD status, including meeting the eligible entity requirements as if it were a separate entity.  If a prospective QI has a branch that is a prospective QDD, the branch may apply for QDD status even if the prospective QI (apart from such branch) is not an eligible entity.  A home office can apply for QDD status as part of the standard QI application.  In order to apply for QDD status for a branch on the QI System, the following steps must be taken:  

  1. The home office (or prospective QI) must complete and submit its QI application or renewal on the QI System (please refer to QI System User Guide for step-by-step instructions).  The application or renewal must include all relevant branch information for each branch that intends to act as a QI (including as a QDD).    
  2. Notwithstanding that the home office (or prospective QI) included all relevant branch information with its application or renewal, a separate QI application must be submitted for each branch (including branches that are disregarded entities) that is a prospective QDD.  Each home office or branch that is a prospective QDD must submit a separate application, even if located in the same country.  Therefore, if multiple branches located in the same country are prospective QDDs, a separate application must be submitted for each branch.  
  3. The process for the branch’s separate QI application will follow the QI System User Guide instruction for applying to become a QI (that is, the same process that the home office or prospective QI used), and the QI System will populate the application using the same answers as provided by the home office (or prospective QI), except for the following lines, which the branch will be required to complete:
    Part 1:
    1. Name of Applicant:  Enter the Home Office QI NAME with the following appended to the Home Office Name:

                         :-QDD-BRANCH-<Branch QDD COUNTRY (and branch identifier, if necessary)>
                         (EXAMPLE: ABC Bank-QDD-BRANCH-SINGAPORE (Disregarded Entity Name))
.

    1. Existing EIN, if any: Enter the home office QI EIN.  
      Note: A QDD branch will receive a message on their message board upon acceptance of its application, but the QDD branch will not be issued its own QI EIN.  
    2. Country / Jurisdiction of Organization:  Enter the country / jurisdiction of the branch.
    3. Indicate that the branch is applying for QDD status.
    4. Identify the applicable Know Your Customer Rules (KYC):  Select the jurisdiction, if any, whose KYC rules apply to the branch.
    5. Does the Applicant Maintain a branch in any Jurisdiction other than the home office:  Select “No.”
    6. Address of applicant:  Enter the address of the branch.
    7. Description of Business:  Preface the description by stating the application is for a branch applying for QDD status only.
    8. Responsible Officer: The applicant may identify the home office’s RO as its Responsible Officer
    9. Contact person: The applicant may identify the home office’s Contact Person as its Contact Person or any other person that meets the requirements of a Contact Person for the branch.

            Part II

    1. QI/WP/WT Information (Part 2):  Enter zeros for all account holder totals and amounts.  
    2. Will the applicant have any PAI agreements in effect: Select “No.”

            Part III

                    Complete all fields.

      Part IV

             Upload files for the QI/WP/WT application:  Select “SS-4.”  
             Upload a document, containing the corporate letter head of the home office, which states the branch is applying strictly for QDD status as a branch of a QI.  The statement should provide the name and 
             QI-EIN of the home office.

            Part V  

                    Complete, sign, and submit as directed.

Entities that have already submitted an application or renewal that included a request for QDD status must update their submission to separately request QDD status for any branch that will act as a QDD by following these procedures and sending an email to *LB&I FI QIWPIssues.  The e-mail should indicate either that the entity has branches which intend to apply for QDD status and list those branches by country or that the entity has no such branches and the submission is ready to be processed by the IRS.

Added: 02-14-2017

Q5.  What information should be provided for question 19 of Part 1?

Part I, Question 19. Description of business of the Applicant
(If the Applicant is applying for QDD status, indicate which portions of the business description are applicable to the QDD status)

Provide a detailed description of your business including, but not limited to, the type of business, the approximate value of your total assets, and, in general, the source of income you expect to receive.  For businesses that may be involved in sale and leaseback type transactions, clearly state the structure of the transaction, including all the parties.  If the business is not yet in operation, explain how the business intends to obtain financing and the projected startup date.  If the Applicant is an investment fund, also describe the type of anticipated investments and state the term of the fund.

In addition, for each QDD applicant, indicate the business operated by the QDD applicant, list the types of potential section 871(m) transactions for which the QDD applicant makes payments, list the types of potential section 871(m) transactions and underlying securities for which the QDD applicant receives payments, and indicate which portion of the business relates to the QDD covered transactions and which portion of the business relates to the equity derivatives dealer business.

For each QDD applicant, indicate the QDD applicant’s entity classification for U.S. federal income tax purposes (such as a corporation, partnership, or disregarded entity) .  If the QDD applicant is a branch, also indicate the entity classification of its home office.

Added: 02-15-2017

Q6. What information should be provided for question 20 of Part 1?

Part I, Question 20. Description of new account opening procedures
(If the Applicant is a WP or WT, provide a description of the procedures for admitting a new partner, beneficiary, or owner)
(If the applicant is applying for QDD or QSL status, describe the Applicant’s procedures for collecting documentation from counterparties)

QI Applicants (including QDD and QSL Applicants):  Provide a detailed description of the account opening procedures.  List each type of document that is required for a new account opening and explain how each document is reviewed and validated.  For entities that facilitate opening new accounts online, describe the entire account opening process, including any uploading of documentation. 

WP/WT Applicants:  Describe the procedures for admitting a new partner, beneficiary, or owner.  If the Applicant is an investment fund, attach the pages of the fund’s subscription agreement or offering documents relating to investor documentation.
Added: 02-15-2017

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Q7. My application for renewal of QI/WP/WT status was not approved and was placed into incomplete status due to compliance issues.  What does this mean?
An incomplete status due to compliance issues on your application for renewal of QI/WP/WT status is caused by prior noncompliance as a QI/WP/WT, such as a failure to file a return or a failure to pay tax.

Added: 02-15-2017

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Q8. How does an applicant provide the description of the types of transactions for applications submitted in 2017?
The applicant should list the approximate value in U.S. dollars (using notional values for derivatives) of the stock in U.S. corporations and potential section 871(m) transactions of the home office or branch (as applicable).  In addition, it should separately list the value of the home office or branch’s potential section 871(m) transactions that are securities lending transactions/sale-repurchase transactions, notional principal contracts, futures/forwards, or other equity linked instruments in the appropriate place.  The securities lending transactions/sale-repurchase transactions, notional principal contracts, futures/forwards, and other equity linked instruments categories should not include values related to transactions that are not potential section 871(m) transactions.

For applications submitted in 2017, the applicant may indicate that the value of the transactions in the previous calendar year is zero when the applicant does not have the relevant information.  For those applications submitted in 2017 for which the applicant does not have the relevant information, the applicant must attach a statement indicating that the information is not available, briefly describing the types of transactions it has entered into, and providing an estimate (if possible) of the anticipated values for these types of transactions.

Added: 03-17-2017

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Q9. How does an applicant provide the approximate value of transactions by account holder type for applications submitted in 2017?
The applicant should list the approximate value in U.S. dollars (using notional values for derivatives) of potential section 871(m) transactions entered into with each counterparty type for the previous calendar year.  For applications submitted in 2017, the applicant may indicate that the value of transactions by counterparty type for the previous year is zero when the applicant does not have the relevant information.  For those applications in 2017 for which the applicant does not have the relevant information, the applicant must attach a statement indicating that the information is not available, briefly describing the types of counterparties with whom the applicant transacts, and providing an estimate (if possible) of the value of the transactions for each counterparty type.

Added: 03-17-2017

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Q10. What information must an applicant provide when describing why it is an eligible entity?
The applicant must identify whether the application is for the home office or branch, and why each home office or branch is an eligible entity.  See Treas. Reg. § 1.1441-1(e)(6)(ii) for an updated definition of an eligible entity.  For each home office or branch applying under the rule for a dealer, bank, bank holding company, or wholly-owned entity of a bank or bank holding company, the applicant must include the name and jurisdiction of the regulator, and whether each home office or branch is regulated by it as a dealer, bank, or bank holding company, as applicable.  The applicant should briefly describe the potential section 871(m) transactions that the home office or branch, as applicable, issues or anticipates issuing to customers and how it hedges or anticipates hedging those transactions, in each case, as a principal.  Each applicant must confirm that the application only describes transactions the QDD enters into as a principal that are recognized and attributable to the QDD for U.S. federal income tax purposes and not effectively connected with the QDD’s conduct of a trade or business in the United States.  For each applicant that is eligible to apply for QDD status because it is a bank, bank holding company, or wholly-owned entity of a bank or bank holding company, the applicant must confirm that it (1) issues potential section 871(m) transactions to customers and (2) receives dividends with respect to stock or dividend equivalent payments with respect to potential section 871(m) transactions that hedge potential section 871(m) transactions that it issued.  

Added: 03-17-2017

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Q11. What information is necessary to describe how an applicant determines which transactions are included of its QDD business?
The applicant should describe how it will determine which transactions are part of the QDD business of the home office or branch (as applicable) and how it will distinguish the home office and each branch’s QDD business from the QDD businesses of the home office and/or any other branches, as applicable, and from non-QDD businesses.  The applicant should briefly describe what systems or procedures it has in place to test, track, and report the transactions associated with the home office or branch’s QDD activities (including whether transactions are held in an equity derivatives dealer capacity or another capacity, and how net delta will be determined).  If the applicant submits the application in 2017 or 2018 and has not yet completed all of its systems or procedures, the applicant must include a brief description of the systems or procedures that have been completed as of the date of the application, and the systems or procedures that the applicant is developing.  For systems or procedures in the development stage at the time the application is submitted, please provide an estimated timeframe for the completion of those items.

Added: 03-17-2017

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Q12. When submitting an application in 2017, should the applicant address non-delta one transactions when completing section 3?
Yes.  Even though section 871(m) only applies to transactions with a delta of one in 2017, an applicant must complete section 3 by including a description of potential section 871(m) transactions for which section 871(m) will apply beginning in 2018.  For example, an applicant applying in 2017 should include responses relating to both delta one transactions and non-delta one transactions.

Added: 03-17-2017

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Q13.  Can a partnership apply to be a QDD?
Yes, a partnership can apply to be a QDD if the partnership qualifies as an eligible entity; however, the IRS may include additional terms that would apply in the case of an agreement entered into with a partnership.

Added: 03-17-2017

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Q14. Who may rely on the “Any other person otherwise acceptable to the IRS” QDD eligible entity category?
This limited category is intended to allow the IRS the discretion to treat an entity that is very similar to the specified categories of eligible entities but that does not satisfy the precise technical requirements in the definition as an eligible entity.  It is not intended to function as a significant expansion of the definition of eligible entity. If an applicant does not satisfy one of the specific categories, the applicant is encouraged to contact the Foreign Intermediaries Program at *LB&I FI QIWPIssues in advance of applying under this category.

Added: 03-17-2017

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Q15. What information must a renewing QI/WP/WT consider in response to Part 4 – Additional Information, Question 4 - Is the QI/WP/WT in compliance with all applicable withholding and reporting requirements, including the filing of the following forms (to the extent required for  calendar years for which the due date of the form (including extensions) has passed)*?

Form 945 * Yes/No/NA
Form 1042 * Yes/No/NA
Form 1042-S * Yes/No/NA
Form 1099 * Yes/No/NA
Form 8966 * Yes/No/NA

The renewing QI/WP/WT (Applicant) should answer this question based on currently available information with respect to each form that Applicant was required to file for the calendar years covered by the most recent QI, WP, or WT agreement that Applicant is renewing:

(1) Answer “Yes” if the Applicant filed the form and the form was correct, and the Applicant has complied with its withholding requirements with respect to such form (if applicable).  

(2) Answer “No” if the Applicant did not file the form or the Applicant filed the form but has failed to pay the amount of tax due with respect to the form (if applicable).

(3) Answer “NA” if the Applicant is not required to file the form for all tax years covered by the QI, WP, or WT agreement.  

Added: 03-31-2017

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Q16. Can a request for renewal of a Qualified Intermediary (QI), Withholding Foreign Partnership (WP) or a Withholding Foreign Trust (WT) agreement submitted after the renewal due date of 3/31/17 still be granted an Effective Date of 1/1/17.  Also, can an application for a new QI agreement that also contains a request for qualified derivatives dealer (QDD) status submitted after 3/31/17 be granted an Effective Date of 1/1/17?
A: The deadline of 3/31/17 for submitting a QI, WP or WT request for renewal as well as for submitting a new application is fast approaching.

In order to allow time for these entities to become better acquainted with the new Qualified Intermediary, Withholding Foreign Partnership, and Withholding Foreign Trust Application and Account Management System (QI/WP/WT System), as well as to gather all information necessary to prepare and submit a renewal application, the Internal Revenue Service will grant an Effective Date of 1/1/17 for all properly submitted and approved renewal applications, including renewals containing a request for QDD status, submitted by 5/31/17.  

Additionally, because a QDD is a new entity type, all  new QI Applications  that also contain a request for QDD status submitted  by 5/31/17 that are approved will be granted an Effective Date of 1/1/17.

For new withholding foreign partnerships, new withholding foreign trusts, and new QIs that are not applying for QDD status, the 3/31/17 new application deadline for a 1/1/17 Effective Date is still in effect.  

Added: 03-31-2017

Q8I am an entity that is registered on the FATCA registration system and that has been issued a GIIN. Do I need to renew my FFI agreement?
The answer depends on your FATCA classification. Not all entities are required to enter into an FFI agreement in order to receive a GIIN. If you are an entity that is required to enter into an FFI agreement and did so before January 1, 2017, you must renew your FFI agreement by July 31, 2017, in the FATCA FFI Registration System if you want to remain on the FFI List. The table below provides a general overview of the types of entities that are required to renew their FFI agreement. For additional guidance, see Sections 4 and 6 of Revenue Procedure 2017-16, the Treasury regulations, or an applicable intergovernmental agreement (IGA).

Renewal of FFI Agreement
Financial Institution's FATCA Classification in its Country/Jurisdiction of Tax Residence Type of Entity FFI Agreement Renewal Required?
Participating Financial Institution not covered by an IGA; or a Reporting Financial Institution under a Model 2 IGA Participating FFI not covered by an IGA Yes
Reporting Model 2 FFI Yes
Registered Deemed-Compliant Financial Institution (including a Reporting Financial Institution under a Model 1 IGA) Reporting Model 1 FFI operating branches outside of Model 1 jurisdictions Yes, on behalf of branches operating outside of Model 1 jurisdictions (other than related branches *)
Reporting Model 1 FFI that is not operating branches outside of Model 1 jurisdictions No
Registered deemed-compliant FFI (regardless of location) No
None of the above Sponsoring entity No
Direct reporting NFFE No
Trustee of Trustee-Documented Trust No

* Related branches means branches that are treated as nonparticipating FFIs under Article 4(5) of the Model 1 IGA.

Added: 07-03-2017

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Q9. I have determined based on the chart above that I am not required to renew an FFI agreement. The “Renew FFI Agreement” link asks if I and/or my branches are required to renew the FFI agreement. Am I required to select “No”? What happens if I do not select either “Yes” or “No”? Will I lose my GIIN?
If you are an entity that is not required to renew, you do not need to take any action with respect to your registration. You are not required to answer “No.” You will remain in “Approved Status,” and you will remain on the FFI list.

Note: entities that are located in a Model 1 jurisdiction that entered into an FFI agreement on behalf of certain branches, described in the table above, must renew the FFI agreement on behalf of those branches.

Added: 07-03-2017

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Q10. What happens if I am an entity that entered into the FFI agreement contained in Revenue Procedure 2014-38 before January 1, 2017, but I do not renew my FFI agreement by July 31, 2017?
The FFI agreement contained in Rev. Proc. 2014-38 terminated on December 31, 2016. Therefore, if you do not renew your FFI agreement (contained in Revenue Procedure 2017-16) by July 31, 2017, you will be considered a nonparticipating FFI as of January 1, 2017, and you will be removed from the FFI list.

Added: 07-03-2017

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Q11. I am an entity that must renew the FFI agreement. What if I incorrectly selected “No” when asked whether I am required to renew the FFI agreement?
If you must renew your FFI agreement but incorrectly selected “No,” you may return to your FATCA FFI Registration system home page, click on the “Renew FFI Agreement” link, and select “Yes” to complete your renewal before the July 31, 2017, deadline.

Added: 07-03-2017

Q11. Has a Form W-8 that has been completed and signed by a payee, scanned into an image or portable document format (PDF), and uploaded to a third-party repository been scanned and received electronically by a withholding agent for purposes of sections 1.1441-1(e)(4)(iv)(C) and 1.1471-3(c)(6)(iv) if the payee, upon request from the withholding agent for a Form W-8 to document its status for purposes of chapters 3 and 4, sends the withholding agent an email with a link to the third-party repository site that allows the withholding agent to download the image or PDF of the form that is stored on the repository for such purpose (or the payee otherwise authorizes the withholding agent to access the specific form from the third-party repository in a similar manner).
Yes. The Form W-8 will be considered to have been scanned and received electronically by the withholding agent, provided that the withholding agent does not know that the email containing the link to the third-party repository has been transmitted by someone other than the payee or an agent of the payee.  Also, because the withholding agent has obtained the form at the payee’s direction, the form will be treated as having been furnished by/provided by the payee (see sections 1.1441-1(e)(1)(ii)(A)(1) and 1.1471-3(c)(1)).  A withholding agent is still required to determine whether the form is valid and may be relied upon for purposes of chapter 3 or 4 and whether a change in circumstances affects its continuing reliance on the form.

This FAQ has been superseded by Treasury Regulations Section 1.1441-1(e)(iv)(E).

Updated: 02-13-2017

Q20. Under what circumstances is a withholding agent required to collect a foreign TIN or date of birth on a beneficial owner withholding certificate?
A withholding agent must obtain a foreign TIN on a beneficial owner withholding certificate in the following circumstances:

(1) For a foreign person claiming a reduced rate of withholding under an income tax treaty if the foreign person does not provide a U.S. TIN and the income is a type to which the TIN requirement apples (see Treas. Reg. § 1.1441-6); and

(2) Except as otherwise provided in  Treas. Reg. §1.1441-1T(e)(2)(ii)(B), for a foreign person that is an account holder (as defined in Treas. Reg. § 1.1471-5(a)(3)) of a financial account (as defined in Treas. Reg. §1.1471-5(b)) maintained at a U.S. branch or office of the withholding agent, but only if the withholding agent is a financial institution (as defined in Treas. Reg. § 1.1441-1(b)(50)).

Added: 04-06-2017

Q21. Is a beneficial owner withholding certificate invalid under  Treas. Reg. §1.1441-1T(e)(2)(ii)(B) (published on January 6, 2017, in TD 9808) during calendar year 2017 if it does not include a foreign TIN or date of birth for the beneficial owner identified on the certificate?
For calendar year 2017, a withholding agent is not required to treat an otherwise valid beneficial owner withholding certificate as invalid when it does not include a foreign TIN because, in the absence of actual knowledge otherwise, the withholding agent may assume that the foreign person does not have a foreign TIN.

For beneficial owner withholding certificates obtained by a withholding agent on or after January 1, 2017, the withholding agent must collect a date of birth on a beneficial owner withholding certificate for an individual beneficial owner.  However, if the withholding agent has the beneficial owner’s date of birth in its files, it may use that information for reporting purposes and will not be required to treat a Form W-8BEN as invalid because it did not include a date of birth.

Added: 04-06-2017

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Q22. How is a withholding agent permitted to obtain  a foreign beneficial owner’s foreign TIN that is not included on an otherwise valid beneficial owner withholding certificate for purposes of satisfying the requirements of Treas. Reg. §1.1441-1T(e)(2)(ii)(B)? 
In such a case, a withholding agent is permitted to obtain the foreign beneficial owner’s foreign TIN on a written statement provided by the beneficial owner (including a written statement transmitted by email) that indicates that the foreign TIN is to be associated with the beneficial owner withholding certificate.  A withholding agent is similarly permitted to obtain the reasonable explanation for the absence of a foreign TIN referred to in Treas. Reg. §1.1441-1T(e)(2)(ii)(B) in this manner.

Added: 04-06-2017

July 15, 2017 in GATCA | Permalink | Comments (0)

Monday, July 10, 2017

Bahrain expands its capacity to fight international tax avoidance and evasion

H.E. Sheikh Ahmed bin Mohammed Al Khalifa, Minister of Finance of Bahrain signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in the presence of OECD Deputy Secretary-General, Mr. Douglas Frantz, therewith becoming the 112th jurisdiction to join the Convention.

The Convention's impact grows with each new signatory; it also serves as the premier instrument for implementing the Standard for Automatic Exchange of Financial Account BahrainInformation in Tax Matters developed by the OECD and G20 countries. In this respect, Bahrain has today also signed the CRS Multilateral Competent Authority Agreement‎ (CRS MCAA), re-confirming its commitment to implementing the automatic exchange of financial account information pursuant to the OECD/G20 Common Reporting Standard (CRS) in time to commence exchanges in 2018. Bahrain is the 93rd jurisdiction to sign the CRS MCAA.

July 10, 2017 in GATCA, OECD | Permalink | Comments (0)

Friday, June 30, 2017

The Offshore Voluntary Disclosure (OVD) Programs Still Lack Transparency, Violating the Right to Be Informed.

Excerpted from the 2018 Objectives Report to Congress ....

Beginning in 2009, the IRS established a series of Offshore Voluntary Disclosure Programs (OVDPs), which allow certain people who have not reported all of their foreign assets and Taxpayer Advocateincome to settle with the IRS by paying taxes, interest, penalties, plus a “miscellaneous offshore penalty” (MOP). It also established a “streamlined” program for those who could certify their violations were not willful. These programs are governed by frequently asked questions (FAQs) posted on the IRS website. The Large Business and International (LB&I) Division Withholding and International Individual Compliance (WIIC) Director can approve minor changes to the FAQs, but the Commissioner or Deputy Commissioner must approve significant ones. IRS examiners interpret the FAQs with assistance from technical advisors and Small Business/Self-Employed (SB/SE) Counsel. They may also access training materials and job aids posted to a secure SharePoint intranet site.   Download JRC18_Volume1_AOF_03

The IRS Does Not Disclose Interpretations of OVDP Frequently Asked Questions (FAQs)

Chief Counsel Advice from (or coordinated with) national office attorneys must be disclosed under IRC § 6110.  Other “instructions to staff ” that affect the public must be disclosed under the Freedom of Information Act (FOIA).  However, the IRS does not disclose its interpretations of FAQs. For example, when the IRS first established the 2009 OVDP, it did not disclose how it interpreted FAQ #35, which addressed how to compute the “offshore penalty.” The guidance memo was only disclosed in response to a Taxpayer Advocate Directive. Practitioners have highlighted other undisclosed and counterintuitive FAQ interpretations.

While the IRS may be required to disclose FAQ interpretations under FOIA, it is generally not required to disclose legal advice regarding the OVDP FAQs under IRC § 6110. IRC § 6110 requires disclosure of certain advice provided by or coordinated with the national office, but legal advice concerning the interpretation of the FAQs is generally provided by an SB/SE attorney in the field who is an OVDP expert. Moreover, some of this advice may be privileged, even if it reveals principles that the IRS will apply in other cases.

The IRS could voluntarily disclose important interpretations of OVDP FAQs, but does not. For example, 2012 OVDP FAQ #10 is particularly important because, like 2009 FAQ #35, it concerns the amount taxpayers must agree to pay under the OVDP. FAQ #10 describes an “alternative mark-to-market” (MTM) method that OVDP participants can only use to file or amend returns inside the program. Under this method, participants are taxed on unrealized gains reduced by unrealized losses. Notably, FAQ #10 does not inform participants that they cannot offset unrealized gains with unrealized losses from years for which the refund statute expiration date (RSED) has passed. Rather, it implies the opposite by warning only that unused losses cannot be carried forward beyond the OVDP disclosure period. If unrealized losses can be claimed for some years during this period and not others (i.e., because the RSED has passed), it is misleading not to include that warning as well. Yet, that is how the IRS interprets FAQ #10 — as not permitting taxpayers to offset unrealized gains with losses from years for which the RSED had passed. Members of the Tax Section of the American Bar Association — who somehow learned of the IRS’s undisclosed interpretation of FAQ #10 — suggested that the IRS is not legally required to deny offsets from barred years and that doing so is unnecessarily punitive.

Although the IRS’s interpretation of FAQ #10 may be implied by IRS training materials, these training materials were not posted to the IRS website, as seemingly required by FOIA. Rather, a private firm acquired them by making a FOIA request and then made them available to the public on its private website. They are not indexed or organized. The firm could remove them or impose an access charge at any time. Moreover, neither the public nor other IRS employees (e.g., TAS employees) should have to search a private website for information about an IRS program.

More Routine Disclosure of Advice Would Be Helpful

In the years before the IRS was required to release its private letter rulings and other legal advice to the public, a 1926 report found that:

[R]ulings were known only to insiders … This system ha[d] created, as a favored class of taxpayers, those who ha[d] employed ‘tax experts.’ It ha[d] created a special class of tax practitioners, whose sole stock in trade [was] a knowledge of the secret methods and practices of the Income Tax Unit. Knowledge of secret precedents had made Bureau employees extremely valuable to corporate taxpayers, fostering a damaging rate of turnover. Only the regular publication of BIR [Bureau of Internal Revenue] decisions could halt this outflow and ensure equal treatment for all taxpayers.

While the IRS is more transparent today, a lack of transparency in connection with undisclosed FAQ interpretations could present the same risks. To assess those risks, TAS reviewed a sample of ten items of undisclosed advice about OVDP FAQs issued between March 1, 2016 and March 8, 2017. According to the IRS, these documents were not checked or reviewed by any disclosure expert to determine if they should be disclosed. However, TAS’s review uncovered information that could be helpful to taxpayers, such as following:

  • When the MOP is assessed pursuant to a closing agreement, the tax year recited in the closing agreement is the tax year that controls the analysis of whether it is too late to issue a refund of the MOP (e., if the refund statute of limitation under IRC § 6511 has expired). The tax year recited in these agreements is generally the last tax year in the disclosure period.
  • If a taxpayer makes a payment for the MOP and then is removed from or opts out of the OVDP, the statute of limitation under IRC § 6511 for all tax years in the OVDP submission must be analyzed in determining if it is too late to issue a refund. If the period is open for any tax year in the submission, then a claim for refund of the MOP may be considered under IRC § 6511.
  • When determining if the taxpayer had less than $10,000 in U.S. source income, as necessary to qualify for the five percent penalty under 2012 OVDP FAQ #52, the IRS considers gross income (not net income). In limited circumstances where the taxpayer receives flow-through income from an entity not controlled by the taxpayer, however, the IRS may apply a cash flow analysis for purposes of determining if the taxpayer exceeds this $10,000 threshold.
  • The IRS is legally permitted to consider an offer in compromise before there is an assessment pursuant to a closing agreement in the OVDP.
  • A Swiss “libre passage” account is not excluded from the OVDP penalty base when computing the MOP on the basis that it is a tax-favored retirement account under Swiss law. 
  • OVDP Hotline personnel can assist taxpayers in determining whether a foreign retirement account (other than a Canadian retirement plan) must be included in the OVDP offshore penalty base by collecting information and elevating the matter to an OVDP Coordinator for consideration.
  • OVDP Hotline personnel can assist taxpayers who have signed a Form 906 closing agreement and are due a refund if the examiner who handled the certification is unavailable to assist (g., has separated from service, is on maternity leave, etc.).
  • OVDP Hotline personnel can assist taxpayers who erroneously omitted an account/asset from their original disclosure by collecting the information and elevating the taxpayer’s request to make a supplemental disclosure.

While taxpayers could glean some of this information from other sources (e.g., a representative with significant OVDP experience), disclosing answers to questions about the FAQs — whether by disclosing internal training and guides or advice currently being provided to IRS employees by email — could help taxpayers (and practitioners) understand the OVDP even if they are unrepresented, reduce unnecessary calls to the Hotline, increase confidence that the IRS is handling cases consistently, reduce internal requests for advice, and reduce unnecessary requests for assistance from TAS.

The IRS Does Not Always Disclose the Basis for Its OVDP-Related Decisions

When an OVDP examiner makes an OVDP-related decision based on guidance from a field attorney, technical advisor, or committee, he or she is not required to explain the resulting “take it or leave it” decision to the participant or allow the participant to speak with the decision maker. For example, the IRS announced in 2014 that certain OVDP participants could apply to transition into a more favorable “streamlined” program if they certified their conduct was non-willful.  However, it would only allow them into the program if technical advisors, and in some cases, a secret “Central Review Committee”

agreed (i.e., taxpayers did not know who was on the committee and could not communicate with it). Participants would have no way to know if the examiner miscommunicated the facts to the technical advisor or to the committee, or what standards were being applied. Thus, a taxpayer had no way to know if the IRS’s decision in his or her case was consistent with its decisions in other similar cases.

The IRS Does Not Release Summary Statistics

The IRS’s release of certain statistics, such as the average or median tax, interest, and penalties paid inside and outside an OVDP could help assure taxpayers they are not being unfairly singled out and the programs are being administered in a rational manner. Both TAS and the Government Accountability Office have computed and publicly reported such statistics in the past. However, LB&I recently stated that TAS should not publish an update. LB&I computes OVDP results using a different methodology, which TAS has obtained and redacted (at LB&I’s request) in the Appendix below. LB&I explained:

Statistics with details beyond those publicly released in press releases by the Commissioner (most recently in IR-2016-137) may impair tax administration and are exempt from release under FOIA. LB&I’s response to FOIA request #————— from —————— ——— limited the information provided under the request to high level statistics. TAS should not release statistics more granular than those provided by the Commissioner in press releases.

We disagree. “May impair tax administration” is not the legal standard for withholding information under FOIA.26 Even if it were, the IRS has provided no basis to support its conclusion that releasing this data may impair tax administration. Moreover, if the IRS could prevent the National Taxpayer Advocate from publishing data more granular than data provided by the IRS Commissioner in press releases, her reports would be much less effective in highlighting problems, such as those caused by the IRS’s initial one-size-fits all approach to the OVDPs.

In addition to penalties assessed inside OVDP-related programs, the Treasury Department also compiles a summary of the penalties assessed outside the OVDPs against those who failed to file a Report of Foreign Bank and Financial Accounts (FBAR) for reports to Congress. However, the IRS has not disclosed this summary to the public, notwithstanding repeated requests by TAS. After years of working with the IRS to release these reports, the IRS recently stated for the first time to TAS that “Treasury is the owner of the annual FBAR report and thereby controls the release of that report.”

The IRS’s lack of transparency about how taxpayers fare inside and outside the OVDPs makes it more difficult for anyone to recognize when the result in a particular case is outside the norm. Moreover, this lack of transparency makes it impossible for impartial and independent observers to assess the effectiveness of the OVDPs.

CONCLUSION

According to a tax historian, “corruption, favoritism, secrecy, and taxpayer mistreatment” have prompted political leaders to try to restructure the IRS four times over the last 145 years. Given the IRS’s history, it may be easier for taxpayers to believe that if the agency is not transparent, it must have something to hide. The IRS and Congress’s recent adoption of the Taxpayer Bill of Rights (TBOR) could help restore faith in the agency.

However, secrecy in the OVDPs violates the TBOR. The TBOR provides that taxpayers “have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.” Blindsiding only those taxpayers who do not have special access to the IRS’s undisclosed interpretations of FAQs is inconsistent with this right, as well as the rights to quality service and to a fair and just tax system. Similarly, when the IRS does not provide for any appeal or review of “take it or leave it” offers (or even provide an explanation of them), it erodes the right to challenge the IRS’s position and be heard.

Transparency could also promote efficiency by reducing disputes. When the IRS’s lack of transparency makes people feel singled out for arbitrary and capricious treatment, they are more likely to try to elevate the IRS’s determinations, delaying resolution of their cases. Although the IRS does not disclose how long it takes to resolve OVDP cases, the Treasury Inspector General for Tax Administration recently reported “the IRS has taken nearly two years to complete 20,587 [OVDP] case certifications, with 241 cases taking at least four years to complete.” Some cases are probably delayed because participants feel they are being treated unfairly. Moreover, trust for the IRS is correlated with voluntary taxcompliance. Thus, additional transparency could help restore faith in the IRS, promote consistent results, speed case resolutions, and promote voluntary compliance.

FOCUS FOR FISCAL YEAR 2018

In Fiscal Year 2018, TAS will:

  • Advocate for the IRS to disclose all of the OVDP-related rules and procedures it is following, along with any interpretations of them (g., the OVDP Hotline Guide, training materials, and IRS Counsel’s responses to questions about the OVDP FAQs), even if disclosure is not legally required;
  • Advocate for the IRS to allow taxpayers to communicate directly with decision makers (g., OVDP Technical Advisors and the Central Review Committee) to verify that they have considered all of the relevant facts, and can articulate a reasonable basis for their decisions; and
  • Advocate for the IRS to disclose detailed summary statistics for the OVDP and streamlined programs (g., the FBAR report to Congress and the OVDP Closed Case Reports) to help taxpayers determine if they are being treated like everyone else and to help stakeholders evaluate these programs.

June 30, 2017 in GATCA, Tax Compliance | Permalink | Comments (0)

Sunday, June 4, 2017

Brazil Extends Tax Reporting Amnesty Until July 31, 2017

Federal Revenue of Brazil Decree here Receita_Federal_do_Brasil

Art. 5 [The Amnesty will be granted under the following conditions]:

I - presentation of a Statement of Exchange and Tax Regularization (Dercat), in electronic format;

II - full payment of income tax at the rate of 15% (fifteen percent) levied on the total amount in real of the resources subject to regularization; and

III - full payment of the fine of regularization in a percentage of 135% (one hundred and thirty five percent) of the tax on the income calculated in the form set forth in item II.

June 4, 2017 in GATCA | Permalink | Comments (0)

Thursday, June 1, 2017

Texas Woman Pleads Guilty to Using Offshore Accounts in Panama to Conceal More than $1.3 Million from the IRS

A resident of College Station, Texas, pleaded guilty today to conspiring to defraud the United States by using offshore accounts in Panama to conceal more than $1.3 million in royalty Irs_logo income that she earned from oil wells, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.

According to documents and information provided to the court, Joyce Meads, 73, admitted that she filed false 1997 through 2009 individual income tax returns, omitting more than $1.3 million in royalty income that she received from oil wells. From approximately April 1997 through April 2010, she conspired with offshore promoters to disguise this income, setting up nominee companies in Delaware and Panama in the name of W.G. Holdings Corporation and transferring her interest in the oil wells to the nominee entity in Delaware. Meads’s monthly royalty checks were issued to W.G. Holdings. For approximately a decade, Meads had her royalty checks sent to a Miami post office box where they were picked up, couriered to Panama and deposited into her nominee accounts. Meads repatriated funds by disguising them as scholarships or loans from W.G. Holdings to herself. She later transferred the funds to bank accounts in her own name or her mother’s name. Meads admitted that she caused a tax loss of more than $250,000. Two of the promoters who assisted Meads, Marc Harris of The Harris Organization, Republic of Panama, and Boyce Griffin of Offshore Management Alliance Ltd., Republic of Panama, have also been convicted of conspiracy and other charges and were previously sentenced to prison.

“For more than a decade, Joyce Meads attempted to conceal her income from the Internal Revenue Service (IRS) by assigning it to a nominee entity and stashing it offshore,” said Acting Deputy Assistant Attorney General Goldberg. “As today’s plea makes clear – the days of safely hiding your money offshore are over – the Department continues to work with its law enforcement partners to find and hold accountable those who seek to evade paying their fair share of taxes.”

“Joyce Meads’ attempt to use complex offshore schemes to evade paying her fair share of income taxes was no match for the skills of IRS Criminal Investigation special agents,” said Chief Richard Weber of IRS Criminal Investigation (CI). “IRS CI and the Department of Justice’s Tax Division share the same vision when it comes to investigating those who attempt to hide their income; whether it’s through offshore holdings or state-side entities, we are determined to put an end to this type of fraudulent activity.”

Sentencing is scheduled for Aug. 4. Meads faces a statutory maximum sentence of five years in prison, a period of supervised release, restitution and monetary penalties.

Acting Deputy Assistant Attorney General Goldberg commended special agents of IRS–Criminal Investigation, who conducted the investigation, and Assistant Chief Greg Tortella of the Tax Division, who is prosecuting the case.

June 1, 2017 in GATCA | Permalink | Comments (0)

Sunday, May 7, 2017

Commission for the Reform of International Corporate Taxation is hiring

The Independent Commission for the Reform of International Corporate Taxation is hiring. As part of the coalition that initiated ICRICT, we’re sharing the details with you below. Please see the job description below for full details and if you want to apply, please send your CV and a covering letter to: alex@taxjustice.net by the closing date of 21 May 2017. Please put “ICRICT media” as the subject of the e-mail when applying.  ICRICT Media Relations officer

Application deadline: 21st May 2017 before midnight Central European Summer Time.

Employer: ICRICT

Employment Type: Part-time/Full time

Salary: Competitive

The Independent Commission for the Reform of International Corporate Taxation is a unique body of prominent and influential thinkers, from both developing and developed nations which promotes international corporate tax reform from the perspective of global public interest. ICRICT is seeking to recruit a Media Relations officer to support the Secretariat and the Commissioners in their work.

Background: The Independent Commission for the Reform of International Corporate Taxation (ICRICT) is a unique body of prominent and influential thinkers that promotes international corporate tax reform and a more inclusive discussion of corporate tax rules. Its perspective is that of the global public interest, rather than national or corporate interest, and it promotes tax reforms which support sustainable development, the reduction of poverty and inequality, good-quality public services and fulfilment of states’ human rights obligations.

ICRICT has become an influential global voice in the corporate tax debate, often challenging official orthodoxy and calling for the deeper reforms which are set out in its Declaration and subsequent statements. Its audience includes international institutions, national governments, business, trade union and civil society organizations and the public. The Commission makes statements and undertakes advocacy: it is governed by a Steering Committee (SC) of interested global organisations and individuals committed to a fairer, more inclusive global tax system.

For the next two years, ICRICT’s aim is to expand and deepen its influence on global debates about corporate taxation, focusing on two priorities: advocating its current policy positions and facilitating technical work to further build on those positions. The advocacy work will take the form of high-level influencing by the Commissioners, public and private events convened by ICRICT itself, participation in events convened by others and securing media coverage for ICRICT. This will require the creation of a regular media presence for ICRICT in a wide range of countries as well as building credibility with national governments and international institutions, with a particular emphasis on developing countries and key OECD countries. The technical work will bring together experts to elaborate and deepen the central issues raised by the ICRICT Declaration. ICRICT will aim to work closely with other coalitions and organizations which share its objectives.

Overall Role

As the media/public relations officer, you will be responsible for increasing the profile and exposure of ICRICT’s key messages to policy makers, the media and the wider public. A specific focus will be to increase ICRICT’s profile in the Global South.

Through regular dialogue with the Head of Secretariat, the Steering Group members and the Commissioners you will proactively identify media opportunities and you will pitch (and in some cases write or co-write) comment pieces, interviews and other features for international print, broadcast and online media in order to maximize media coverage.

You will also ensure a flow of regular and high-quality written content for the ICRICT website and other ICRICT media platforms, some of it written by you and some by others. The successful candidate will have substantial experience as a journalist and/a press officer and excellent network of worldwide contacts in the specialist and general media, especially in the Global South. You will be confident and experienced in devising and implementing creative media campaigns, and generating extensive coverage across a wide range of worldwide press/broadcast and online media.

Specific Duties

Responsible for:

  1. Developing and implementing a communications strategy for ICRICT which includes: identifying and making connections to relevant media in key countries (including developing countries and major OECD countries , notably Commissioners’ countries of origin); identifying key moments during the year which offer media potential for ICRICT, drafting and placement of publications and statements in the media; working with individual Commissioners to write and publish op-eds and commentaries in the media; managing the content of the ICRICT website, including ensuring a flow of fresh content and setting up a blog to be written by Commissioners or other experts associated with ICRICT.
  2. Pitching to the media and developing relationships with key journalists in key countries, maintaining an active presence on social media platforms, responding to appropriate media enquiries, updating the media area of the ICRICT’s website and other ICRICT platforms and keeping accurate records of media engagement.

  3. Support the work of the Secretariat in overseeing the organisation of ICRICT events in collaboration with partners.

Your profile

You must have significant experience of working in or with the media especially in developing countries, excellent communication skills, the ability to plan and deliver results and the desire to work in a fast-paced team committed to making a difference. You will need:

  • Excellent written and oral communication skills in English and, ideally, at least one other language;
  • The ability to write and support the writing of high quality press releases, opinion pieces, interviews and features in a way that establishes a consistent and authoritative voice for ICRICT;

  • Several years of working experience in journalism and/or international public relations or communications, with specific experience in a developing country context;

  • Experience working with social justice, trade union, human rights organizations and campaigns.

  • A strong network of key journalists and media contacts, particularly in developing countries and the international media;

  • Ability to deal quickly and confidently with media inquiries and an awareness of media-related legal and reputational risks for ICRICT;

  • Commitment to the importance of online media, including social media;

  • Creativity and open-mindedness. We are looking for a very good team player with excellent organisational skills;

  • Personal interest in tax justice and commitment to ICRICT’s mandate and values;

  • Proven experience in consistently meeting deadlines.

  • Willingness to travel to ICRICT events around the world.

Duration

The contract is for a fixed term (subject to a probationary period) that concludes at the end of the current funding agreement: 31st December 2018.

Location

The position can be located anywhere in the world. However, the successful candidate will be required to work with the Head of Secretariat, who is based in the UK, and the ICRICT Chair, who is currently based in New York, and the position is administered via a UK organisation. Thus a demonstrated ability to work with people in these locations and time zones will be amongst the factors used in the selection. Reliable broadband connectivity will also be a key requirement.

Remuneration

Remuneration is competitive and to be determined in line with the funding and mode of engagement. Travel and accommodation expenses related to participation in meetings will be provided.

Contract details

ICRICT is committed to a recruitment process based on the values of equity, diversity and inclusion. The position will be formally contracted to Tax Justice Network (either as employee or consultant) who will administer the contract on behalf of the ICRICT Steering Group. It is envisaged that the position will be offered on an ongoing full time or part time basis, subject to the incumbent maintaining the confidence of the Steering Committee and there being no change to the funding situation.

May 7, 2017 in GATCA | Permalink | Comments (0)

Thursday, May 4, 2017

Citizens for Tax Justice Finds Missing $70 Billion For Trump To Build His Great Southern Wall

Forgive the alarmist headline.  But I just read Citizens for Tax Justice Network (CTJ)*/ITEP defending FATCA because it can raise $40 billion to $70 billion tax revenue a Pot-of-gold-2130425_960_720year for the U.S.  Enough already.  I hope that Citizens for Tax Justice/ITEP are correct and that $70 billion a year remains to be recovered by the IRS from non-reported foreign income.  I work for a public taxpayer-funded academic research institution.  If all the FATCA digging can discover a $70 billion treasure chest that can be spent on higher education support (instead of the Great Southern Wall) then I'm first in line with my hat out for further research funding.  While there may be supportable reasons for Tax Justice / ITIP to argue for requiring foreign institutions to submit the equivalent of the 1099 series to the U.S. Treasury, the collection of an additional $70 billion in tax revenue is likely not one of them.  So let's look at the $70 billion of hidden tax revenue waiting to be discovered....

The article states that "it is estimated that the United States loses $40 to $70 billion in revenue annually due to individual income tax evasion."  Its citation of this data is the September 2016 Congressional Research Service report: FATCA Reporting on U.S. Accounts: Recent Legal Developments.  However, I read the CRS report and it is primarily about the status of IGAs and protection (I argue lack thereof) of taxpayer information shared.  I could not find in the CRS the $40 - $70 billion figure or even a discussion about the calculation of revenue annually lost to individual income tax evasion.  

And that term implies "all" tax evasion (domestic and foreign-based nonreporting) which is quite different from previous claims of $150 billion tax revenue lost from nonreporting of foreign income.  

I think what the CTJ / ITEP commentator meant to citation is a Congressional Research Service (CRS) Memorandum of July 23, 2001 referencing an inquiry made by the House Majority Leader as to the method used by attorney Jack Blum, an IRS contract consultant, to construct the then estimate of $70 billion of illegal tax evasion losses due to tax havens. This figure was contained in his affidavit submitted in support of the government’s request from the federal court for a John Doe summons for records from MasterCard and American Express.  However, according to the CRS Memorandum: “Mr. Blum’s estimate was contained in a declaration filed in connection with a petition the Internal Revenue Service filed with the U.S. District Court for the Southern District. In response to your request, we contacted Mr. Blum and discussed his estimate; he was not able to send us a written discussion of his estimating procedure … We did not discuss these particular aspects of the estimating process in our initial conversation with Mr. Blum and our attempts to contact Mr. Blum on a follow-up basis have not been successful.” (see my 130-page SSRN article for footnotes ad nauseum)

On March 4, 2009 the IRS Commissioner Charles Shulman testified before the Subcommittee that there is no credible estimate of lost tax revenue from offshore tax abuse.  Treasury Departments have often stated large figures of unreported annual taxable income in foreign jurisdictions, and a huge asset base from which that income percolates.  By example, the IRS has stated that underreporting and underpayment of tax liabilities account for more than 90 percent of the $450 billion tax gap dollars. While the IRS has not estimated the size of the international tax gap, the Treasury Inspector General for Tax Administration reported in 2012 that estimates range from $40 billion to $123 billion annually.  

I fancy myself a two-bit political economist of sorts and thus understand the difficulty in measuring an unseeable "black hole" (I recall Dutch Prof. Dr. Brigitte Unger of Utrecht referring to her measuring of the opaqueness of the money laundering industry in this way, but it may have been my crime fighting friend Prof. Dr. Dionysios Demetis of Hull).  However, just like with 'proving' the existence of a black hole, we can research for and analyze data of 'measurable' surrounding circumstances.  In 2000, the U.S. State Department estimated that assets 'secreted' in offshore jurisdictions totaled $4.8 trillion. In 2007, the OECD estimated the total at $5 trillion to $7 trillion.  If banks, like UBS,  had such significant 'secreted' assets in 2007, then I wonder why it is that these same banks required capital bailouts in 2008 from sovereign wealth funds, direct governments intervention, and central banks? Seems to me a disconnect.  Several academics and economists with various motivations have sought to measure the AUM of international financial centers, naming just two examples from many: the IMF and Brook Harrington.  I welcome a research grant and a collaborative team (without a political opinion to express in its findings) to undertake an exhaustive research and analysis.  

The CTJ/ITEP article then points to the egregious UBS  conduct wherein the bank assisted clients in evading U.S. tax on $15 billion of assets (I recall it being $20 billion but I'll go with Citizen's for Tax Justice's figure).  I also recall that after the full investigation of Credit Suisse's international clients that more than half of the clients turned out to be 'tax compliant', or so the bank testified under oath about the findings of a robust audit of its international client base by a respected outside U.S. law firm.  See my commentary of 2014  Of about $10 billion of Credit Suisse AUM initially identified as potentially non-compliant with U.S. tax laws, it turned out that $5 billion were compliant and another $2 billion had lost a U.S. tax during the time in question.  

Still, $4 or 5 billion of non-compliant AUM is $ 4 or $5 billion of AUM.  Not something that should go unnoticed by a reputable bank.  Not excusing Credit Suisse or UBS in any way. The bank and its employee(s) should be held accountable for assisting individuals in committing a crime against the U.S. government.  The other governments of the world may not like the U.S. jurisdictional criminal reach into their business' affairs, but that's the reality they live in for exposing themselves to the U.S. market.  Especially banking institutions that are both subsidized and protected by U.S. taxpayers, or take advantage of the U.S. financial markets (UBS had significant U.S. exposure during the time of its non-compliant behavior). 

Let's say it all of UBS was non-compliant dollars hidden from the IRS though probably some portion was compliant.  5% return on $15 billion is $750 million. Take an average 15% tax rate on portfolio income and that gives is $112.5 million.  UBS, the biggest wealth manager for foreign assets under management, I recall reading in industry reports back when the UBS case broke, had 10% of the market.   Let me cut that figure in half for sake of argument.  So if UBS is representative of only 5% of the market, we are still in the $2 billion range of lost tax revenue - a very far cry from the articles $40 - $70 billion, or previous $150 billion.  More likely, it's a lot less.  (see my previous commentary on Kluwer's Tax Blog)

See Background and Current Status of FATCA (March 1, 2017). LexisNexis® Guide to FATCA & CRS Compliance (5th ed., 2017) . SSRN: https://ssrn.com/abstract=2926119 

book coverByrnes’ Lexis Guide to FATCA & CRS Compliance – NEW 2017 edition expanded to two-volume set!

Since the first edition written in Spring of 2012, the industry leading 2,000 page analysis of the FATCA and CRS compliance challenges,  79 chapters by FATCA and CRS contributing experts from over 30 countries.  Besides in-depth, practical analysis, the 2017 edition includes examples, charts, timelines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers.   Byrnes’ Lexis Guide to FATCA Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments.  This treatise also includes in-depth analysis of designing a FATCA internal policy, designing an equivalent form to the W-8, reporting accounts, reporting payments, operational specificity of the mechanisms of information capture, validation for fit for purpose, data management, and exchange by firms and between countries, insights as to the application of FATCA, CRS, and the IGAs within BRIC, SEA and European country chapters.  This fifth edition provides the financial enterprise’s FATCA compliance officer the tools for developing and maintaining a best practices compliance strategy.  No filler of forms and regs – it’s all Texas beef folks!

* In an earlier version this morning I inadvertently swapped TJN for CTJ.  I am separately examining a TJN post of yesterday citing to a Finish government sponsored Global Financial Integrity report measuring illicit flows (see here) based upon matched-trade methods to estimate misinvoicing. Trade misinvoicing is calculated by comparing a country’s reported trade statistics with those of its “advanced economy” trading partners (see p. 46 of the GFI report).

May 4, 2017 in GATCA, Tax Compliance | Permalink | Comments (1)

Saturday, April 29, 2017

United Arab Emirates is 109th jurisdiction to bend to OECD will and sign OECD treaty against offshore tax evasion and tax avoidance

His Excellency Muadid Hareb Mughair Al-Khaili, Ambassador of the United Arab Emirates to France, signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters in the presence of the OECD Deputy Secretary-General, Rintaro Tamaki.  The Convention is the most powerful instrument for international tax cooperation. It provides for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees extensive safeguards for the protection of taxpayers' rights.

United Arab Emirates become the 109th jurisdiction to join the most powerful multilateral treaty against offshore tax evasion and avoidanceMuadid Hareb Mughair Al-Khaili, Ambassador of the United Arab Emirates to France and OECD Deputy Secretary-General, Rintaro Tamaki during the signing ceremony
OECD Headquarters
Paris, 21 April 2017

The Convention's impact grows with each new signatory; it also serves as the premier instrument for implementing the Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries. The Convention will enable the United Arab Emirates to fulfil their commitment to begin the first of such exchanges by 2018.

The Convention can also be used to swiftly implement the transparency measures of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project such as the automatic exchange of Country-by-Country reports under Action 13 as well as the sharing of rulings under Action 5 of the BEPS Project. The Convention is also a powerful tool in the fight against illicit financial flows.

The Convention was developed jointly by the OECD and the Council of Europe in 1988 and amended in 2010 to respond to the call by the G20 to align it to the international standard on exchange of information and to open it to all countries, thus ensuring that developing countries could benefit from the new more transparent environment.

The 109 jurisdictions participating in the Convention can be found at: www.oecd.org/ctp/exchange-of-tax-information/Status_of_convention.pdf

April 29, 2017 in GATCA | Permalink | Comments (0)

Thursday, April 13, 2017

Australia Revenue To Report Tax Debts to Credit Agencies

The Government has announced that from 1 July 2017 it will allow the Australian Taxation Office (ATO) to disclose debt information to credit reporting bureaus of taxpayers that are ATOnot effectively engaged with the ATO to manage their debts.

Taxpayers are encouraged to pay taxation debts in a timely manner to avoid it affecting their credit rating.

Providing transparency of tax debts owed by disengaged taxpayers aims to influence taxpayer behaviour and reduce the unfair financial advantage gained by taxpayers that do not pay their tax on time. It will also help to provide visibility of tax debt information to other businesses (such as suppliers) and credit providers.

Taxpayers who effectively engage with the ATO to resolve their debt will not have it reported.

While the specific circumstances and exceptions for disclosure are being confirmed through the consultation and design process, tax debts will only be reported where:

  • the debt is for a taxpayer that has an ABN
  • the debt is over $10,000 and unpaid for over 90 days
  • the debt is not in dispute
  • no payment plan has been established or an existing payment plan has defaulted.

The ATO will notify a taxpayer that it intends to refer its tax debt to a credit reporting bureau before it passes on the information.

The ATO will establish agreements with credit reporting bureaus to manage the reporting and administration of tax debt information.

In conjunction with Treasury, the ATO is consulting with the community, including business, industry groups and associations (including the Australian Small Business and Family Enterprise Ombudsman), to ensure that the measure is implemented and administered effectively.

 

Legislation and supporting material

This measure is not yet law and is subject to the normal parliamentary process.

Subject to passage of the law, the ATO will issue further details on how the measure will be implemented and administered.

More information

April 13, 2017 in GATCA | Permalink | Comments (0)