FATCA Lawyers

Ireland-Kazakhstan Tax Treaty Ratified | International Tax Lawyer News

On December 29, 2017, the President of Kazakhstan Nazarbayev signed the law for the ratification of the Ireland-Kazakhstan Tax Treaty for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income.

History of the Ireland-Kazakhstan Tax Treaty

The Ireland-Kazakhstan Tax Treaty was originally signed in Astana on April 26, 2017. Ireland already ratified the treaty through Statutory Instrument 479 on November 10, 2017. By ratifying the treaty on December 29, 2017, Kazakhstan completed the process for the treaty ratification on the part of Kazakhstan.

The Ireland-Kazakhstan Tax Treaty will enter into force once the ratification instruments are exchanged. The provisions of the Treaty will apply from January 1 of the year following its entry into force. The Treaty is the first tax treaty between Ireland and Kazakhstan.

Taxes Covered by the Ireland-Kazakhstan Tax Treaty

The Ireland-Kazakhstan Tax Treaty will apply to the following taxes. With respect to Ireland, the Treaty will apply to the income tax, the universal social charge, the corporation tax and the capital gains tax. For Kazakhstan, it will apply to the corporate income tax and the individual income tax. Identical or substantially similar taxes imposed by either state after the Treaty was signed are also covered by the Treaty.

Main Provisions of the Ireland-Kazakhstan Tax Treaty

Here is an overview of the most important provisions. Obviously, this is a very general description for educational purposes only, and it cannot be relied upon as a legal advice; you should contact a licensed attorney in Ireland or Kazakhstan for legal advice.

Article 4 of the Ireland-Kazakhstan Tax Treaty defines the meaning of the term “resident”. It should be noted that the Treaty applies only to Irish and Kazakh residents (see Article 2 of the Treaty).

Article 5 defines the term Permanent Establishment.

Article 6 states that income from the “immovable” property (i.e. real estate) is subject to taxation in a country where it is located. This includes business real estate. This provision, of course, does not exempt the owner of the real estate from the obligation to also pay taxes in his home country.

Article 7 deals with business profits. It states that “the profits of an enterprise of a Contracting State shall be taxable only in that Contracting State unless that enterprise carries on business in the other Contracting State through a permanent establishment situated therein.” In the latter case, “the profits of the enterprise may be taxed in the other Contracting State but only so much of them as is attributable to that permanent establishment.”

Article 8 states that “profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that Contracting State.”

Article 9 deals with Associated Enterprises.

Article 10 establishes the maximum tax rates for dividends. In general, dividends should be taxed at a maximum rate of 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 25 percent of the capital of the payer company; in all other cases, the tax rate should be no more than 15%.

Articles 11 and 12 establish the maximum tax withholding rate of 10% for interest and royalties respectively.

Articles 13 – 22, 24 and 25 deal with capital gains, employment income, director fees and certain special cases.

Article 23 establishes the usage of foreign tax credit to eliminate double-taxation under the Treaty.

Information Exchange and Tax Enforcement under the Ireland-Kazakhstan Tax Treaty

The Ireland-Kazakhstan Tax Treaty contains fairly strong provisions on the information exchange and tax enforcement. Article 26 provides for exchange of relevant tax information described in the Treaty. Article 27 obligates the signatory states to lend assistance for the purposes of collection of taxes.

Information Exchange under the Ireland-Kazakhstan Tax Treaty and FATCA Compliance

Article 26 of the Ireland-Kazakhstan Tax Treaty could be dangerous to US citizens who are also either Kazakh residents or citizens. The reason for it is FATCA which would obligate Ireland to turn over the information it receives under the Treaty directly to the IRS in cases where this information concerns noncompliant US tax residents. This may lead to an IRS investigation and the imposition of FBAR and other penalties on these US taxpayers.

Contact Sherayzen Law Office if You Have Unreported Foreign Accounts in Ireland or Kazakhstan

If you have undisclosed foreign accounts and/or foreign income in Ireland and Kazakhstan, you should contact Sherayzen Law Office as soon as possible. Our firm specializes in offshore voluntary disclosures and has helped hundreds of US taxpayers to deal with this issue. We can help You!

Contact Us Today for Your Confidential Consultation!

Guam & American Samoa Are Non-Cooperative Tax Jurisdictions | News

On December 5, 2017, the European Union (the EU) Council published its list of the non-EU non-cooperative tax jurisdictions. The list included American Samoa and Guam unleashing strenuous objections from the United States.

Full List of Non-Cooperative Tax Jurisdictions

A total of seventeen countries made it to the list of non-cooperative tax jurisdictions: American Samoa, Bahrain, Barbados, Grenada, Guam, Korea (Republic of), Macao SAR, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates.

Criteria for Inclusion in the List of Non-Cooperative Tax Jurisdictions

The list of non-cooperative tax jurisdictions was formed out of tax jurisdictions that failed to meet three criteria at the same time: transparency, fair taxation and the implementation of anti-base-erosion and profit-shifting measures.

The EU Reasoning for Including American Samoa and Guam on the List of Non-Cooperative Tax Jurisdictions

The EU reasoning for including American Samoa and Guam on the list of non-cooperative tax jurisdictions is a peculiar one because it does not seem to care about the fact that both jurisdictions are only US territories with no authority to separately sign international tax commitments (i.e. everything is done through the United States).

In particular, the EU Council specifically criticized American Samoa and Guam for three failures. First, American Samoa and Guam did not implement the automatic information exchange of financial information. Second, both jurisdictions did not sign the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Finally, neither American Samoa nor Guam followed the EU’s BEPS minimum standards.

US Objections to the Inclusion of Its Territories on the List of Non-Cooperative Tax Jurisdictions

In his letter to the Council of the European Union, the Treasury Secretary Steven Mnuchin strenuously objected to the inclusion of American Samoa and Guam on the list of non-cooperative tax jurisdictions. The Treasury Secretary set forth the following reasons.

First, he objected to the publication of the list per se as being “duplicative” of the efforts at the G-20 and OECD level.

Second and most important, Mr. Mnuchin stated that the EU reasoning does not make sense, because American Samoa and Guam “participate in the international community through the United States”. The fact that the United States agreed to implement BEPS minimum standards and the tax transparency standards should be considered as the agreement of American Samoa and Guam to do the same. In other words, he argued that American Samoa, Guam and the Untied States should be considered as one whole legal framework.

Based on this reasoning, Mr. Mnuchin urged the EU to immediately remove American Samoa and Guam from its list of non-cooperative tax jurisdictions. It should be noted that several other jurisdictions also rejected their inclusion on the list.

Sherayzen Law Office will continue to watch for any new developments with respect to this issue.

Cyprus-Saudi Arabia Tax Treaty Signed | International Tax Lawyers

On January 3, 2018, the “Convention for the Avoidance of Double Taxation with respect to Taxes on Income and for the Prevention of Tax Evasion between the Republic of Cyprus and the Kingdom of Saudi Arabia” or the Cyprus-Saudi Arabia Tax Treaty was signed in Riyadh, Saudi Arabia.

The Cyprus-Saudi Arabia Tax Treaty was signed during the official visit of the President of Cyprus to Saudi Arabia. On behalf of Cyprus, the treaty was signed by Mr. Ioannis Kasoulides, Minister of Foreign Affairs of the Republic of Cyprus. On behalf of the Kingdom of Saudi Arabia, the treaty was signed by Mr. Mohammad Abdullah Al-Jadaan, Minister of Finance of Saudi Arabia.

Cyprus authorities have stated that the Cyprus-Saudi Arabia Tax Treaty is based on the OECD Model Convention for the Avoidance of Double Taxation on Income and on Capital, and it includes the exchange of financial and other information in accordance with the relevant Article of the Model Convention.

The signing of the Cyprus-Saudi Arabia Tax Treaty comes at a very special time for Saudi Arabia as another eleven princes were arrested. It should be remembered that there were numerous arrests for corruption in November of 2017.

The signing of the Cyprus-Saudi Arabia Tax Treaty will strengthen the treaty networks of both countries. The exchange of information will also help Saudi Arabia to exercise better control the flow of funds from Saudi Arabia to Cyprus.

Moreover, the exchange of information between Saudi Arabia and Cyprus may also inadvertently lead to this information being turned over to the IRS through FATCA (i.e. this information may be disclosed to the IRS by Cyprus or any other FATCA-compliant country that obtains it from Cyprus through another exchange of information arrangement). Hence, there is an increased potential of the IRS discovery of noncompliance with US international tax provisions by Saudi Arabian citizens who are also US tax residents.

It should be noted that the Cyprus-Saudi Arabia Tax Treaty was only signed and it has not yet been ratified by either country.

Sherayzen Law Office will continue to monitor new developments with respect to the Treaty.

Belarus-Spain Tax Treaty Approved | FATCA Lawyer News

On December 19, 2017, the Belarusian Council of the Republic, which is the upper chamber of the Belarusian parliament, approved a law on the ratification of the pending Belarus-Spain Tax Treaty. The Belarus-Spain Tax Treaty will cover both income and capital gain taxes and is meant to prevent the double taxation of the same income in both countries. This development comes after both countries signed the Belarus-Spain Tax Treaty in Madrid, Spain, on June 14, 2017.

The exact text of the treaty is not yet known. There are reasons to believe, however, that it includes an article on the automatic exchange of tax-related information in compliance with the OECD standard. The exchange of information under the Belarus-Spain Tax Treaty is reported to be quite extensive.

The Belarus-Spain Tax Treaty will enter into force within three months after all of the ratification procedures are completed. Once in force and effective, the Belarus-Spain Tax Treaty will replace the agreement signed between the former Soviet Union and Spain on March 1, 1985.

The Belarus-Spain Tax Treaty is just the latest example of the recent rise in the number of tax treaties signed between various countries. It appears that the web of treaties between various countries is growing increasingly wider and diverse as a result of the global preference for bilateral negotiations over the multilateral ones.

Similarly, as a result of FATCA and CRS, there has been an explosion of the agreements concerning automatic exchange of certain tax-related information, including those related to foreign accounts and beneficial ownership of foreign corporations. Again, the general trend toward bilateral negotiations, led by FATCA implementation treaties (which are bilateral treaties between the United States and other countries), can be clearly observed from these developments.

This trend toward bilateral negotiations reflects the underlying complex historical processes of moving to an increasingly multipolar world. This, of course, offers little consolation to US taxpayers as well as taxpayers of other countries who are increasingly caught between the ever demanding tax compliance requirements of various countries. The recent Belarus-Spain Tax Treaty will make but a modest contribution to this burden; yet, it is definitely part of this trend.

Sherayzen Law Office will continue to observe and analyze these trends and developments, including the progress of the new Belarus-Spain Tax Treaty.

Happy New Year 2018 From Sherayzen Law Office

Our team at Sherayzen Law Office wishes a very Happy New Year 2018 to our clients; colleagues at other law firms; judges of state and federal courts; our website blog readers; and our followers on Facebook, Twitter, YouTube and other social media.

Year 2017 was another highly successful year at Sherayzen Law Office. Our tremendous expertise and experience in US international tax law draws an ever-increasing number of clients from all over the world. We have expanded our client base at existing countries and added clients from new countries, bringing the total number of countries with our client assets to close to seventy. Additionally, we were asked to defend a case in federal court concerning FBAR penalties, successfully advised on expatriation cases and finalized a number of existing and new tax planning cases.

Our biggest success area, however, remains Offshore Voluntary Disclosures with the new highs for Form 3520, 5471 and 926 voluntary disclosures as well as FBAR/FATCA voluntary disclosures. FATCA-based cases were especially prolific with a significant variation in fact patterns and countries.

Furthermore, we have made an unprecedented effort to educate our clients as well as the general public about US international tax law. A combined record number of video posts and website blog posts were made available online. Additionally, Mr. Eugene Sherayzen, the owner and the principal attorney of Sherayzen Law Office, spoke at a large number of seminars in 2017, including outside of the United States.

In many ways, year 2017 was also a preparatory year for the new year 2018. We are closely following the rapid changes in US international tax law. The main changes are coming, of course, from the Tax Cuts and Jobs Act of 2017. The changes are enormous and will affect virtually every US taxpayer – both, individuals and businesses. We already started a series of articles on this topic. Please, continue to follow our blog in the new year 2018 to learn more about how the Act’s provisions may affect your tax situation.

It is also important to emphasize that, while the Tax Cuts and Jobs Act of 2017 will introduce the main changes in the new year 2018, some of its provisions are very relevant for the tax year 2017. In particular, the new income recognition rules for US Shareholders of foreign corporations (PFIC corporations are exempted from this provision) may impose a significant and unexpected tax burden on US taxpayers. Please, continue to follow our blog in the new year 2018 to learn more about these changes.

Equally important are the new IRS regulations that will be coming in the new year 2018. The IRS has announced that it intends to issue regulations that will target certain obscure areas of tax law which remain unregulated by the IRS or where the regulations are contradictory. In this context, it is particularly important to mention the interaction of PFIC rules with the Throwback Rule concerning distributions of a foreign trust’s UNI.

Finally, the IRS has also stated that it would announce sometime in the new year 2018 dramatic changes to Offshore Voluntary Disclosure options that exist right now. We have written a number articles on this topic and we have warned our readers that the current favorable environment may change dramatically with a potentially complete closure of the IRS OVDP program.

Sherayzen Law Office is a highly experienced law firm with a unique expertise in US international tax law. We have helped hundreds of US taxpayers around the world to bring and maintain their US tax affairs in full compliance with US tax laws while ethically and effectively reducing their penalties and tax burden. We can help You!

Contact Us Today to Schedule Your Confidential Consultation!