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Mizrahi-Tefahot Bank Rejects DOJ Settlement Offer | FATCA Tax Lawyer

On August 8, 2018, Mizrahi-Tefahot Bank (“Mizrahi-Tefahot”) informed the Tel Aviv Stock Exchange that its Board of Directors rejected a settlement offer from the US Department of Justice (“DOJ”).

It appears that the DOJ offer was received by the bank on August 7, 2018. The DOJ proposed that Mizrahi-Tefahot pay $342 million to settle the DOJ investigation into whether the bank helped US taxpayers evade US federal taxes.

Mizrahi-Tefahot felt that this was an unreasonably high amount to pay. In its financial statements for the quarter that ended on March 31, 2018, the bank reserved just $46.1 million to settle the DOJ investigation.

The official and primary reason for the rejection of the DOJ offer, however, was the fact that the DOJ’s letter was not accompanied by any details of how DOJ arrived at such a high sum of money. The letter did not contain even any references to any calculation principles. Mizrahi-Tefahot’s lawyer felt that any reasonable calculation of potential settlement amount would lead to a much lower settlement offer.

The most likely reason why Mizrahi-Tefahot felt so confident in rejecting the DOJ offer was its knowledge of the settlements paid by the Swiss banks. NPB Neue Privat AG, for example, only paid $5 million. Basler Kantonalbank believes it can settle for $100 million. In other words, it appears that the negotiation process with the DOJ has matured to the point where Mizrahi-Tefahot can reasonably predict the amount for which the DOJ would agree to settle the case.

Mizrahi-Tefahot is not the only bank in Israel under the IRS investigation. Bank Leumi settled its DOJ investigation for a fine of $270 million and entered into a deferred prosecution agreement. Bank Hapoalim is still in settlement negotiation with the DOJ; in fact, last May, it further increased the funds set aside for a possible DOJ settlement to a total of $365 million.

Contact Sherayzen Law Office for Help With the Voluntary Disclosure of your Mizrahi-Tefahot and Other Israeli Bank Accounts

As part of their settlement agreements, foreign banks agree to supply to the DOJ full information concerning bank accounts owned by US persons. Mizrahi-Tefahot settlement will very likely follow the same path; so will Bank Hapoalim and any other Israeli bank investigated by the DOJ.

This means that if you have undisclosed foreign bank accounts in Israel, you are at a high risk of IRS detection and potentially disastrous FBAR penalties. This is why you need to contact Sherayzen Law Office for professional help with the voluntary disclosure of your Israeli bank accounts. Our law firm specializes in offshore voluntary disclosures of foreign accounts and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

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!

H1B Holder FATCA Requirements

There is a confusion in general public about the H1B holder FATCA requirements. The key concept that lies at the heart of the U.S. tax obligations of an H1B holder is tax residency (which is very different from the definition of a U.S. permanent resident in immigration law). In this article, I will discuss the concept of tax residency and the H1B Holder FATCA requirements.

H1B Holder FATCA Requirements: H1B Visa

H1B visa is a non-immigrant visa that allows U.S. companies to hire foreign workers to work in the United States. These workers have to be working in occupations that require theoretical or technical expertise in specialized fields such as in architecture, engineering, mathematics, science and medicine.

H1B Holder FATCA Requirements: FATCA

The Foreign Account Tax Compliance Act (FATCA) was signed into law in the year 2010. This law was passed by U.S. Congress with the specific purpose of combating tax noncompliance of U.S. taxpayers with undeclared offshore accounts. Today, FATCA is one of the most influential tax information exchange regimes in the world; through a huge network of bilateral treaties, the IRS managed to implement FATCA in the great majority of the countries.

FATCA consists of basically two parts. First, it obligates foreign financial institutions to turn over to the IRS certain information regarding foreign accounts owned by U.S. persons as well as certain information regarding the U.S. owners themselves. The H1B Holder FATCA information is also required to be turned over to the IRS.

The second part of FATCA imposes a new reporting requirement, IRS Form 8938, which must be filed with a U.S. tax return. Form 8938 requires U.S. taxpayers to disclose specified foreign assets to the IRS. “Specified Foreign Assets” includes various class assets, including foreign financial accounts.

H1B Holder FATCA Requirements: Tax Residency and FATCA Requirements

The key to understanding H1B holder FATCA requirements is the determination of whether an H1B holder is a tax resident of the United States. In order for an H1B holder to be classified as a U.S. tax resident, he must pass the “substantial presence test”. The substantial presence test determines the tax residency of a person based on the number of days this individual was physically in the United States.

If the substantial presence test is satisfied, the H1B holder is considered to be a tax resident of the United States. As a U.S. tax resident, the H1B holder FATCA requirements will be the same as those of any other U.S. tax resident, including U.S. citizens and U.S. permanent residents.

This means that, under FATCA, foreign banks should disclose to the IRS all of the foreign financial accounts owned directly, indirectly or constructively by the H1B holder. At the same time, the H1B holder FATCA obligations extend to filing Form 8938 for all of the required specified foreign assets, including foreign financial accounts, foreign stocks and other securities, foreign bonds, foreign derivatives and ownership of foreign businesses (unless such ownership is reported on another IRS form; in this case, Form 8938 should indicate the form on which such foreign business ownership is disclosed), and other assets.

H1B Holder FATCA Requirements: Late Disclosure

What if H1B holder FATCA obligations were not timely satisfied (i.e. Forms 8938 should have been filed, but they never were) and the H1B holder just found out about it? If an H1B holder did not file Forms 8938 timely, he may be subject to Form 8938 penalties. Moreover, in most such cases, such an H1B holder is likely to have failed to comply with other important U.S. international tax requirements such as FBAR and worldwide income reporting. The combination of FATCA, FBAR, income reporting and other penalties may create a huge tax liability that may even exceed the total value of the H1B holder’s foreign assets.

In such cases, the H1B holder should contact an international tax attorney experienced in offshore voluntary disclosures as soon as possible. Various offshore voluntary disclosure options offer varying rates of reduced penalties, sometimes even with the possibility of eliminating all penalties. However, time is of the essence – if foreign banks report the H1B holder’s foreign assets as part of their FATCA compliance and the IRS commences its investigation of the H1B holder FATCA noncompliance, then all of the voluntary disclosure options may automatically close.

Contact Sherayzen Law Office for Legal Help with H1B Holder FATCA Compliance

If you work in the United States on H1B visa, have foreign assets which are required to be disclosed under FATCA and have not done so, you should contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is an experienced international tax law firm that specializes in FATCA compliance for U.S. taxpayers, including voluntary disclosures for H1B holders.

Contact Us Today to Schedule Your Confidential Consultation!

Hiding Assets and Income in Offshore Accounts Again Made the IRS “Dirty Dozen” List

On February 5, 2016, the IRS again stated that avoiding U.S. taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.

The problem with offshore accounts is two-fold. On the one hand, there are numerous con-artists who use offshore accounts to lure taxpayers into scams and schemes. The second and a much larger problem for the IRS is the fact that many U.S. taxpayers used offshore account to hide assets and income from the IRS.

Fighting the strategy of using offshore accounts to hide assets and income has been one of the top priorities of the IRS since the early 2000s. The problem has been complicated by the fact that there are many legitimate reasons for having an offshore account – a fact that, unfortunately, has been largely ignored by journalists and the public opinion in the United States. Therefore, it is necessary for the IRS to approach the problem of offshore accounts carefully in order to avoid hurting innocent people.

Over the years, the IRS (with the help of Congress) has chosen five different and interrelated strategies to fight tax evasion through offshore accounts.

1. IRS Civil and Criminal Enforcement

IRS examinations, audits, subpoenas, and criminal enforcement play a central role in the IRS war against using offshore accounts to hide assets and income. The ability of the IRS to enforce U.S. tax laws is amazingly broad and the IRS will use it whenever it wishes.

Since 2009, the IRS conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

Hence, brute force still looms large in fighting tax evasion through offshore accounts and creates enormous (and fully justified) fear in the hearts of many U.S. taxpayers. This fear is also central to the IRS ability to use the other four strategies listed below.

2. Extensive Reporting Requirement for Owners of Offshore Accounts

As owners of offshore accounts have already noticed, the number of reporting requirements with respect to offshore accounts has risen dramatically. In addition to FBAR (which has existed since the 1970s), FATCA introduced Form 8938 in 2011. Furthermore, Form 8621 and Schedule B to Form 1040 have been modified to require additional reporting with respect to offshore accounts. Other forms also indirectly require reporting of foreign accounts (through reporting of ownership or a beneficial interest in a foreign entity or a foreign trust).

By forcing U.S .taxpayers to do extensive reporting with respect to their offshore accounts, the IRS has achieved two goals at the same time. First, it has collected an enormous amount of information with respect to U.S. offshore accounts and their owners. This information can be used in a later investigation to track fund and identify patterns of behavior. In a short while, due to the implementation of FATCA in many jurisdictions around the world, this information will also be used to compare the banks’ information with the information provided by the taxpayers on their information returns.

Second, the enormous fines associated with offshore accounts reporting can create huge tax liabilities for noncompliant taxpayers. This provides the IRS with a financial incentive to pursue these taxpayers. These potentially disastrous noncompliance fines also serve to deter many taxpayers from engaging in risky tax evasion schemes.

Of course, one of the biggest problems associated with these reporting requirements is that the majority of persons, including tax accountants, never heard of them until they were already in trouble. When the IRS pressure started to rise, it was already too late for a lot of U.S. taxpayers to do simply current compliance and they had to pay fines to the IRS. It is important to emphasize that the process is by no means over – on the contrary, as the complexity of U.S. tax compliance continues to rise, a lot of taxpayers (and their accountants) still do not know about a lot of these requirements.

3. Voluntary Disclosures

In order to alleviate the reporting noncompliance nightmares for U.S .taxpayers, the IRS created a number of voluntary disclosure programs. The early programs were not very successful; however, after the IRS stunning victory in the 2008 UBS case, the 2009 Offshore Voluntary Disclosure Initiative (OVDI) turned out to be a huge success. The 2011 OVDP, 2012 OVDP and 2014 OVDP with 2014 Streamlined Compliance Procedures followed in quick succession and with even bigger success. Since 2009, more than 54,000 OVDP disclosures took place and the IRS has collected more than $8 billion; this is not taking into account the huge surge in Streamlined disclosures since 2014.

The information that has been collected through OVDP is used to identify noncompliant individuals and entire schemes to evade U.S. taxes through offshore accounts. The IRS then uses this information to pursue taxpayers with undeclared offshore accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas using offshore accounts. The IRS works closely with the Department of Justice (DOJ) to prosecute these tax evasion cases.

4. Swiss Bank Program

In addition to the voluntary disclosure program for individuals, the IRS also created a voluntary disclosure program for Swiss banks. Such voluntary disclosure program is, of course, an unprecedented event – never in history did one country force another country’s entire bank system to do a voluntary disclosure on the territory of that other country.

While the debate over this breach of Swiss sovereignty (although, technically, the Swiss government agreed to the Swiss Bank Program) is interesting, for the purposes of this article, it is important to note that Swiss Bank program was a huge step forward in attacking the usage of offshore accounts to hide assets and income.

By the end of February of 2016, about 80 Swiss banks went through Category 2 voluntary disclosure and paid penalties to the U.S. government. They also turned over enormous amount of information regarding their U.S. accountholders and the various schemes that Swiss bankers developed to hide assets and funds from the IRS. In essence, the Swiss bankers turned over to the IRS substantially all of the blueprints for tax evasion that they had created.

5. FATCA

The final major strategy for fighting the practice of using offshore accounts to hide assets and income from the IRS is the famous Foreign Account Tax Compliance Act or FATCA. Ever since FATCA entered into force, it has changed the global landscape of international tax compliance. One of the most salient features of FATCA is the fact that it forces foreign banks to report to the IRS all of the offshore accounts that they can identify as owned by U.S. persons.

This groundbreaking piece of legislation has had an enormous impact on the ability of the IRS to identify noncompliance by U.S. persons, because foreign banks now act as its agents and voluntarily disclose U.S. persons and their offshore accounts.

Contact Sherayzen Law Office for Help With Your Offshore Accounts

If you have undisclosed offshore accounts, you should contact Sherayzen Law Office as soon as possible. We have helped hundreds of U.S. taxpayers to bring their U.S. tax affairs in order while saving millions of dollars in potential penalty reductions. We furthermore help to reduce your income tax liability as a result of your voluntary disclosure and post-voluntary disclosure tax planning.

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Cayman Islands FATCA Registration Portal

On March 20, 2015, the Cayman Islands FATCA Registration Portal was launched by the Department for International Tax Cooperation (which is a department within Cayman Islands Tax Information Authority).

Cayman Islands FATCA Background 

The Cayman Islands FATCA Registration Portal is part of the long process of Cayman Islands FATCA compliance. Cayman Islands FATCA IGA (Model 1) was signed with the United States on November 29, 2013. At the same time, Cayman Islands signed the amended Tax Information Exchange Agreement. Both of these developments led to the creation of the Portal as a way to automatically exchange information required by FATCA between Cayman Islands and the United States.

It is also important to point out that Cayman Islands FATCA compliance was not only driven by the US considerations, but also by the UK considerations. As an overseas territory of the United Kingdom, Cayman Islands had to come to an agreement with the United States that could not have been better the terms negotiated between the UK and Cayman Islands with respect to the exchanges of tax-related information.

Purchase of the Portal

The Portal plays a critical role in Cayman Islands FATCA compliance, because it allows Cayman’s financial institutions (including the investment funds based in Cayman islands) to report information required by FATCA to the Cayman Islands Tax Information Authority, which, as it is mandated by Model 1 FATCA agreement, will turn over the required information to the IRS.

Registration

As part of Cayman Islands FATCA compliance, the Cayman Islands Tax Information Authority warned the island’s financial institutions that they much must register via the Portal by April 30, 2015 and provide their names, FATCA classification, principal point of contact and other information.

Reporting Deadline by May 31, 2015

The deadline for reporting the 2014 (calendar year) information by the Cayman’s financial institutions must be done by May 31, 2015. The information that will have to be submitted through the Portal is the one usually required by FATCA, including:

1. US person’s name, address and tax identification number (and date of birth, where applicable);
2. US person’s account number or its equivalent;
3. Name and ID of the reporting financial institution; and
4. Year-End Balance of the account.

Interestingly enough, the UK FATCA requirement for Cayman Islands is much later – May 31, 2016.

Caymans Islands FATCA Compliance Is Not Unique

Cayman Islands FATCA compliance through a Portal is now a common theme throughout the world. In fact, it is expected that most of the Model 1 FATCA countries around the world have either complied with 2014 US FATCA requirements or will do so soon, and they are likely to be using a Portal of some kind.

For example, it is expected that the following jurisdictions will do their FATCA reporting through an information reporting system (deadlines in parenthesis): Ireland (June 30, 2015), Luxembourg (June 30, 2015), United Kingdom (May 31, 2015), Canada (May 2, 2015), and so on.

What Portal Means for US Persons with Undisclosed Cayman Islands Accounts

If you are a US person with undisclosed foreign accounts in Cayman Islands (any many other jurisdictions around the world), you are very likely to have very little time left before your account will be disclosed to the IRS. The penalties (especially FBAR and Form 8938 penalties) for failure to report foreign accounts can be draconian, including potential incarceration. Moreover, once the IRS learns about the existence of your account and initiates an invest, you may not be able to do a voluntary disclosure to reduce your penalties.

This means that US persons with undisclosed foreign accounts need to immediately contact an experienced international tax lawyer to explore their voluntary disclosure options in order to timely file their request for Preclearance.

Contact Sherayzen Law Office for Professional Help With Disclosing Your Foreign Accounts

Sherayzen Law Office, Ltd. is the experienced international tax firm that can help you with the voluntary disclosure of your foreign accounts. We have already successfully helped hundreds of US taxpayers around the world to conduct various types of voluntary disclosures (OVDP, SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), Delinquent Information Returns, Delinquent FBAR Submission, and Noisy/Reasonable Cause disclosures), and We can help You!

Contact Us to Schedule Your Confidential Consultation!