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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.

Ukrainian FATCA Agreement Authorized for Signature

On November 9, 2016, the Ukrainian government authorized the Ukrainian FATCA Agreement for signature. Let’s explore this new development in more depth.

Ukrainian FATCA Agreement and FATCA Background

The Ukrainian FATCA Agreement is one of the many bilateral FATCA implementation agreements signed by the great majority of jurisdictions around the world. The Foreign Account Tax Compliance Act (FATCA) was enacted into law in 2010 and quickly became the new standard for international tax information exchange.

FATCA is extremely complex, but its core purpose is very clear – increased US international tax compliance (with higher revenue collection) by imposing new reporting requirements on US taxpayers and especially foreign financial institutions (FFIs). Since FFIs are not US taxpayers, the United States has been working with foreign governments to enforce FATCA through negotiation and implementation of FATCA treaties. The Ukrainian FATCA Agreement is just one more example of these bilateral treaties.

Ukrainian FATCA Agreement is a Model 1 FATCA Agreement

There are two types of FATCA treaties – Model 1 and Model 2. Model 2 FATCA treaty requires FFIs to individually enter into a FFI Agreement with the IRS to report the required FATCA information directly to the IRS (for example, Switzerland signed a Model 2 treaty).

On the other hand, Model 1 treaty requires FFIs in the “partner country” (i.e. the country that signed a Model 1 FATCA agreement) to report the required FATCA information regarding US accounts to the local tax authorities. Then, the tax authorities of the partner country share this information with the IRS.

The Ukrainian FATCA Agreement is a Model 1 FATCA Agreement.

When will the Ukrainian FATCA Agreement Enter into Force?

The Ukrainian FATCA Agreement will enter into force once Ukraine notifies the US government that it has completed all of the necessary internal procedures for the ratification of the Agreement.

What is the Impact of Ukranian FATCA Agreement on Noncompliant US Taxpayers?

The implementation of the Ukrainian FATCA Agreement will mean that the Ukrainian government will force its FFIs to identify all of the FATCA information regarding their US accountholders and share this information with US government.

This further means that any US taxpayers who are currently noncompliant with the US tax reporting requirements (such as FBAR, Form 8938, foreign income reporting, et cetera) are now at an ever increasing risk of detection by the IRS and the imposition of draconian IRS penalties.

Contact Sherayzen Law Office for Help With US Tax Compliance in light of the Ukrainian FATCA Agreement

If you have undisclosed Ukrainian assets (including Ukrainian bank accounts) and Ukrainian foreign income, you should contact Sherayzen Law Office for help as soon as possible. We have helped hundreds of US taxpayers around the globe (including Ukrainians) to bring their US tax affairs in order and we can help you!

Hapoalim Prepares for Settlement with DOJ | FATCA Tax Attorney

On October 6, 2016, Israeli bank Hapoalim Ltd. announced that, in order to cover the costs of a future settlement with the US Department of Justice (DOJ), it will add a $70 million charge to an existing $50 million provision in its third-quarter results. The expected settlement will cover Hapoalim’s role in helping US tax residents to evade their US tax obligations.

In its news release, Hapoalim stated that its representatives held an initial discussion with the DOJ on September 30, 2016, to discuss the future settlement. The bank did not indicate whether $120 million in charges that it booked to date is the actual amount that Hapoalim will pay under its settlement with the DOJ. Rather, the news release emphasizes the uncertainty that still exists with respect to the actual amount.

The issue of the DOJ investigation dates back to the year 2011. In its recent (June 30, 2016) financial statements Hapoalim confirmed that its Swiss subsidiary Bank Hapoalim (Switzerland) Ltd. had been notified by Swiss authorities in 2011 that it was being investigated by the US government as a result of the DOJ’s suspicions that the bank had assisted US clients in evading federal taxes. The Swiss subsidiary could not resolve this issue in 2013 in the DOJ’s Swiss Bank Program due to the fact that it could not be classified as a Category 2 bank.

It is important to remember that the DOJ is not the only institution that is going after Hapoalim. The State of New York is conducting its own review. In its news release, Hapoalim indicated that the $120 million charge is not related to the New York investigation.

While all of this legal uncertainty makes it difficult for Hapoalim to assess its future liability under any deferred prosecution agreement, one can compare its situation with Bank Leumi. In 2014, Bank Leumi Group entered into a Deferred Prosecution Agreement with the DOJ under which it paid $270 million ($157 million of this penalty was allocated to Bank Leumi’s Swiss accounts held by US taxpayers).

If we rely on this precedent, it appears that Hapoalim is greatly underestimating its penalty, because Bank Leumi and Hapoalim are fairly similar in size as well as their actions in soliciting US clients. One also must not forget about the possible future indictments of Hapoalim’s employees (at least in the United States) by the DOJ.

Jordanian Bank FATCA Letters

As FATCA continues its triumphant march across the globe, banks from more and more countries continue to send out FATCA letters to their US customers. Recently, the banks in the Kingdom of Jordan sent out additional FATCA letters (hereinafter, “Jordanian Bank FATCA Letters”). Jordanian Bank FATCA letters caught many U.S. taxpayers by surprise; some even refuse to believe that they are obligated to provide this type of information to their banks. Yet, noncompliance with the requests of Jordanian Bank FATCA Letters may have grave consequences for US taxpayers.

FATCA Background

The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 to target tax noncompliance of U.S. taxpayers with foreign accounts. Since its enaction, this law established a new global standard for tax information exchange. More than 110 jurisdictions today operate under the worldwide reach of FATCA.

In essence, FATCA is used by U.S. authorities to obtain information regarding foreign accounts held by U.S. persons directly from foreign financial institutions by forcing these institutions to collect and send to the IRS information required by FATCA. Hence, FATCA effectively turns all FATCA-compliant foreign banks into IRS informants.

Additionally, FATCA requires U.S. taxpayers to report “Specified Foreign Assets” (this is a term of art in international tax law) on Forms 8938. Forms 8938 should be attached to the taxpayers’ U.S. tax returns and filed with the IRS.

Jordanian Bank FATCA Letters

FATCA is implemented worldwide through a network of bilateral treaties, which are divided in to Model 1 and Model 2 treaties. However, individual banks can also comply with FATCA without Model 1 and Model 2 treaties. A minority of countries follow this path, and the Kingdom of Jordan is one of them.

This means that Jordanian Bank FATCA Letters are sent out by Jordan banks not due to any Model 1 or Model 2 treaties between the United States and Jordan, but, rather, through direct FATCA compliance (i.e. Jordanian banks register with the IRS and provide the required information directly to the IRS).

The purpose of the Jordanian Bank FATCA Letters are similar to all other FATCA Letters – obtain the information required to be reported under FATCA by foreign financial institutions to the IRS. In particular, this includes information relevant to the account owner’s U.S. tax residency.

Impact of Jordanian Bank FATCA Letters on U.S. taxpayers with Undisclosed Foreign Accounts

Jordanian Bank FATCA Letters may have very important impact on U.S. taxpayers with undisclosed foreign accounts. In this article I want to emphasize the timing aspects of such letters.

By requesting FATCA information, Jordanian Bank FATCA Letters create a timetable for timely voluntary disclosure of the concerned U.S. taxpayers. First of all, the taxpayers who receive Jordanian Bank FATCA Letters have a deadline (ranging usually between 30-45 days, and, occasionally, 90 days) to file the letter with the bank. Since the bank sends the information supplied by U.S. taxpayers to the IRS, these U.S. taxpayers have a limited window of opportunity to timely disclose their foreign accounts. If a taxpayer refuses to provide the required information, the bank may still report him to the IRS as a “recalcitrant taxpayer” and even close his accounts.

Additionally, there is a more subtle impact of Jordanian Bank FATCA Letters on U.S. taxpayers – a notice of existence of FATCA and other U.S. tax reporting requirements. A lot of U.S. taxpayers are able to utilize Streamlined Procedures due to the fact that they did not know about the U.S. tax reporting requirements with respect to foreign accounts and foreign income. However, once U.S. taxpayers receive Jordanian Bank FATCA Letters, they can only claim their lack of knowledge with respect to prior years. It will be very difficult to sustain this argument with respect to current and future tax years.

Contact Sherayzen Law Office if You Received a FATCA Letter (from Jordan or from Any Other Country)

If you received a FATCA Letter from a foreign bank, you should contact Sherayzen Law Office for professional help. Our experienced legal team will thoroughly analyze your situation, propose the best strategy with respect to responding to the FATCA Letter, review your voluntary disclosure options and prepare all legal and tax documents to complete your voluntary disclosure.

Call Us Today to Schedule Your Confidential Consultation!

IRS Criminal Investigation Co-Hosts First International Criminal Tax Symposium

The Internal Revenue Service Criminal Investigation Division (IRS-CI) and Her Majesty’s Revenue & Customs (HMRC) co-hosted a three-day International Criminal Tax Symposium in Washington, D.C. on January 27 – 29, 2015. The symposium focused on combating offshore tax evasion and international financial crimes. It is worth mentioning that delegates from criminal tax and enforcement programs from Australia, Canada, The Netherlands, Norway and New Zealand also attended the symposium.

IRS states that, recognizing the increasing trends in sophisticated tax evasion and other financial crimes crossing international borders, the symposium participants discussed best practices and methods of effective investigations as well as other strategies to combat emerging issues.

“The IRS continues to enhance its international efforts through a number of strategies working with international law enforcement and actively participating in a number of international financial task force groups. We will continue our recent successes in international cases, following the money across the world to bring criminals to justice,” said Richard Weber, Chief, IRS-Criminal Investigation. “Those who believe they can cross international borders to commit financial crimes will find that they have far fewer places to hide.”

“HMRC is committed to tackling tax crimes through international collaboration and ensuring there is no safe haven for the proceeds of crime,” said Richard Summersgill, Director, HMRC Criminal Investigation. “The world is becoming a much smaller place for those who want to hide themselves and their assets behind anonymous corporate structures.”

Focus of the Symposium

The delegates focused on four key areas: combating beneficial ownerships and the use of shell companies, transnational organized crime, combating offshore tax evasion and refund crimes and repayment fraud.

Combating international financial crimes is a top priority for all of the participating countries and each actively pursues offshore tax evaders, promoters and financial institutions involved in hiding income and assets offshore. Currently, many countries coordinate through international and interagency task forces, exchange of information methods, joint investigations and other formal and informal methods of international cooperation. The IRS affirms that the symposium delegates discussed further enhancements to this international collaboration moving forward.

FATCA and Beneficial Ownership Issue

The beneficial ownership problem is one that is probably most difficult to trace for the IRS at this point, because it may not be as easily detectable through FATCA as, for example, individual or partnership ownership of foreign accounts. Therefore, it is not surprising that the symposium emphasized this aspect of international tax enforcement.

Symposium and Non-Compliant Foreign Accounts

This symposium is one more evidence of an ever closer cooperation between countries in terms tackling international tax enforcement. With FATCA being adopted as the global standard for tax enforcement, US owners of non-compliant foreign accounts are in ever-more present danger of discovery.

If the evidence is found that these owners used foreign entities to conceal their beneficial ownership of the foreign accounts, there is a very high likelihood of the IRS pursuing criminal penalties against non-compliant US taxpayers.

This is why it is so important for non-compliant US taxpayers to consider their voluntary disclosure options before it is too late (if the IRS commences an investigation of these accounts, the voluntary disclosure options may be entirely precluded).

Contact Sherayzen Law Office for Experienced Help with Undisclosed Foreign Accounts and Other Assets

If you are a US person with undisclosed foreign accounts, please contact Sherayzen Law Office to secure professional, experienced and creative legal help. Our experienced law firm will thoroughly analyze your case, discuss with you the available voluntary disclosure options, prepare and file your entire voluntary disclosure case (including all legal documents and tax forms), and negotiate the final settlement with the IRS.