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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.

El Salvador Tax Amnesty Program | International Tax Lawyer & Attorney

On October 10, 2017, the Salvadorian Congress enacted the Legislative Decree No. 804, “La Ley Transitoria para el Cumplimiento Voluntario de Obligaciones Tributarias y Aduaneras”. After noting the experience of the past El Salvador voluntary disclosure options, the Decree announced a three-month long El Salvador Tax Amnesty Program. Let’s briefly explore the main contours of this new El Salvador Tax Amnesty Program.

The Duration of El Salvador Tax Amnesty Program

The Decree specifies that the program will become effective on October 27, 2017 and it will end on January 27, 2018.

The Terms of El Salvador Tax Amnesty Program

El Salvador Tax Amnesty Program basically allows El Salvadorian taxpayers to voluntarily come forward, correctly declare their income and pay any undeclared or understated taxes. In return for doing so, all penalties, charges and interest will be waived by the tax authorities of El Salvador, la Dirección General de Impuestos Internos. This Salvadorian voluntary disclosure program compares very favorably with the IRS OVDP (which is not really an amnesty program and imposes a significant penalty for prior noncompliance).

The El Salvador Tax Amnesty Program is also very broad. The voluntary disclosure program is applicable to all taxpayers with outstanding tax liabilities that were due prior to October 27, 2017. The program covers understated taxes, undeclared taxes, withholding taxes, VAT, real estate transfer taxes and basically all other situations. The program is applicable to taxpayers irrespective of whether they ever filed their tax returns. El Salvador Tax Amnesty Program will even allow the taxpayers to simply pay their tax liability without any penalties, even if the income was already declared and taxes assessed.

Only a narrow category of taxpayers is not eligible to participate in El Salvador Tax Amnesty Program: the taxpayers already under a criminal investigation initiated by la Dirección General de Impuestos Internos and la Dirección General de Aduanas.

US Taxpayers May Participate in El Salvador Tax Amnesty Program and US Voluntary Disclosure at the Same Time

If you are a US taxpayer who has not declared his Salvadorian income in the United States and El Salvador, you may be eligible to participate in the voluntary disclosure programs of both countries at the same time.

It is important to remember, however, that these voluntary disclosures should be coordinated by your US and Salvadorian lawyers. The main reason for this coordination is a concern that an information disclosed under El Salvador Tax Amnesty Program may be automatically disclosed to the IRS by la Dirección General de Impuestos Internos, leading to an investigation that may prevent you from going through a voluntary disclosure in the United States.

FBAR and Form 8938 Filings Continue to Grow

On March 15, 2016, the IRS announced that there was continuous growth in the FBAR and Form 8938 filings. While the IRS attributes this growth in FBAR and Form 8938 filings to the greater awareness of taxpayers, one cannot underestimate the impact of the FATCA letter and the increasing knowledge of foreign financial institutions with respect to U.S. tax reporting requirements.

Background Information for the FBAR and Form 8938 Filings

FBAR and Form 8938 are the main forms with respect to reporting of foreign financial accounts and (in the case of Form 8938) “other specified assets”. The Report of Foreign Bank and Financial Accounts, FinCEN Form 114 (commonly known as “FBAR”) should be filed by U.S. taxpayers to report a financial interest in or signatory authority over foreign financial accounts if the aggregate value of these accounts exceeds $10,000. This form is associated with draconian noncompliance penalties.

IRS Form 8938 was created by the famous Foreign Account Tax Compliance Act (“FATCA”). Generally, U.S. citizens, resident aliens and certain non-resident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds the required thresholds (the lowest threshold is $50,000, but it varies by taxpayer). The noncompliance with respect to Form 8938 may result in additional penalties, including $10,000 per form.

IRS Registers Sustained Increase in the FBAR and Form 8938 Filings

Compliance with FBAR and, later, Form 8938 is one of the top priorities for the IRS according to the IRS Commissioner John Koskinen. Recent statistics with respect to the FBAR and Form 8938 filings support the conclusion that the IRS has been largely successful in achieving this task.

The IRS states that the FBAR filings have grown on average by 17 percent per year during the last five years, according to FinCEN data. In fact, in 2015, FinCEN received a record high 1,163,229 FBARs.

Similar, but far less successful trends can be seen with respect to Form 8938 filings. In 2011, the IRS received about 200,000 Forms 8938, but the number rose to 300,000 by the tax year 2013. However, it seems to have stagnated at the same number judging from the statistics for the tax year 2014.

While the lower number of Forms 8938 could be explained by the novelty of the form as well as higher thresholds, it appears that some Forms 8938 might not also be filed due to mistaken calculation of the asset base used to determine whether Form 8938 filing requirements were met.

Nevertheless, overall, it appears that the FBAR and Form 8938 filings have grown sufficiently for the IRS to be satisfied with its progress.

Contact Sherayzen Law Office for Professional Help with Your FBAR and Form 8938 Filings

U.S. international tax law is incredibly complex and the penalties are excessively high. If you were supposed to file FBARs and Forms 8938 in the past, but you have not done so, you need to contact Sherayzen Law Office as soon as possible. Mr. Sherayzen and his legal team will thoroughly analyze your case, assess your potential tax liabilities, determine the available voluntary disclosure options, and implement (including the preparation of all legal documents and tax forms) the voluntary disclosure option that fits your case best.

Contact Us Today to Schedule Your Confidential Consultation!

IRS Tax Attorney Perspective on the Top 3 International Tax Enforcement Trends in 2014

As an IRS tax attorney, I foresee that 2014 is likely to be a continuation of the global tax enforcement trends that started in the earlier years. Specifically, I believe the following three moves by the IRS will form the core of the US international tax enforcement efforts in 2014.

IRS Tax Attorney Top Trend #1: FATCA IGAs

I believe we will see a continuous efforts by the U.S. government to expand the enforcement scope of the Foreign Account Tax Compliance Act by increasing the number of Intergovernmental Agreements (“IGAs”). Through the IGAs, the IRS hopes to increase FATCA compliance to the most important tax jurisdictions in the world.

Of course, expanding FATCA compliance to such countries as China, Russia and even India, will continue to present a formidable challenge to the IRS. If IGAs are actually enforced in these countries, it would be a major victory for U.S. enforcement efforts given the sheer number of non-compliant U.S. taxpayers from these countries and their stubborn belief (less so in India than in other countries) that the IRS will not be able to expand FATCA to these countries.

IRS Tax Attorney Top Trend #2: US DOJ Program for Swiss Banks

Undoubtedly, the latest initiative by the US government in the form of the Department of Justice Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”) will occupy the central stage if the attention of any IRS tax attorney who practices in the area of international tax compliance. The Program is a unique, unprecedented effort to apply the lessons from the individual IRS Offshore Voluntary Disclosure Program (“OVDP”) that has been running in the United States since 2012 in its current form (and since 2003 in other variations) to foreign banks located in foreign jurisction.

As I predicted earlier, it is likely that the Program, if successful, will become the template for similar programs throughout the world. Potentially, it could become a permanent feature in the current arsenal of tax enforcement tools.

IRS Tax Attorney Top Trend #3: OVDP for Non-Compliant US Taxpayers

The latest version of the IRS Offshore Voluntary Disclosure Program was launched in 2012 on the heels of the success of 2011 Offshore Voluntary Disclosure Initiative. I anticipate that this trend will continue into 2014. In combination with the Program, it is likely that an ever increasing number of non-compliant U.S. taxpayers will join the OVDP, especially since they are urged to do so by the Swiss banks without the benefit of analyzing their voluntary disclosure options (something that should be done by an IRS tax attorney who specializes in international tax compliance such as at Sherayzen Law Office).

Contact Sherayzen Law Office for Help with International Tax Compliance

So far, I provided just the top three trends that every IRS tax attorney who practices in the area of international tax law should know. However, even this simplistic overview makes it abundantly clear that international tax compliance is real and you should be worried about it if you have undisclosed foreign assets or income.

Given the complexity of the international tax law and the draconian penalties in case of non-compliance or incorrect compliance, it is very important to choose the right firm to represent your interests. This is why you should contact the IRS tax practice of Sherayzen Law Office who has built a wide range of expertise in the area of international tax compliance.

We offer specialized services for international tax matters to individuals and businesses with foreign income and/or assets. If you are currently in violation of US tax laws, we can help you bring your tax affairs into full compliance in a responsible manner.