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2018 Egyptian Tax Amnesty | International Tax Lawyer & Attorney

Egyptian Law 174 of 2018 announced the 2018 Egyptian Tax Amnesty program that commenced on August 15, 2018. Egypt is no stranger to tax amnesties; in fact, the very first documented tax amnesty program in the world is believed to be the one announced by Ptolemy V Epiphanes in 197 B.C.

The 2018 Egyptian Tax Amnesty program is a continuation of the worldwide trend to fight tax noncompliance with amnesty programs. If they are structured well (such as the US OVDP) and combined with effective tax administration, these amnesty programs can be highly effective, generating large revenue streams for national governments. There are, however, numerous examples of failed amnesty programs (like the ones in Pakistan) due to either poor structuring or other factors. Let’s acquaint ourselves with the 2018 Egyptian Tax Amnesty program.

2018 Egyptian Tax Amnesty: Term

The 2018 Egyptian Tax Amnesty program will last a total 180 days starting August 15, 2018.

2018 Egyptian Tax Amnesty: Taxes and Penalties Covered

The 2018 Egyptian Tax Amnesty program will cover stamp duty, personal income tax, corporate income tax, general sales tax, and VAT liabilities that matured before August 15, 2018.

The interest and penalties on the outstanding tax liabilities related to the listed taxes will be reduced according to a fairly rigid schedule which benefits most taxpayers who go through the program within 90 days after the Program opens on August 15, 2018. These taxpayers can expect a whopping 90% reduction in penalties and interest!

If a taxpayer misses the 90-day deadline, but settles his outstanding tax debts within 45 days after the deadline, he will be entitled to a waiver of 70% of the tax debt and interest.

If a taxpayer misses both, the 90-day deadline and the 45-day deadline, but settles his outstanding tax debts within 45 days after the 70%-waiver deadline (i.e. 135 days after August 15, 2018), he can still benefit from a 50% reduction in tax penalties and interest.

US Tax Amnesty & 2018 Egyptian Tax Amnesty

US taxpayers who participate in the Egyptian Tax Amnesty should also consider pursuing a voluntary disclosure option in the United States with respect to their unreported Egyptian income and Egyptian assets. There is a risk that the information disclosed in the Egyptian Tax Amnesty may be turned over to the IRS, which may lead to an IRS investigation of undisclosed Egyptian assets and income for US tax purposes.

While the IRS Offshore Voluntary Disclosure Program closes on September 28, 2018, there is still a little time left to utilize this option. Additionally, US taxpayers should consider other relevant voluntary disclosure options, such as Streamlined Offshore Compliance Procedures.

Contact Sherayzen Law Office for Professional Help With Offshore Voluntary Disclosure of Egyptian Assets in the United States

If you have undisclosed Egyptian assets and/or Egyptian income, you should contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world to successfully settle their US tax noncompliance, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Guilty Pleas for Secret Swiss-Israeli Bank Accounts | FATCA Lawyer

On January 18, 2017, three US taxpayers pleaded guilty for hiding millions of dollars in their secret Swiss and Israeli bank accounts (hereinafter “Swiss-Israeli Bank Accounts”) and failing to report these Swiss-Israeli Bank Accounts on their FBARs.

Facts of the Case Involving Secret Swiss-Israeli Bank Accounts

All three defendants are relatives – Mr. Dan Farhad Kalili and Mr. David Ramin Kalili are brothers while Mr. David Shahrokh Azarian is their brother-in-law. They are all residents of Newport Coast, California.

According to the documents filed with the court and statements made in connection with the defendants’ guilty pleas, between May 1996 and 2009, Mr. Dan Kalili opened and maintained several undeclared offshore bank accounts at Credit Suisse and UBS in Switzerland. Similarly, Mr. David Kalili opened and maintained several undeclared accounts at Credit Suisse from February 1999 through at least 2009. He also owned several undeclared accounts at UBS from October 1993 through at least 2008. The brothers also maintained joint undeclared Swiss bank accounts at both UBS and Credit Suisse beginning in 2003 and 2004, respectively.

At the same time, Mr. Azarian opened and maintained several undeclared accounts at Credit Suisse from May 1994 through at least 2009. He also owned several accounts at UBS in Switzerland from April 1997 through at least 2008.

In 2006, we had the appearance of the now famous Ms. Beda Singenberger, a Swiss citizen who owned and operated a financial advisory firm called Sinco Truehand AG. She was indicted in New York on July 21, 2011. The charges were: conspiring to defraud the United States, evade U.S. income taxes, and file false U.S. tax returns. Ms. Singenberger remains a fugitive as of the time of this writing.

In July of 2006, Mr. Dan Kalili, with the assistance of Ms. Singenberger, opened an undeclared account at UBS in the name of the Colsa Foundation, a Liechtenstein entity. As of May 2008, the Colsa Foundation account at UBS held approximately $4,927,500 in assets.

In light of the increased IRS tax enforcement and the UBS case, all three defendants attempted to partially hide their prior ownership of Swiss accounts by moving the assets from one account to another. At the same time, they also tried to legitimize partial ownership of their assets.

Mr. Dan Kalili opened an undeclared account at Swiss Bank A in the name of the Colsa Foundation and in May 2008 and transferred his assets from the UBS Colsa Foundation account to Swiss Bank A. He then made partial disclosure of the Swiss Bank A Colsa account on his individual income tax returns. In 2009, Mr. Dan Kalili opened undeclared accounts at Israeli Bank A and at Bank Leumi, both in Israel. He then closed his joint (with his brother) Credit Suisse account and his own undeclared account and transferred all funds to Israel.

At that time of its closure, the undeclared joint account of Dan and David Kalili at Credit Suisse held approximately $2,561,508 in assets. As of December 2009, Dan Kalili’s undeclared account at Israeli Bank A had the approximate value of $1,569,973 and his undeclared account at Bank Leumi was valued at approximately $2,497,931.

Mr. David Kalili followed almost the same pattern. In August of 2008, he opened an account at Israeli Bank A in Israel and transferred to this account all of his funds from his UBS accounts. He later partially declared the Israeli Bank A account on his individual income tax returns. As of August 2009, Mr. David Kalili’s undeclared account at Israeli Bank A held assets valued at approximately $1,369,489.

Finally, Mr. Azarian also opened an account at Israeli Bank A in Israel in August of 2008. In May of 2009, he closed his Credit Suisse account and transferred all funds to his Israeli account. At the time of its closure, Mr. Azarian’s undeclared account at Credit Suisse held assets valued at approximately $1,903,214.

Neither of the three defendants ever filed an FBAR for their secret Swiss-Israeli Bank Accounts on their FBARs during any of the years 2006-2009.

Criminal and Civil Penalties Imposed For Failure to Declare Foreign Income and Swiss-Israeli Bank Accounts

According to the plea agreements, the criminal and civil penalties were severe. Mr. Dan Kalili, Mr. David Kalili and Mr. Azarian each face a statutory maximum sentence of five years in prison, a period of supervised release and restitution for 2003-2009 tax loss and monetary penalties. The defendants also admitted to committing civil fraud, which exposes them to additional civil fraud penalty.

In addition, each defendant agreed to pay a willful FBAR civil penalty in the amount of 50% of the highest balances of their undeclared Swiss-Israeli Bank Accounts. Mr. Dan Kalili agreed to pay the FBAR penalty of $2,674,329, Mr. David Kalili agreed to pay the FBAR penalty of $1,325,121 and Mr. Azarian agreed to pay the FBAR penalty of $951,607.

Lessons to Be Learned from the Defendants’ Handling of Their Undeclared Swiss-Israeli Bank Accounts

This case is a classical example of what not to do if one wishes to avoid criminal prosecution. Let’s point out five main mistakes which exposed the taxpayers to the IRS criminal prosecution.

The first mistake is obvious – the defendants willfully failed to declare their Swiss-Israeli bank accounts on their FBARs and the income generated by these accounts on their US tax returns.

The deleterious impact of the first mistake was magnified by the usage of an offshore shell corporation to hide the ownership of the Swiss-Israeli bank accounts (while the entity was concerned mostly with Swiss accounts, it was also used to hide the source of funds on the defendants’ Israeli bank accounts).

Third, the defendants engaged in the evasive pattern of opening and closing foreign accounts in various banks in order to hide them from the IRS. The defendants obviously underestimated the IRS ability to track these accounts and ended up giving the IRS additional powerful indirect evidence of intent to evade taxes and the willfulness of their failures to file FBARs.

Fourth, the taxpayers engaged in partial voluntary disclosure outside of any actual voluntary disclosure program. By doing partial disclosure, the taxpayers provided additional evidence to the IRS of their knowledge of the requirement to report foreign income and properly complete Schedule B. At the same time, the fact that their disclosure was only partial further emphasized the willfulness of their prior failure to disclosure foreign income and foreign assets. The readers should remember that a voluntary disclosure must always be accurate and complete; otherwise, the taxpayers simply give the IRS more evidence of willfulness of their tax noncompliance.

Finally, it does not appear that the taxpayers ever considered doing a true voluntary disclosure which could have limited their penalties and prevented the IRS criminal prosecution. One of the first thing that the taxpayers should always consider once they find out about their noncompliance or the possibility of the IRS detection of such noncompliance is to retain an international tax lawyer to review their voluntary disclosure options. The taxpayers failed to do so in this case and paid a very high price.

Contact Sherayzen Law Office for Professional Help with the Voluntary Disclosure of Your Foreign Income and Foreign Assets, including Swiss-Israeli Bank Accounts

If you have undisclosed foreign income and foreign assets, you should contact Sherayzen Law Office for professional help as soon as possible. Our international tax law firm has successfully helped hundreds of US taxpayers around the world to bring their tax affairs into full compliance with US laws and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

How IRS Can Get $718 Billion in Tax Revenue | International Tax Lawyer

On October 4, 2016, the US Public Interest Research Group, Citizens for Tax Justice, and the Institute on Taxation and Economic Policy issued a report called “Offshore Shell Games 2016: the Use of Offshore Tax Havens by Fortune 500 Companies”. The report calculates that eliminating all tax deferral on Fortune 500 US companies’ foreign earnings would allow the IRS to collect almost $718 Billion in additional US tax revenue.

Where does the Amount of $718 Billion Come From?

This amazing report targets the estimated $2.5 trillion in offshore earnings which are assumed to be mostly help by the US companies’ foreign subsidiaries in tax havens. The report calculates that the top 30 (meaning top 30 companies by the amount of offshore holdings) of the Fortune 500 companies account for two-thirds of the total, with Apple ($215 billion), Pfizer ($194 billion), and Microsoft ($124 billion) topping the list. It should be noted that some of the other estimates calculate the amount of total offshore earnings of US companies to be in excess of $5 trillion, i.e. double the amount used by the report.

The number of foreign subsidiaries owned by US multinationals is also impressive – the estimate runs as high as 55,000 subsidiaries owned just by Fortune 500 companies. The report states that, although many offshore subsidiaries do not show up in companies’ SEC filings, at least 367 of the Fortune 500 companies maintain subsidiaries in tax havens and the top 20 account for 2,509 of those entities. Subsidiaries of US multinationals reported profits of more than 100 percent of national GDP for five tax havens, including 1,313 percent for the Cayman Islands and 1,884 percent for Bermuda.

The most popular country for organizing the subsidiaries remains the Netherlands. However, Ireland, Luxembourg, Switzerland, Bermuda and Cayman Islands closely follow Netherlands in terms of their popularity among US multinationals.

How is $718 Billion Calculated?

The report sets forth its methodology for the calculation of $718 Billion. In essence, the report focuses on the data from 58 Fortune 500 companies to estimate the additional tax all of the companies would owe upon repatriation of funds to the United States. The final tax rate amount to about 28.8% of the repatriated income; the rest (i.e. the difference between the 35% US statutory rate and the 28.8%) is assumed to be the foreign tax rate that the companies will be able to use as a foreign tax credit to offset their US tax liability. Once 28.8% rates is applied to $2.5 trillion, the total amount of additional tax due to the IRS by the Fortune 500 companies is estimated to be close to $718 Billion.

This methodology, however, is not without its flaws. First, as I already referenced above that the amount of funds in foreign subsidiaries may be substantially higher than the estimated $2.5 trillion. Second, the report’s assumption of 6.2% of foreign tax rate may be too generous, especially for foreign companies owned by US persons for generations; in reality, a lot of companies are able to escape all taxation on a substantial amount of their income. Hence, the $718 Billion amount may actually be an understatement.

How Does the Report Propose to Collect the $718 Billion?

The report offers three approaches to the problem of collecting the $718 billion. The first approach is deceptively simple – end all tax deferral. The problem that I see with this approach is that it essentially expands US tax jurisdiction to foreign entities (which are non-resident alien business structures) to the extent that these entities automatically become US persons as soon as any US person becomes an owner of all or any part of them. In addition to the obvious legal problems with such an approach, there is also a potential to create a real chilling effect to the US activities overseas. At the very least, the proposed course of action should be modified to include only controlled foreign entities and large US corporations.

The second approach is less radical; the report suggests tighter anti-inversion rules, elimination of the check-the-box election and the elimination of aggressive tax planning through intellectual property transfers. While many of these rules may be effective to combat future aggressive tax planning, they are unlikely to influence the current IRS inability to collect the $718 billion in additional tax revenue.

Finally, the report also lends support to the Obama administration’s (which is actually not a resurrection of older proposals) tax proposal to treat as subpart F income excess profits earned by a controlled foreign corporation from US-developed intangibles. The administration’s proposal is to expand the definition of Subpart F income to all excess income taxed at 10% or less (later expanded to 15%) would be included in subpart F. While a sensible proposal, it also seems to fall short of the expected $718 billion in additional tax revenue.

Also, it seems strange that all of the proposals seems to put foreign companies owned by small US firms and those owned by large US firms on the same footing. This kind of seemingly non-discriminatory approach has had a disproportionally heavy impact on small US firms’ ability to conduct business overseas due to lower resources that small firms can devote to the same type of tax compliance as that required of the Fortune 500 companies.

First Colombia-US Tax Treaty is Almost Ready | International Tax Lawyer

The first Colombia-US Tax Treaty nears the final stage of negotiations. This announcement was made on September 28, 2016, in Bogota, Colombia, by Colombian Finance Minister Mauricio Cardenas and U.S. Treasury Secretary Jacob Lew (the details of the meeting were published on the Colombian president’s website).

Despite the fact that United States and Colombia already signed a tax information exchange agreement on March 30, 2001, the two countries still do not have an income tax treaty that would protect its citizens and business from the effect of double-taxation.

There are a lot of expectations that the first Colombia-US Tax Treaty will benefit individuals and business in both countries. “La negociación de un tratado de doble tributación entre Colombia y Estados Unidos está cerca del fin, esperemos avanzar para lograr algo que los empresarios colombianos y los empresarios norteamericanos desean, al igual que muchos colombianos que dividen sus actividades entre los dos países”, said Mr. Cárdenas.

It is also possible that, upon ratification of the first Colombia-US Tax Treaty the Colombians who live in the United States and have businesses in Colombia will finally be able to benefit from the long-term capital gains tax rates that apply to qualified foreign dividends.

Of course, there is a still a long way to go for the first Colombia-US Tax Treaty. Even after the negotiations are successfully concluded and finalized, the first Colombia-US Tax Treaty will need to be signed and ratified by both countries before it enters into force. While it is reasonable to expect a relatively fast ratification in Colombia, the United States is a completely different story. Treaties can languish in the United States Senate for years before they are even considered.

Furthermore, Mr. Cárdenas and Mr. Lew may not have sufficient time to conclude the current negotiations. Before they may be done, a new president may be elected in the United States and he may take a different to negotiating with Colombia. If this happens, the conclusion of the negotiations and the ratification of the first Colombia-US Tax Treaty may be postponed even further into the future.

Sherayzen Law Office will continue to observe the situation surrounding the first Colombia-US Tax Treaty.