Foreign Account Tax Compliance Act
FATCA Lawyer Update: India Signed FATCA Agreement
/0 Comments/in FATCA Lawyers, Legal Notes /by ManagerOn July 9, 2015, India finally signed the Intergovernmental Agreement (IGA) to implement FATCA. The fact is that the Indian signed FATCA Agreement has significant implications for millions of Indian-Americans who reside in the United States as well as outside of the United States.
India Signed FATCA: Background Information on FATCA
The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 to specifically target non-compliance by U.S. taxpayers using foreign accounts. Over the past few years, this law established a new global standard for promoting tax transparency and fighting tax evasion. More than 110 jurisdictions today operate under the worldwide reach of FATCA.
Generally, FATCA is a mechanism for US authorities to obtain information regarding foreign accounts held by US persons directly form the financial institutions. In essence, FATCA effectively turns all foreign financial entities that wish to comply with the law into IRS informants. In order to force other countries to accept FATCA, the US Congress armed FATCA with a global enforcement mechanism – the law requires U.S. financial institutions to withhold a portion of certain payments made to non-compliant foreign financial institutions (FFIs).
Governments have the option of permitting their FFIs to enter into agreements directly with the IRS to comply with FATCA under U.S. Treasury Regulations or to implement FATCA by entering into one of two alternative Model IGAs with the United States. India chose the latter route.
India Signed FATCA: Model 1 Agreement
On July 9, 2015, India signed FATCA Model 1 IGA. Unlike Model 2 IGA, Model 1 IGA will require Indian FFIs (banks, mutual funds, et cetera) to report information to India’s Central Board of Direct Taxes which will then turn over this information to the IRS. It is expected that various details and information regarding US-held Indian accounts will be provided to the IRS.
India Signed FATCA: US Will Provide Information to India Regarding Indian-held US accounts
India signed FATCA Agreement not only in order to provide information regarding US-held accounts in India, but also to obtain information regarding the assets held in the United States by Indian residents (so-called “black money”). – i.e. the FATCA Agreement signed by India is also a reciprocal Agreement. This means that the United States will also provide information to India regarding Indian-held accounts and assets in the United States.
India Signed FATCA: Implementation Schedule
India singed FATCA IGA with the agreement that the implementation of the IGA will begin on October 1, 2015. The automatic exchange of information between India and the United States is scheduled to begin on September 30, 2015. The reporting period due on October 1, 2015 will be July – December 2014.
India Signed FATCA: Consequences for Indian-Americans With Undisclosed Indian Accounts
For millions of Indian-Americans who have not yet disclosed their ownership of Indian accounts and other assets, the India FATCA IGA represents a potential disaster. They are facing the draconian civil and criminal FBAR penalties, income tax penalties (with interest), PFIC taxes, and other potentially devastating consequences.
The FATCA IGA started the clock for the Indian-Americans to immediately start exploring their voluntary disclosure options. If the IRS finds out about their non-compliance first, some or potentially all voluntary disclosure options may be closed for these taxpayers.
India Signed FATCA: What Should Indian-Americans With Undisclosed Indian Accounts Do?
If you are an Indian who is a US person with undisclosed foreign accounts, contact the experienced international tax team of Sherayzen Law office for professional help. Our legal team has helped hundreds of clients around the world, including Indians. We can hep you!
So, Contact Us to Schedule Your Confidential Initial Consultation Now!
Privatbank Von Graffenried AG Signs Non-Prosecution Agreement
/0 Comments/in FATCA Tax Attorney, Legal Notes /by ManagerOn July 2, 2015, the US Department of Justice announced that Privatbank Von Graffenried AG became the fifteenth bank to sign a Non-Prosecution Agreement under the DOJ’s Swiss Bank Program. It also became the 27th bank on the 50% penalty list for US taxpayers who wish to enter the OVDP.
Background Information
Von Graffenried is a private bank founded in 1992 and based in Bern, Switzerland. Starting in at least July 1998, Von Graffenried, through certain practices, assisted U.S. taxpayer-clients in evading their U.S. tax obligations, filing false federal tax returns with the Internal Revenue Service (IRS) and otherwise hiding assets maintained overseas from the IRS.
Von Graffenried opened and maintained undeclared accounts for U.S. taxpayers when it knew or should have known that, by doing so, it was helping these U.S. taxpayers violate their legal duties. Von Graffenried offered a variety of traditional Swiss banking services that it knew could assist, and that did assist, U.S. clients in the concealment of assets and income from the IRS. For example, Von Graffenried would hold all mail correspondence, including periodic statements and written communications for client review, thereby keeping documents reflecting the existence of the accounts outside the United States. Von Graffenried also offered numbered account services, replacing the accountholder’s identity with a number on bank statements and other documentation that was sent to the client.
In late 2008 and early 2009, Von Graffenried accepted accounts from two European nationals residing in the United States who had been forced to leave UBS and Credit Suisse, respectively. At the time it accepted the accounts, Von Graffenried knew that UBS was the target of an investigation by the Department of Justice. It also knew that both individuals had been forced to leave their respective banks because the banks were closing their accounts, and that both individuals had U.S. tax obligations and did not want the accounts disclosed to U.S. authorities. Senior management at Von Graffenried approved the opening of these accounts.
When Von Graffenried compliance personnel sought to obtain an IRS Form 8802, Application for U.S. Residency Certification, from one of the accountholders, that accountholder replied that completing the form would be problematic for him and that he believed the relationship manager knew why. The beneficial owner of the second account was referred by an external fiduciary, who handled the account at Credit Suisse. The fiduciary told a Von Graffenried relationship manager that Credit Suisse was attempting to exit its U.S. offshore clients to other banks if the clients would not sign an IRS Form W-9. The relationship manager agreed to take on the account, which was held by a Liechtenstein “stiftung,” or foundation, with the beneficial owner as the primary beneficiary and U.S. citizens as other beneficiaries.
Between July 1998 and July 2000, Von Graffenried accepted approximately two dozen accounts from a specific external asset manager. Von Graffenried was aware that the external asset manager seemed to be targeting U.S. clientele. Sixteen of the accounts were beneficially owned by individuals with U.S. tax and reporting obligations, and most of those accounts were held by U.S. citizens residing in the United States. At the time, Von Graffenried did not have a policy in place that required U.S. clients to show tax compliance. Consequently, Von Graffenried accepted these accounts without obtaining IRS Forms W-9 or assurances that the accounts were in fact tax compliant. By early 2009, Von Graffenried determined that some of the external asset manager’s accountholders likely were attempting to evade U.S. tax requirements. In 2010, Von Graffenried began to close the existing U.S.-related accounts that originated with the external asset manager. Von Graffenried did not complete the exit process for these accounts until late 2012.
Non-Prosecution Agreement with DOJ
According to the terms of the non-prosecution agreement signed on July 2, 2015, Von Graffenried agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Von Graffenried for tax-related criminal offenses.
Since August 1, 2008, Von Graffenried held a total of 58 U.S.-related accounts with approximately $459 million in assets. Von Graffenried will pay a penalty of $287,000.
In accordance with the terms of the Swiss Bank Program, Von Graffenried mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.
Consequences for US Taxpayers With Undisclosed Accounts at Von Graffenried
There are two major consequences (for US taxpayers with undisclosed accounts) of the Von Graffenried’s participation in the Swiss Bank Program. First, as it was mentioned above, if such taxpayers with undisclosed financial accounts at Von Graffenried wish to enter the 2014 IRS Offshore Voluntary Disclosure Penalty, their penalty rate will now go up to 50% of the highest value of the accounts.
Second, as part of its participation in the Swiss Bank Program, Von Graffenried also had provided to the IRS certain account information related to U.S. taxpayers that will enable the IRS to make requests under the 1996 Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income for, among other things, the identities of U.S. accountholders. If the IRS is successful, then, these accountholders are likely to be rejected from the OVDP participation and may face draconian civil and criminal FBAR and income tax penalties.
Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts
The number of banks which are coming forward to disclose their US clients’ accounts is growing rapidly with each passing month. Moreover, the great majority of the banks worldwide are also attempting to comply with various FATCA requirements.
This means that the longer US taxpayers with undisclosed foreign accounts wait, the more likely it is that their situation will worsen. The risk of the IRS discovery is higher today than ever before, and the consequences of such a discovery may be truly grisly.
This is why, if you have undisclosed foreign accounts or any other assets, contact Sherayzen Law Office as soon as possible. Our professional legal team is highly experienced in handling all types of offshore voluntary disclosures. We can handle the entire process of your voluntary disclosure from the beginning to the end, including the preparation of all tax forms and legal documents.
So, Contact Us Now to Schedule Your Confidential Consultation Now! We Can Help You!