Ireland-Kazakhstan Tax Treaty Ratified | International Tax Lawyer News

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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, 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!

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Guam & American Samoa Are Non-Cooperative Tax Jurisdictions | News

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On December 5, 2017, the European Union (the EU) Council published its list of the non-EU non-cooperative tax jurisdictions. The list included American Samoa and Guam unleashing strenuous objections from the United States.

Full List of Non-Cooperative Tax Jurisdictions

A total of seventeen countries made it to the list of non-cooperative tax jurisdictions: American Samoa, Bahrain, Barbados, Grenada, Guam, Korea (Republic of), Macao SAR, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates.

Criteria for Inclusion in the List of Non-Cooperative Tax Jurisdictions

The list of non-cooperative tax jurisdictions was formed out of tax jurisdictions that failed to meet three criteria at the same time: transparency, fair taxation and the implementation of anti-base-erosion and profit-shifting measures.

The EU Reasoning for Including American Samoa and Guam on the List of Non-Cooperative Tax Jurisdictions

The EU reasoning for including American Samoa and Guam on the list of non-cooperative tax jurisdictions is a peculiar one because it does not seem to care about the fact that both jurisdictions are only US territories with no authority to separately sign international tax commitments (i.e. everything is done through the United States).

In particular, the EU Council specifically criticized American Samoa and Guam for three failures. First, American Samoa and Guam did not implement the automatic information exchange of financial information. Second, both jurisdictions did not sign the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Finally, neither American Samoa nor Guam followed the EU’s BEPS minimum standards.

US Objections to the Inclusion of Its Territories on the List of Non-Cooperative Tax Jurisdictions

In his letter to the Council of the European Union, the Treasury Secretary Steven Mnuchin strenuously objected to the inclusion of American Samoa and Guam on the list of non-cooperative tax jurisdictions. The Treasury Secretary set forth the following reasons.

First, he objected to the publication of the list per se as being “duplicative” of the efforts at the G-20 and OECD level.

Second and most important, Mr. Mnuchin stated that the EU reasoning does not make sense, because American Samoa and Guam “participate in the international community through the United States”. The fact that the United States agreed to implement BEPS minimum standards and the tax transparency standards should be considered as the agreement of American Samoa and Guam to do the same. In other words, he argued that American Samoa, Guam and the Untied States should be considered as one whole legal framework.

Based on this reasoning, Mr. Mnuchin urged the EU to immediately remove American Samoa and Guam from its list of non-cooperative tax jurisdictions. It should be noted that several other jurisdictions also rejected their inclusion on the list.

Sherayzen Law Office will continue to watch for any new developments with respect to this issue.

Cyprus-Saudi Arabia Tax Treaty Signed | International Tax Lawyers

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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.

EU Tax Harmonization Initiative Stalled by Ireland and Hungary | Tax News

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The EU Tax Harmonization initiative faced a joint opposition of Ireland and Hungary in early January of 2018. Both countries are vehemently opposed to any effort that would “tie their hands” in terms of their corporate tax policies.

The EU Tax Harmonization Initiative

Tax Harmonization is basically a policy that aims to adjust the tax systems of various jurisdictions in order to achieve one tax goal. The adjustment usually implies equalization of tax treatment.

In the past, the EU tax harmonization efforts were mostly limited to Value-Added Tax (“VAT”) and certain parent-subsidiary taxation issues. Since at least 2016, however, the EU Tax Harmonization policy seeks to regulate corporate income taxes among its members in order to limit intra-EU tax competition.

In 2016, the European Commission released two proposed directives addressing the issues of a common corporate tax base and a common consolidated corporate tax base. Neither directive establishes a minimum corporate tax rate. Neither directive passed the internal EU opposition.

Irish and Hungarian Opposition to the EU Tax Harmonization of Corporate Taxation

Today, the EU internal opposition to the EU tax harmonization initiatives consists of Ireland and Hungary. Both Hungary and Ireland have very low (by EU standards) corporate tax rates. The Irish corporate tax rate is 12.5% and the Hungarian corporate tax rate is only 9% (the EU average corporate tax rate is about 22%).

In early January of 2018, the Hungarian Prime Minister Viktor Orbán and Irish Prime Minister Leo Varadkar both stated that their countries have the right to set their corporate tax policies and that this area should not be subject to the EU tax harmonization efforts. “Taxation is an important component of competition. We would not like to see any regulation in the EU, which would bind Hungary’s hands in terms of tax policy, be it corporate tax, or any other tax,” Mr. Orbán said. He further added that “we do not consider tax harmonization a desired direction.”

Both countries view the aforementioned proposed 2016 European Commission directives as a threat, because harmonizing of the tax base could lead to corporate income tax rate harmonization.

Impact of Brexit on the EU Tax Harmonization Initiatives

The United Kingdom used to be in the same opposition camp as Ireland and Hungary. Given the size of its economy and its political influence, the United Kingdom was an almost insurmountable barrier to the proponents of greater EU unity (mainly France and Germany). In essence, the UK was enough of a counterweight to keep the balance of power within the European Union from tilting in favor of the EU unity proponents.

Everything has changed with Brexit. The exit of the United Kingdom from the EU automatically led to the shift of the balance of power in favor of Germany. Brexit also means that Ireland and Hungary are now alone in their resistance against the Franco-German efforts to achieve greater EU unity. The political pressure of these outliers is now enormous.

In fact, it appears that, rather than suspending the unanimity requirement by invoking the so-called “passerelle clauses” (which would be a highly controversial step), the proponents of the EU Tax Harmonization initiative will simply wait until this political pressure forces Ireland and Hungary to modify their positions on this issue.

2018 Tax Filing Season | International Tax Lawyer News

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On January 4, 2018, the IRS announced that the 2018 tax filing season for the tax year 2017 will commence on January 29, 2018. This date was chosen by the IRS to make sure its software incorporates the full impact of the Tax Cuts and Jobs Act of 2017 on the 2017 tax returns.

2018 Tax Filing Season: EITC and ACTC Refunds

Despite the fact that the 2018 tax filing season will begin on January 29, the IRS warned that taxpayers who will claim Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) will not receive their refunds until at least February 27, 2018.

2018 Tax Filing Season: Processing of Paper Tax Returns

Also, it is important to note that the processing of paper returns will begin only in mid-February, because the system updates will continue until that time. The IRS, however, will begin accepting both, electronic and paper tax returns, on January 29, 2018.

This is very important for taxpayers who file US international information returns, such as Forms 926, 5471, 8621, 8865, 8938, et cetera. A lot of these returns are voluminous and cannot be e-filed due to tax software limitations; hence, they must be filed on paper.

2018 Tax Filing Season: Deadline on April 17, 2018

The filing deadline to submit 2017 tax returns will be on Tuesday, April 17, 2018. Usually, the deadline would be on April 15, but, in 2018, April 15 falls on a Sunday and April 16 is a legal holiday in the District of Columbia (Emancipation Day). Under the tax law, legal holidays in the District of Columbia affect the filing deadline for federal tax returns; hence, the filing deadline moved by one more day to April 17, 2018.

US taxpayers who have to file international information returns should keep in mind that there are two categories of such returns: information reports which are filed with their 2017 tax returns and the information reports which are filed (or e-filed) separately from the 2017 tax returns. Forms 926, 5471, 8621, 8865, 8938 and other similar information returns must be filed with the original US tax returns.

On he other hand, FBARs (FinCEN Form 114) and Form 3520 should be filed separately from the taxpayers’ tax returns. The deadline for this category of returns, however, is the same as the deadline for the 2017 tax returns – April 17, 2018 (unless an extension is filed).

Contact Sherayzen Law Office for Help with Your US International Tax Compliance During this 2018 Tax Filing Season

If you have foreign income and/or foreign assets, or if you received a foreign gift or inheritance, you should contact Sherayzen Law Office for professional help in determining your US tax compliance obligations and the preparation of the required US international information returns.

Contact Us Today to Schedule Your Confidential Consultation!