international tax lawyer minnesota

SLO’s 2017 Seminar on Business Lawyers’ International Tax Mistakes

On February 23, 2017, Mr. Eugene Sherayzen, an international tax lawyer and owner of Sherayzen Law Office (“SLO”), conducted a seminar titled “Top 5 International Tax Mistakes Made by Business Lawyers”. The seminar was sponsored by the Corporate Counsel Section and International Business Law Section of the Minnesota State Bar Association.

Mr. Sherayzen commenced the seminar by asking a question about why business lawyers should be concerned with making international tax mistakes. After identifying the main answers, the tax attorney stated that he would focus on the strategic mistakes, rather than any specific U.S. international tax requirements.

Mr. Sherayzen first discussed the Business Purity Trap, a situation where business lawyers view a business transaction as something exclusively within the business law domain and with no relation whatsoever to U.S. tax law. The tax attorney stated that all business transactions have tax consequences, even if the effect is not immediate and there is no actual income tax impact.

Then, Mr. Sherayzen discussed the Tax Dabble Trap. This trap describes a situation where a business lawyer attempts to provide an advice on an international tax issue. The tax attorney explained why business lawyers often fall into this trap and the potentially disastrous consequences this trap may have for the business lawyers’ clients.

The Tax Law Uniformity Trap was the third trap discussed by the tax attorney. One of the most common international tax mistakes that business lawyers (and also many accountants) make is to believe that U.S. domestic tax law and U.S. international tax law are similar. Mr. Sherayzen also pointed out that there is a variation on this trap with respect to foreign owners of U.S. entities.

The discussion of the fourth trap, the Tax Professional Equality Trap, turned out be very fruitful. Mr. Sherayzen drew a sharp distinction between the role played by a general accountant versus the role of an international tax attorney. He also specifically focused on the potentially disastrous consequences the reliance on a domestic accountant may have in the context of offshore voluntary disclosures.

Finally, Mr. Sherayzen discussed the Foreign Exceptionalism Trap. This trap deals with a false belief that certain foreign transactions that occur completely outside of the United States have no tax consequences for the U.S. clients involved in these transactions. Mr. Sherayzen also pointed out that danger of relying solely on foreign accountants and lawyers in this context.

He concluded the seminar with a short examination of another “bonus” tax trap called the Linguistic Uniformity Trap. The description of all tax traps was accompanied by real-life examples from Mr. Sherayzen’s international tax law practice.

Contact Sherayzen Law Office for Professional U.S. International Tax Advice to Avoid Costly International Tax Mistakes

If you are a business lawyer who deals with international business transactions or transactions involving tax residents of a foreign country, please contact Sherayzen Law Office to avoid costly international tax mistakes. Our law firm has worked with many business lawyers, helping them to properly structure international business transactions in a way that avoids making international tax mistakes. Remember, it is much easier and cheaper to avoid making international tax mistakes than fixing them later.

Contact Us Today to Schedule Your Confidential Consultation!

Taxation of Royalties Ceases Under Estonia-UK Tax Treaty | MN Tax Lawyer

On January 18, 2017, the HM Revenue & Customs announced that the withholding tax on royalties under the 1994 Estonia-UK tax treaty has been eliminated retroactively as of October 16, 2015.

Under the original Estonia-UK tax treaty, the rates had been 5 percent for industrial, commercial, and scientific equipment royalties and 10 percent in other cases. However, paragraph 7 of the Exchange Notes to the Treaty contains the Most Favoured Nation” (MFN) provision relating to royalties (Article 12). Under the MFN provision, UK tax residents only need to pay the lowest tax withholding rate ever agreed by Estonia in a Double-Taxation Treaty (DTA) it later agrees with an OECD member country that was a member when the UK-Estonia tax treaty was signed in 1994.

It turns that Switzerland was an OECD member country in 1994. In 2002, Estonia signed a tax treaty with Switzerland, but the treaty did not impact the UK withholding tax rate at that time. In 2014, however, Estonia and Switzerland signed an amending protocal to the 2002 Estonia-Switzerland tax treaty. Under the protocol, the treaty was revised to provide for only resident state taxation of royalties.

It was this provision in the 2014 protocol to the Estonia-Switzerland tax treaty that triggered the 1994 MFN provision of the Estonia-UK tax treaty. Therefore, when the 2014 protocol entered into force on October 16, 2015, it effectively eliminated tax withholding on royalties not only in Switzerland (wth respect to Estonia), but also in the United Kingdom. While the taxation of royalties under the Estonia-UK tax treaty ceased on October 16, 2015, the HM Revenue & Customs waited for more than a year to announce it on January 18, 2017.

It should be pointed out that MFN provisions, such as the one in Estonia-UK tax treaty, quite often have an important impact throughout the treaty network of a country. This ripple effect of the MFN provisions creates enormous opportunities for international tax planning that is often utilized by international tax lawyers, including US international tax law firms such as Sherayzen Law Office, Ltd.

IRS 2016 Standard Mileage Rates for Business, Medical and Moving

On December 17, 2015, the IRS issued its 2016 standard mileage rates to calculate deductible automobile operation costs for business, charitable, medical or moving purposes.

The 2016 standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

54 cents per mile for business miles driven, down from 57.5 cents for 2015
19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
14 cents per mile driven in service of charitable organizations

These 2016 standard mileage rates are effective January 1, 2016 and they are optional; taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

There are some circumstances where a taxpayer cannot use the business standard mileage rate. These exceptions include where a vehicle is depreciated using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. Furthermore, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

The 2016 Standard Mileage Rates apply to the vehicles that the taxpayers own or lease (though, there may be additional complications if the vehicle is leased). In addition to standard mileage rates, taxpayers may also deduct, as separate items: parking fees and tolls attributable to the use of a car for business purposes; interest related to the business purchase of a car; state and local personal property taxes (to the extent allowed by IRC Sections 163 and 164).

Parking fees and tools are also available for deduction, as separate items, for the use of a car for charitable, medical, or moving expense purposes. The interest related to the purchase of a car and state/local property taxes are not deductible as charitable, medical or moving expenses; however, they may be deducted as separate items to the extent allowed by IRC Sections 163 and 164.

IRS Notice 2016-01 contains the 2016 standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

FBAR Tax Attorney St Louis: Another Swiss Banker Pleads Guilty to Tax Evasion

On March 12, 2014, the IRS and the DOJ announced that Andreas Bachmann, 56, of Switzerland, pleaded guilty to conspiring to defraud the Internal Revenue Service (IRS) in connection with his work as a banking and investment adviser for U.S. customers. It appears (at least from the perspective of an FBAR Tax Attorney St Louis) that Mr. Bachmann helped his U.S. customers conceal assets in secret Swiss Bank Accounts and other tax havens.

FBAR Tax Attorney St Louis: Background Information

In a statement of facts filed with the plea agreement, Mr. Bachmann admitted that between 1994 and 2006, while working as a relationship manager in Switzerland for a subsidiary of an international bank, he engaged in a wide-ranging conspiracy to aid and assist U.S. customers in evading their income taxes by concealing assets and income in secret Swiss bank accounts. Moreover, Mr. Bachmann traveled to the United States twice each year to provide banking services and investment advice to his U.S. customers (note from FBAR Tax Attorney St Louis: this could have been critical information for building the IRS case against Mr. Bachmann).

According to the IRS, Mr. Bachmann also engaged in cash transactions while traveling in the United States. In the course of arranging meetings with U.S. customers, some clients would request that Mr. Bachmann either provide them with cash as withdrawals from their undeclared accounts or take cash from them as a deposit to their undeclared accounts. As part of that process, Mr. Bachmann agreed to receive cash from U.S. customers and used that cash to pay withdrawals to other U.S. clients.

The IRS describes how, in one instance, Mr. Bachmann received $50,000 in cash from one U.S. customer in New York City and intended to deliver the money to another U.S. client in Southern Florida. Airport officials in New York discovered the cash but let Mr. Bachmann keep the money after questioning him (note from FBAR Tax Attorney St Louis: by that time, the IRS was probably already taking interest in Mr. Bachmann). The client in Florida refused to take the money after the client learned about the questioning by New York airport officials, and Mr. Bachmann returned to Switzerland with the $50,000 in cash in his checked baggage. Mr. Bachmann advised the executive management of the subsidiary about the incident with the cash.

The IRS further alleges that Mr. Bachmann also understood that a number of his U.S. customers concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities, or structures, which were frequently created in the form of foreign partnerships, trusts, corporations or foundations.

FBAR Tax Attorney St Louis: IRS is Pleased

The IRS and the DOJ seem to be pleased with the result of their investigation. “Today’s plea is just the latest step in our wide-ranging investigations into Swiss banking activities and demonstrates the Department of Justice’s commitment to global enforcement against those that facilitate offshore tax evasion,” said Deputy Attorney General Cole. “We fully expect additional developments over the course of the coming months.”

Mr. Bachmann was charged in a one-count superseding indictment on July 21, 2011, and faces a maximum penalty of five years in prison when he is sentenced on August 8, 2014.

FBAR Tax Attorney St Louis: IRS and DOJ Are Stepping Up Criminal Enforcement of FBARs and International Tax Laws of the United States

As I predicted earlier, the IRS and the DOJ are in high gear of criminal enforcement of FBARs and international tax laws of the United States. As they work through the mountains of information that they received from the U.S. taxpayers participating in the Offshore Voluntary Disclosure Program and the defendants, like Mr. Bachmann, I fully expect the enforcement efforts to increase in the near future.

Moreover, with the new information disclosed by the Swiss banks as part of the U.S. Department of Justice (“DOJ”) The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”), the IRS will get an unprecedented new fountain of information that will allow it to reach ever further.

FBAR Tax Attorney St Louis: U.S. Taxpayers with Undisclosed Bank Accounts Should Consider Their Voluntary Disclosure Options As Soon As Possible

Given the fact that a large number of Swiss banks that participate in the Program will disclose all of their U.S.-held bank accounts by April 30, 2014 (assuming they have not already disclosed them), U.S. taxpayers with undisclosed accounts in Switzerland must act as soon as possible and consider their voluntary disclosure options. Failure to do so may result in the imposition of willful civil and even criminal penalties.

Contact Sherayzen Law Office for Help With Undisclosed Swiss Accounts

Sherayzen Law Office can help you with the voluntary disclosure of your Swiss accounts. Owner and attorney Eugene Sherayzen is an international tax expert in this field. He will thoroughly analyze the facts of your case and explain to you the available voluntary disclosure options. After you choose the voluntary disclosure option, our firm can prepare all legal documents and tax forms required for your voluntary disclosure, fully implement the ethically available strategies and rigorously defend your position against the IRS.

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Tax-Filing Extension for Individuals Expires on October 15, 2013

Individual taxpayers who filed Form 4868 to request a six-month extension to file their 2012 tax returns should be cognizant of the fast-approaching October 15, 2013 final deadline to timely file these extended tax returns. This is also the last day the IRS will accept an electronically filed tax return for the year 2012.

The deadline equally applies to the extended 2012 tax returns for the taxpayers who reside in the United States and outside of the United States. It also applies to the filing of any required information tax returns such as Forms 3520, 8865, 5471, et cetera. Particular attention should be paid to Forms 8938 (the new forms created by the IRS in 2011 as a result of FATCA).

While this is not true in every situation, generally, the taxpayers who are in the Offshore Voluntary Disclosure Program should nevertheless attempt to file their extended 2012 tax returns timely.

Moreover, October 15, 2013, is the final deadline to fund a SEP-IRA or solo 401(k) for tax year 2012 if the taxpayer requested an automatic extension of time to file.

This essay is provided as a courtesy notice by Sherayzen Law Office, PLLC, a Minnesota international tax law firm for businesses and individuals; the essay does not constitute a legal or tax advice on your particular situation.