international-tax-lawyer

Uruguay-US Social Security Agreement Sent to Congress | Tax Lawyer

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On March 19, 2018, President Trump sent the Uruguay-US Social Security Agreement to the US Senate. This is an important step toward the final ratification of the treaty that promises to benefit the citizens of both countries.

Uruguay-US Social Security Agreement: What is a Social Security Agreement?

A Social Security Agreement (also called a Totalization Agreement) is essentially a treaty between two countries that eliminates the burden of dual social security taxation for individuals and businesses who operate in both countries.

Typically, the potential for this type of double-taxation arises when a worker from country A works in Country B, but he is covered under the social security systems in both countries. In such situations, without a Social Security Agreement, the worker will have to pay social security taxes to both countries on the same earnings. A Social Security Agreement, on the other hand, allows the worker (and employers) to pay social security taxes only in one country identified in the treaty.

Social Security Agreements are authorized by Section 233 of the Social Security Act. Right now, only 26 Totalization Agreements are in force between the United States and another country: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, South Korea, Spain, Sweden, Switzerland and the United Kingdom. Uruguay may become the 27th country to have a Social Security Agreement with the United States.

Uruguay-US Social Security Agreement: Recent History

The Uruguay-US Social Security Agreement has had a very favorable history so far. In fact, it may set the record for the fastest treaty ever negotiated by Uruguay. The countries first agreed to pursue a Social Security Agreement between them in May 2014, when the then Uruguayan president Jose Mujica was in Washington.

Amazingly, already in May of 2015, after just two rounds of talks held over a six-month period, the countries finished the negotiations of the Uruguay-US Social Security Agreement. Typically, it takes anywhere between two to three years to negotiate a Totalization Agreement.

On January 10, 2017, the Uruguay-US Social Security Agreement was signed in Montevideo. The United States was represented by its ambassador Mr. Kelly Kinderling. Uruguay was represented by its Foreign Minister Jose Luis Cancela and Labor and its Social Security Minister Ernesto Murro.

On October 3, 2017, the Uruguayan Senate approved the pending Uruguay-US Social Security Agreement, thereby completing the first part of the necessary ratification process. By sending the treaty to Congress for the required 60-day review period, President Trump started the US ratification process.

Uruguay-US Social Security Agreement: Benefits

According to Uruguay, the Uruguay-US Social Security Agreement will benefit some 60,000 Uruguayans working in the United States and up to 6,000 Americans living in Uruguay. The primary benefit is that the workers of both countries will be able to count the working years spent in both countries to be obtain eligibility for their home-country retirement, disability and survivor benefits.

Additionally, the Agreement will exempt US citizens sent by US-owned companies to work in Uruguay for five years or less from paying the Uruguayan social security taxes. Similarly, Uruguayan citizens sent to work temporarily in the United States by Uruguayan-owned companies will not need to pay social security taxes to the US government. Thus, employers in both countries will pay social security taxes only to their employees’ home countries.

Additionally, both countries hope that the Uruguay-US Social Security Agreement will boost trade between the countries. Currently, more than 200 American firms operate in Uruguay (mostly in the service sector).

Sherayzen Law Office will continue to monitor future developments with respect to this highly-beneficial treaty.

South Korean Inheritance Leads to Criminal Sentence for FBAR Violations

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On January 25, 2018, a South Korean citizen and a US Permanent Resident, Mr. Hyong Kwon Kim, was sentenced to prison for filing false tax returns and willful FBAR violations; additionally, he had to pay over $14 million in FBAR willful civil penalties. I already discussed Mr. Kim’s guilty plea and the main facts of his case in an earlier article last year, but I would like to come back to another aspect of this case: South Korean inheritance. In particular, I would like to trace how a South Korean inheritance led to Mr. Kim’s guilty plea and a criminal sentence for FBAR violations.

From South Korean Inheritance to Swiss Account FBAR Violations

According to the US Department of Justice (“DOJ”), Mr. Kim became a US permanent resident in 1998. The DOJ describes him as a sophisticated business executive who ran family businesses with operations in the United States and internationally.

At some point after he became a US tax resident, Mr. Kim inherited tens of millions of dollars from his family in South Korea. Instead of properly reporting his South Korean inheritance (which would not have been subject to US taxation at that time), he decided to hide it in foreign accounts. You can find the details of his efforts to hide his accounts in this article (unavailable).

In the end, despite his ingenuous efforts, the IRS was able to identify Mr. Kim as a willfully noncompliant taxpayer who deliberately failed to file FBARs and filed false income tax returns for the years 1999 through 2010. As a result of his willful FBAR and income tax noncompliance and as part of Mr. Kim’s guilty plea, U.S. District Court Judge Brinkema sentenced Mr. Kim to six months to prison, imposed a fine of $100,000 and ordered him to pay $243,542 in restitution to the IRS. Moreover, Mr. Kim already paid $14 million in willful FBAR penalties.

In other words, as a result of his actions, Mr. Kim lost the majority of his South Korean inheritance and all earnings on that inheritance in addition to going to be jail.

Failure to Report South Korean Inheritance Was the First Step that Led to Criminal FBAR Violations

While, undoubtedly, the entire history of willful failures to file FBARs and report foreign income on tax returns is the primary cause of Mr. Kim’s imprisonment in 2018, it is important to understand that his noncompliance was only possible because Mr. Kim did not properly report his South Korean inheritance.

In other words, had Mr. Kim disclosed on Form 3520 that he had received an inheritance from South Korea in the last 1990s, he would not have been tempted to hide his inheritance from the IRS. In fact, the disclosure of his South Korean inheritance, would have made it impossible for him to hide his foreign assets in Swiss banks afterwards.

Primary Lesson from Mr. Kim’s South Korean Inheritance Case

This is an important lesson from this case that many observers and tax attorneys have missed – Mr. Kim’s noncompliance began with failure to report South Korean inheritance, not from the failure to file FBARs and foreign income (even though, he was sentenced and penalized for the latter two activities).

In fact, a very high number of my offshore voluntary disclosure clients came from a similar background – they received an inheritance from a foreign country (and it could be any foreign country: Australia, Canada, China Colombia, France, Germany, Italy, Russia, South Korea, Thailand, et cetera) and they failed to report the foreign inheritance first (usually, due to lack of knowledge about proper reporting of foreign inheritance). This failure to report foreign inheritance later led to significant US tax noncompliance that could have only been corrected through a voluntary disclosure.

Starting in 2013-2014, I have also seen the steady rise in the “reverse discovery” inheritance cases – i.e. clients would receive a foreign inheritance and would come to me to discuss on how to best disclose it. Then, as a result of my due diligence checklist, we would uncover prior FBAR or other tax noncompliance with respect to other foreign assets my clients had prior to their foreign inheritance.

Contact Sherayzen Law Office for Proper Reporting of Your Foreign Inheritance

If you received a foreign inheritance, you should contact Sherayzen Law Office for professional help. Sherayzen Law Office is an international tax law firm that specializes in US tax reporting of a foreign inheritance. We can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

IMF Wants “Modern” Croatian Real Estate Tax | Tax Lawyer News

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On January 16, 2018, the International Monetary Fund (“IMF”) released its 2017 Article IV consultation notes with respect to Croatia. Among its recommendations is the introduction of a modern Croatian Real Estate Tax.

Croatian Real Estate Tax: IMF assessment of Croatian Economy

The IMF began on the positive note stating that, in 2017, Croatia continued its third year of positive economic growth, mostly supported by tourism, private consumption, trade partner growth and improved confidence. The IMF also noted that the fiscal consolidation was progressing at a much faster pace than originally anticipated with Croatia leaving the European Union’s Excessive Deficit Procedure in June of 2017. The international organization made other positive comments, particularly stressing that Croatia was overcoming its Agrokor crisis.

Then, the IMF turned increasingly negative. It first noted that, while the balance risks has improved, it was not satisfied with the high level of Croatian public and external debt levels. Then, it stated that the full impact of the Agrokor restructuring is not yet known. The IMF was also unhappy about the pace of structural reforms since 2013 (when Croatia became a member of the EU), further stating that Croatia’s GDP per capita stood at about 60% of the EU average and Croatian business environment remained less favorable than that of its peers.

Finally, the IMF expressed its concerns over the fact that the output did not recover from its pre-recessing level and stated that, in the medium-term, the Croatia’s economic growth is expected to decelerate. Hence, the IMF emphasized that Croatia needed to do more to improve its economic prospects.

Croatian Real Estate Tax: IMF Recommendations

What precisely does Croatia need to do in the IMF opinion? Mainly reduction of public debt.

How does the IMF recommend that Croatia accomplish this task? The IMF made a number of proposals that can be consolidated into five courses of action. First, enhance the efficiency of public services by streamlining public services. Second, keep the wages low and reform the welfare state policies (here, it probably means either slashing the state benefits or privatizing them). Third, relaxing the labor regulations, particularly in the areas of hiring and temporary employment. Fourth, enhancement of legal and property rights. Finally, improvement of the structure of revenue and expenditure.

This last enigmatic phrase is the keyword for reducing the expenses and the introduction of new taxes. In particular, the IMF wants to see an introduction of a modern Croatian real estate tax.

What is a “Modern” Croatian Real Estate Tax According to IMF

The IMF defined a “modern” Croatian real estate tax as a “real estate tax that is based on objective criteria” and the one that “would be more equitable and would yield more revenue than the existing communal fees.” The idea is that “a modern more equitable property tax could allow for a reduction of less growth-friendly taxes.” In fact, the additional revenue derived from this tax “could compensate for a further reduction in the income tax burden, the parafiscal fees, or even VAT.”

It should be noted that the Croatian government already listened to the IMF and tried to impose a Croatian real property tax starting January of 2018, but the implementation of the law was suspended in light of strong public opposition.

Sherayzen Law Office will continue to monitor the situation.

Toledo Tax Lawyer and Attorney | Ohio Tax Lawyers

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A Toledo Tax Lawyer who specializes in international tax law does not necessarily have to be a tax lawyer who actually resides in Toledo. An international tax lawyer who offers US international tax law services to residents of Toledo, Ohio, may also be considered a Toledo Tax Lawyer. Let’s analyze a bit deeper why this is the case.

Toledo Tax Lawyer Definition: Offering International Tax Services to Residents of Toledo

Of course, the definition of a Toledo Tax Lawyer includes all tax lawyers who are physically located in Toledo, Florida, and offer their tax services there.

With respect to US international tax law, however, the definition of a Toledo Tax Lawyer expands to encompass all international tax lawyers who offer services to residents of Toledo, Ohio.

The reason for such an expansion in the definition of Toledo Tax Lawyer lies in the nature of US international tax law. Unlike many other areas of law which are predominantly local in nature (such as local contracts, torts, criminal law, et cetera), US international tax law is federal law which is applied equally to the residents of all states of the United States. In other words, there is nothing local about it; the city of Toledo cannot in any way modify US international tax law.

Hence, an international tax lawyer residing in Minneapolis, such as attorney Eugene Sherayzen of Sherayzen Law Office, Ltd., has the same right to offer international tax law services to residents of Toledo as a lawyer who lives in Toledo.

Toledo Tax Lawyer Definition: Local Tax Law

It is important to distinguish, however, a tax lawyer who offers US international tax services from a tax lawyer who offers his services with respect to local tax law. In the first case, as I had mentioned before, the lawyer may call himself a Toledo Tax Lawyer as long as he offers international tax services to residents of Toledo (even though he is not residing in Toledo or anywhere else in the State of Ohio).

In the second case, however, an out-of-state lawyer cannot be classified as a Toledo Tax Lawyer, because he is working on local Toledo or Ohio state tax issues. In fact, in this case, it would best for local taxpayers to retain a local Toledo Tax Lawyer who resides in Toledo, Ohio.

Sherayzen Law Office is Your Preferred Choice for Toledo Tax Lawyer With Respect To US International Tax Issues

Sherayzen Law Office is a highly experienced international tax law firm which specializes in the area of foreign account tax compliance. We have been helping our clients worldwide with their international tax issues, including FBAR, FATCA and Offshore Voluntary Disclosure issues since the end of 2005. We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

Tampa Foreign Accounts Lawyer and Attorney | Florida Tax Lawyers

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Tampa Foreign Accounts Lawyer is an interesting specialty among international tax lawyers who offer their foreign account tax compliance services to residents of Tampa, Florida. The term Tampa Foreign Accounts Lawyer does not simply refer to a lawyer who is physically located in Tampa, but also covers lawyers who reside outside of Tampa. Let’s explore why international tax lawyer Eugene Sherayzen of Sherayzen Law Office, Ltd., can be considered a Tampa Foreign Accounts Lawyer.

Tampa Foreign Accounts Lawyer Definition: Foreign Account Tax Compliance Services Offered to Residents of Tampa Florida

Obviously, the definition of a Tampa Foreign Accounts Lawyer includes all FBAR lawyers who are physically located in Tampa, Florida, and offer their tax services there. However, this definition also includes every international tax lawyer who offers out-of-state foreign account tax services to residents of Tampa.

Why is this the case? The answer is simple – it is the federal tax law, not local law, that requires foreign account tax compliance (with the exception of a few states like New York and California; the main requirements, however, come from federal tax law). This means that an international tax lawyer licensed to practice anywhere in the United States is qualified to help residents of Tampa with their US tax compliance requirements concerning foreign accounts (such as FBAR and FATCA Form 8938).

Tampa Foreign Accounts Lawyer Definition: Knowledge of US International Tax Law is Required

Having stated the definition of a Tampa Foreign Accounts Lawyer so broadly, I do not mean to imply that any lawyer can offer foreign account tax compliance services to Tampa residents. On the contrary, in order to help his clients, a Tampa Foreign Accounts Lawyer must be an international tax attorney who specializes in the area of foreign accounts tax compliance. Otherwise, the lawyer simply would not have the required expertise to practice in this area of law.

Tampa Foreign Accounts Lawyer: Modern Technologies Eliminated the Advantages of Hiring a Local Lawyer

There is still some hesitance on part of many taxpayers to retain the services of an out-of-state tax lawyer. This hesitance comes from a false myth that working with a local attorney is more convenient.

This myth is false for two reasons. First, the development of modern means of communication has completely resolved the communication problems of the past. Email, Video Skype Conferences, telephone and text messages make your out-of-state Tampa Foreign Accounts Lawyer as equally accessible as your local Tampa Foreign Accounts Lawyer.

Second, in reality, almost the entire course of communication between you and your local lawyer is going to be exactly the same as it would be between you and your out-of-state lawyer – i.e. email, telephone and even regular mail.

Sherayzen Law Office is Your Preferred Choice for Your Tampa Foreign Accounts Lawyer

Sherayzen Law Office is a highly experienced international tax law firm which specializes in the area of foreign account tax compliance. We have been helping our clients worldwide with their FBAR and FATCA issues for a very long time; in fact, we are one of the few firms which advised clients with respect to all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP, 2014 OVDP closed and Streamlined Submission Procedures (Domestic and Foreign). We can help you!

Contact Us Today to Schedule Your Confidential Consultation!