taxation law services

Partnership International Tax Issues | International Tax Lawyer & Attorney

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This article introduces readers to potential US international tax issues that a business entity may face when it elects to operate as a partnership for US tax purposes (all together “partnership international tax issues”). The focus of this article is on partnership international tax issues, particularly where US partnerships have a foreign partner and foreign partnerships have a US partner. The purpose of this article is to just identify the strategic groups of partnership international tax issues; future articles will analyze these issues in more depth.

Partnership International Tax Issues: Two Main Fact Patterns

As stated above, the partnership international tax issues outlined below concern primarily one of the following situations. First, a partnership is a US partnership and a foreign person invests in this partnership. Second, a partnership is a foreign partnership and a US person invests in this partnership.

The Internal Revenue Code (“IRC”) deals with both situations in a different manner. They are taxed differently, and a partnership and/or its partner may have to file different information returns.

Partnership International Tax Issues: Classification Issues

Three important US international tax issues exist with respect to classification of partnerships. First, classification of an entity or arrangement as a partnership. The tax classification of a partnership that is officially formed by filing appropriate organizational documents with the proper government entity is usually fairly clear. This is not the case, however, with respect to a situation where parties enter into a contractual arrangement which exhibit features similar to a partnership. In these situations the IRS may determine such a contractual arrangement to be a partnership for US tax purposes; these are so-called “contractual partnerships”.

Second, classification of a partnership as “domestic” or “foreign”. Again, the easiest cases are those that involve a formally-organized partnership, but contractual partnerships raise a lot of difficult issues.

Third, classification of a partnership as either “resident” or “non-resident”.

Partnership International Tax Issues: Issues Concerning Inbound Investments

An important set of US international tax issues arises when a foreign person invests in a US partnership. Most of these issues would arise in situations where the partnership trades or otherwise does business in the United States. The most salient issues concern: partnership formation, taxation of partnership operations, taxation of partnership distributions and sale of a partnership interest by a foreign partner. We will discuss these issues in more detail in the future.

Partnership International Tax Issues: Issues Concerning Taxation of Outbound Investments

Another highly important set of issues arises when a US person does business through a foreign partnership. The most important of these issues concern: acquisition of an interest in a foreign partnership, taxation of foreign partnership income allocated to US partners and disposition of an ownership interest in a foreign partnership.

These issues interconnect in an interesting and very complex way with such issues as income source rules, foreign tax credit, Subpart F rules and so on. The interaction of these issues may directly affect taxation of foreign income of a US partner. In future articles, we will cover this very diverse set of partnership international tax issues concerning taxation of outbound investments.

Partnership International Tax Issues: Tax Withholding Issues

US international tax law subjects domestic partnerships to a great variety of tax withholding rules whenever they have foreign partners with effectively connected income. Most common of these rules are the ones that concern partnership distributions to a foreign partner. Another very common example is Foreign Investment in Real Property Tax Act of 1980, commonly known as “FIRPTA”, tax withholding requirements. Again, we will cover these tax withholding issues as well as the problem of “effectively connected income” in future articles.

Partnership International Tax Issues: Tax Treaties

Bilateral tax treaties form an important part of US international tax law concerning taxation of partnerships. Partnership taxation is affected by a host of tax treaty issues. For example, the treatment of “hybrid” and “reverse hybrid” entities, tax treaty benefits and the issue of “imputed” permanent establishment are all highly important tax treaty issues that directly affect partnership taxation under US tax law. In future article, we will discuss selected tax treaties as well as certain features common to most US tax treaties.

Partnership International Tax Issues: Information Returns and Income Tax Returns

Numerous tax filing requirements are imposed on partnerships, especially US partners of foreign partnerships. The most salient information returns are those required by the Internal Revenue Code (“IRC”) Sections 6031, 6038 and 6046A. There is also an important interaction of these sections with information returns under the IRC Sections 6038A and 6038C. We will cover the partnership information and income tax returns in future articles.

Contact Sherayzen Law Office for Professional Help Concerning Partnership International Tax Issues

If you are a US person who owns an interest in a foreign partnership or a foreign person who owns an interest in a US partnership, contact Sherayzen Law Office for professional help. Our highly-experienced international tax team, headed by attorney Eugene Sherayzen, will help you identify your US international tax compliance issues and help you resolve them.

If you are facing an IRS audit concerning partnership international tax issues, call us as soon as possible to obtain the maximum benefit from our advice.

Contact Us Today to Schedule a Confidential Consultation!

Minnesota Sales Tax Responsible Person Legal Standard | Audit Tax Lawyer

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In this article, I would like to discuss the legal definition of Responsible Person under Minn. Stat. § 270C.56 – I will refer to this term as Minnesota sales tax responsible person legal standard.

Minnesota Sales Tax Responsible Person: Background Information

Minnesota imposes a sales tax “on the gross receipts from retail sales.” Minn. Stat. § 297A.62, subd. 1 (2014). “The sales … tax required to be collected by the retailer under chapter 297A constitutes a debt owed by the retailer to Minnesota, and the sums collected must be held as a special fund in trust for the state of Minnesota.” Minn. Stat. § 289A.31, subd. 7(a) (2014).

If the sales tax is not collected or remitted to the Minnesota Department of Revenue (“DOR”) by the company, then Minnesota law imposes personal liability upon a person who “has the control of, supervision of, or responsibility for filing returns or reports, paying taxes, or collecting or withholding and remitting taxes and who fails to do so.” Minn. Stat. § 270C.56, subd. 1 (2014). In other words, the State of Minnesota will collect the sales tax liability incurred by a company from whoever is defined as a “responsible person” – this is what I mean by Minnesota Sales Tax Responsible Person.

Minnesota Sales Tax Responsible Person: Legal Test

In order for a person to be assessed with the personal liability for non-payment of a sales tax, Minnesota courts follow a two-prong analysis under the Legal Test that establishes whether a person is a Minnesota Sales Tax Responsible Person. The first prong is definitional and the second one is substantive. Yik C. Lo v. Comm’r of Revenue, 2016 Minn. Tax LEXIS 17, *24 (Minn. T.C. April 7, 2016).

Let’s deal with the definitional prong first. “The threshold definitional question is whether the assessed person qualifies as a ‘person’ for purposes of the personal liability statute.” Id.; also see Igel v. Comm’r of Revenue, 566 N.W.2d 706, 709 (Minn. 1997). For the purposes of this statute, the word “person” is defined broadly to include an officer of a company, a member of a partnership and even an employee. Minn. Stat. § 270C.56, subd. 2 (2014). Pretty much any stakeholder, officer or employee would be considered a “person”.

If the first question is answered positively, then, the second issue is whether the “person” was also a “responsible person” – i.e. whether the “person” had the requisite control over financial matters to be found personally liable for the company’s tax liabilities. Stevens v. Comm’r of Revenue, 822 N.W.2d 646, 652 (Minn. 2012).

The Minnesota Supreme Court adopted a five-factor test to determine who is a responsible person. Benoit v. Commissioner of Revenue, 453 N.W.2d 336, 344 (Minn. 1990). This test is “informative” while the statutory language of 270C.56 controls. Larson v. Comm’r of Revenue, 581 N.W.2d 25, 28-29 (Minn. 1998). In other words, the courts may and actually at other factors besides those listed in the test.

The five factors are:

“(1) The identity of the officers, directors and stockholders of the corporation and their duties;
(2) The ability to sign checks on behalf of the corporation;
(3) The identity of the individuals who hired and fired employees;
(4) The identity of the individuals who were in control of the financial affairs of the corporation; and
(5) The identity of those who had an entrepreneurial stake in the corporation.” Benoit, 453 N.W.2d at 344.

The idea behind the test is to focus on “those persons who have the power and responsibility to see that the taxes are paid.” Id. Writing for a unanimous court, Judge Wahl also stated: “Control and influence over the ‘disbursement of funds and priority of payments to creditors’ are the most important elements.” Id. at 342.

Contact Sherayzen Law Office for Professional Help With Minnesota Statute § 270C.56

If the DOR found you personally responsible for a company’s sales tax liability under Minn. Stat. § 270C.56, contact Sherayzen Law Office for professional tax help.

2019 Zurich Trip Completed | Zurich US International Tax Lawyer & Attorney

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In July of 2019, Mr. Eugene Sherayzen, an international tax attorney and owner of Sherayzen Law Office, Ltd., completed his business trip to Zurich, Switzerland. Let’s discuss in more detail this 2019 Zurich Trip, its goals and accomplishments.

2019 Zurich Trip: Goals

Mr. Sherayzen outlined the firm’s goals for the Zurich trip during the Sherayzen Law Office Board of Director’s meeting on March 19, 2019. At the beginning of the meeting, he outlined two long-term goals for Sherayzen Law Office: (1) deepen the firm’s ties to the global banking and investment community, and (2) promote Sherayzen Law Office’s international tax services in Europe.

Mr. Sherayzen stated that the particular goals for the 2019 Zurich trip were as follows: (1) gather the necessary intelligence to achieve the long-term goals; (2) resolve certain issues for the firm’s current clients with Swiss bank accounts; and (3) make promotional videos of the firm’s services.

2019 Zurich Trip: Achievements

The 2019 Zurich trip achieved all of the goals that were outlined above. During the trip, Mr. Sherayzen gathered a large amount of data that will need to be analyzed in the future for the purpose of improving the firm’s marketing strategies.

Second, while in Zurich, Mr. Sherayzen successfully resolved all of the pending issues for the firm’s clients.

Finally, a number of videos were made for the purpose of promoting the vast experience and deep expertise that Sherayzen Law Office has accumulated in US international tax law. Sherayzen Law Office is a leader in US international tax compliance, including offshore voluntary disclosures.

2019 Zurich Trip and Future Plans

Sherayzen Law Office intends to capitalize in the near future on the achievements made by Mr. Sherayzen during this trip. We encourage our clients and followers on social media to stay tuned for future updates, including video updates.

The Board of Directors of Sherayzen Law Office, Ltd., will analyze the successes of the 2019 Zurich trip in order to modify the plans for the firm’s marketing strategies in Europe. The Board already commenced planning for new targeted trips which will lead to the expansion of the firm’s clientele in Europe.

Sherayzen Law Office already has a very large exposure in the European continent. We have helped clients with undisclosed European assets in most countries on the European continent: Austria, Belarus, Belgium, Croatia, Cyprus, the Czech Republic, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Liechtenstein, Lithuania, Luxembourg, Monaco, Poland, Portugal, Romania, the Russian Federation, Spain, Sweden, Switzerland, United Kingdom and Ukraine.

Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance

Sherayzen Law Office is a US international tax law firm with deep expertise in all relevant areas of US international tax law, including offshore voluntary disclosures. With clients from over 70 countries around the world, our firm is a leader in US international tax compliance.

We have helped hundreds of US taxpayers around the world with their US international tax compliance issues, and We can help You! Contact Us Today to Schedule Your Confidential Consultation!

2019 Karlovy Vary Trip Completed | US International Tax Lawyer & Attorney

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Mr. Eugene Sherayzen, an international tax attorney and owner of Sherayzen Law Office, Ltd., completed his trip to Karlovy Vary, Czech Republic, on July 10, 2019. Let’s discuss in more detail this brief 2019 Karlovy Vary trip, its motivations and results.

2019 Karlovy Vary Trip: Reasons for this Excursion

There were several reasons why Mr. Sherayzen decided to undertake this trip to Karlovy Vary. He outlined them at the Sherayzen Law Office board of directors meeting on March 19, 2019.

First, this is part of the firm’s overall expansion effort into the European market of high-net worth individuals.

Second, this is a very attractive venue for new clients from all over the world, because Karlovy Vary is a world-famous resort. It is important for Sherayzen Law Office to establish a foothold in this city.

Third, Karlovy Vary offers amazing scenery which is perfect for filming promotional videos for the firm.

Finally, the 2019 Karlovy Vary trip was undertaken during Mr. Sherayzen’s Switzerland-Prague business trip. In other words, it was very a convenient time for a journey into this prestigious European high-end legal market.

2019 Karlovy Vary Trip: Results

The 2019 Karlovy Vary trip was very successful in three aspects. First of all, the firm now has acquired certain information about the city sufficient to commence building a comprehensive marketing strategy. Second, the trip laid basis for several business relationships which the firm hopes to explore further in the future. Finally, a large set of promotional material was created during the trip.

Despite its successes, the 2019 Karlovy Vary trip was merely an exploratory marketing trip. In order to build a more solid foothold in the city, Mr. Sherayzen and the employees of Sherayzen Law Office will need to continue to visit the city on a more sustained basis.

2019 Karlovy Vary Trip: What Sherayzen Law Office Can Offer to Its European Clients

Sherayzen Law Office specializes in US international tax compliance, including offshore voluntary disclosures, current tax compliance and international tax planning. Europeans who reside in Europe, but who are US citizens or US permanent residents, may be exposed to high IRS non-compliance penalties. This is why they should contact Sherayzen Law Office for professional help with US international tax compliance requirements.

Contact Us Today to Schedule Your Confidential Consultation!

Legal Entity Identifiers: Introduction to LEI | International Tax Lawyer & Attorney

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The Legal Entity Identifiers (“LEI”) is a method to identify legal entities that engage in financial transactions. Let’s discuss LEI in more detail.

LEI: Background Information

The establishment of LEI was driven by the recognition by regulators around the world that there is a complete lack of transparency with respect to identifying parties to international transactions. Each business entity is registered at the national level, but another country’s authorities would have great difficulty identifying this entity in an international transaction, including whether this entity has taken consistent tax positions in both countries.

Establishment of LEI; Additional Initiatives

Hence, on the initiative of the largest twenty economies of the world (“G-20“), the Financial Stability Board (“FSB”) developed the framework of Global LEI System (“GLEIS”). FSB was created in 2009 in the aftermath of the financial crisis (it replaced the Financial Stability Forum or “FSF”).

Additionally, in January of 2013, a LEI Regulatory Oversight Committee (“ROC”) was created. ROC is a group of over 70 public authorities from member-countries and additional observers from more than 50 countries. The job of the ROC is coordination and oversight of the worldwide LEI framework.

On May 9, 2017, the ROC announced that it has launched data collection on parent entities in the Global Legal Entity Identifiers System – this is the so-called “relationship data”. The member countries (especially in the European Union (“EU”)) will use this data in a number of regulatory initiatives. For example, as of 2018, the EU uses the relationship data for the purposes of commodity derivative reporting.

How LEI Works

The LEI is a 20-character, alpha-numeric code, to uniquely identify legally distinct entities that engage in financial transactions. The code incorporates the following information:

1.the official name of the legal entity as recorded in the official registers;
2.the registered address of that legal entity;
3.the country of formation;
4.codes for the representation of names of countries and their subdivisions;
5.the date of the first Legal Entity Identifier assignment; the date of last update of the information; and the date of expiration, if applicable.

Here is how the numbering system works:

•Characters 1–4: A four-character prefix allocated uniquely to each LOU.
•Characters 5–6: Two reserved characters set to zero.
•Characters 7–18: Entity—specific part of the code generated and assigned by LOUs according to transparent, sound, and robust allocation policies.
•Characters 19–20: Two check digits as described in the ISO 17442 standard.

Jurisdictions With Rules Referring to LEI

Over 40 jurisdictions have rules that refer to Legal Entity Identifiers: Argentina, Australia, Canada, 31 members of the European Union and European Economic Area, Hong Kong, India, Israel, Mexico, Russia, Singapore, Switzerland, and the United States. IGOs such as Basel Committee on Banking Supervision and International Organization of Securities Commissions also use Legal Entity Identifiers.

Could LEI Be Used for CRS and FATCA Purposes?

Sherayzen Law Office, like many other commentators, believes that there is a possibility that the LEI would be a better alternative than Global Intermediary Identification Number (GIIN) for CRS and FATCA purposes. First of all, it would be more efficient to have one identification system across all compliance terrains. Second, Legal Entity Identifiers are actually more popular than GIINs. As of December 7, 2017, there were 830,477 LEIs issued versus a mere less than 300,000 GIINs.