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Argentinian Tax Information Exchange Agreement Signed | FATCA Lawyer

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On December 23, 2016, Argentina and the United States signed a Tax Informational Exchange Agreement (“Argentinian Tax Information Exchange Agreement” or “Argentinian TIEA”) in Buenos Aires. Let’s explore the main points of the Argentinian Tax Information Exchange Agreement.

Argentinian Tax Information Exchange Agreement: Information to Be Exchanged

The information to be exchanged under the Argentinian Tax Information Exchange Agreement is described in its very first article. Article 1 states that the parties will provide information to each other that is “foreseeably relevant to the administration and enforcement of the domestic laws of the Contracting Parties concerning taxes covered by this Agreement”.

Article 1 then specifies that such information includes everything “foreseeably relevant to the determination, assessment and collection of such taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax matters”.

Argentinian Tax Information Exchange Agreement: Taxes

What are these “taxes” mentioned in Article 1? Article 3 of the Argentinian TIEA explains that the focus is on information related to US federal taxes and all national taxes administered by the Federal Administration of Public Revenue. Obviously, the Argentinian TIEA will apply to any identical or substantially similar taxes that are imposed after the Agreement is signed in addition to, or in place of, the existing taxes. Both parties, Argentina and the United States, agreed to notify each other of any significant changes that have been made in their taxation laws or other laws that relate to the application of the Argentinian TIEA.

Argentinian Tax Information Exchange Agreement: Automatic Exchange, Spontaneous Exchange and Exchange Upon Request

The Argentinian Tax Information Exchange Agreement prescribes three modes of exchange of information. First, Article 6 of the Argentinian TIEA provides for automatic exchange of certain information.

Second, Article 7 allows Argentina and the United States to spontaneously transmit to each other’s respective tax authorities any relevant information that has come to the attention of the either Party’s tax authorities. For example, if Argentinian tax authorities obtain information that points to US tax noncompliance of a dual citizen of Argentina and the United States, Argentina can provide this information to the IRS.

Finally, Article 5 allows Argentina and the United States to request relevant information from each other. There is an interesting clause in Article 5 that removes potential limitations on the exchange of information upon request: “such information shall be exchanged without regard to whether the requested Party needs such information for its own tax purposes or whether the conduct being investigated would constitute a crime under the laws of the requested Party if such conduct occurred in the requested Party.”

Article 5 of the Argentinian Tax Information Exchange Agreement is remarkable in another aspect. It states that, if the information possessed by the “requested Party (i.e. the country that received the request from another country) is insufficient to enable it to comply with the request for information, the requested Party needs to engage in information gathering measures in order to provide the other Party will the requested information. The requested Party needs to do these investigations even if it does not regularly collect this information or need it.

Under Article 5(3), the requested Party, if specially requested so by the applicant Party, has to provide the information in the form of depositions of witnesses and authenticated copies of original records.

Argentinian Tax Information Exchange Agreement: Foreign Bank and Beneficial Ownership Information in Focus

Article 5(4) also clarifies what is at the heart of the exchange of information upon request. First, information “held by banks, other financial institutions, and any person acting in an agency or fiduciary capacity including nominees and trustees.”

Second, the beneficial ownership information of “companies, partnerships, trusts, foundations, “Anstalten” and other persons”. This information should also include all persons in the ownership chain. In the case of trust, “information on settlors, trustees and beneficiaries”. In the case of foundations, “information on founders, members of the foundation council and beneficiaries”. Publicly-traded companies and public collective investment funds are excluded (unless the information can be obtained without giving rise to “disproportionate difficulties” to the requested Party).

Argentinian Tax Information Exchange Agreement: Tax Examinations Abroad

Article 8 of the Argentinian Tax Information Exchange Agreement grants each Party the right to conduct tax examinations abroad. Obviously, the written consent of the persons to be interviewed has to be secured first. However, once both Parties agree to the examination, “all decisions with respect to the conduct of the tax examination shall be made by the Party conducting the examination.”

Argentinian Tax Information Exchange Agreement: Entry Into Force

According to Article 14, the Argentinian Tax Information Exchange Agreement shall enter into force “one month from the date of receipt of Argentina’s written notification to the United States that Argentina has completed its necessary internal procedures for entry into force of this Agreement.”

Once the Argentinian TIEA is in force, its provisions will apply for requests “made on or after the date of entry into force, concerning information for taxes relating to taxable periods beginning on or after January 1 of the calendar year next following the year in which this Agreement enters into force or, where there is no taxable period, for all charges to tax arising on or after January 1 of the calendar year next following the year in which this Agreement enters into force.”

Argentinian Tax Information Exchange Agreement: Impact on US Taxpayers

The Argentinian Tax Information Exchange Agreement will have a profound impact on US taxpayers with undisclosed Argentinian income and Argentinian assets. First, the combination of three different disclosure modes – automatic, spontaneous and upon request – greatly increases the risk of the IRS detection of undisclosed Argentinian assets and unreported Argentinian income. The spontaneous exchange of information may be especially dangerous because it increases the probability of indirect (and unpredictable) detection. For example, if information about US tax noncompliance is obtain through an audit of an Argentinian tax return, such information may be turned over to the IRS.

Second, the Argentinian Tax Information Exchange Agreement allows the IRS to obtain witness depositions and other evidence against noncompliant US taxpayers at a relatively low cost. Furthermore, the Argentinian TIEA grants the IRS the ability to conduct examinations in Argentina, greatly enhancing the IRS reach in that country. In other words, the chances of successful imposition of civil penalties and even criminal prosecution by the IRS of noncompliant US taxpayers is substantially increased by the Argentinian TIEA.

Contact Sherayzen Law Office if You Have Undisclosed Foreign Assets and Foreign Income in Argentina

If you have undisclosed Argentinian assets and income, contact Sherayzen Law Office as soon as possible. Once the IRS detects your noncompliance or even just commences an investigation to verify whether you were not tax compliant, then you may lose all of your voluntary disclosure options.

Sherayzen Law Office is an international tax law firm that specializes in offshore voluntary disclosures of undisclosed foreign assets and foreign income. We have helped hundreds of US taxpayers to bring their US tax affairs into full compliance with US tax laws while reducing their penalties and, in many cases, even their tax liabilities. We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

Minneapolis MN FATCA Tax Lawyer Update: FATCA-Related Forms

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As a Minneapolis MN FATCA Tax Lawyer, I often receive questions about what US tax forms precisely are affected by the implementation of the Foreign Account Tax Compliance Act (FATCA). Here is a list of the tax forms most affected by FATCA:

1. Minneapolis MN FATCA Tax Lawyer: IRS Form 1042 and 1042-S

Form 1042 is used as an annual withholding tax return for US-source income of non-US persons. Form 1042-S is used to report income that is considered to be “Amounts Subject to Reporting on Form 1042-S” (basically US-source income paid to foreign persons such as FDAP (fixed or determinable annual or periodical) income; certain gains from the disposal of timber, coal or domestic iron; and gains related to contingent payments received from the sale or exchange of intangible property (such as intellectual property rights), amounts withheld under Chapters 3 and 4 of the Internal Revenue Code, distributions of effectively connected income by a publicly traded partnership (or nominee), and certain federal procurement payments paid to foreign persons who are subject to withholding under Section 5000C.

2. Minneapolis MN FATCA Tax Lawyer: IRS Form 8966

For a Minneapolis MN FATCA Tax Lawyer, IRS Form 8966 is highly important. The main reason is because Form 8966 is an actual FATCA Report that needs to be filed by foreign financial institutions (FFIs) and their variations (PFFI, Us Branch of a PFFI treated as non-US person, RDC FFI, Limited Branch or Limited FFI, and Reporting Model 2 FFI), QI (qualified intermediary), WP (withholding foreign partnership), WT (withholding foreign trust) , direct reporting NFFE, and a Sponsoring Entity.

The purpose of this form is to allow these filers to report the required FATCA information with respect to mainly foreign accounts held (directly or indirectly) by US persons.

3. Minneapolis MN FATCA Tax Lawyer: IRS Forms W-8 Series

The full list of these forms include: Form W-8BEN, Form W-8BEN-E, W-8ECI, Form W-8EXP, and W-8IMY. The full discussion of these forms is beyond the scope of this article; suffice it to state that all of these forms play a critical part in FATCA and tax withholding compliance of various FFIs and NFFEs.

4. Minneapolis MN FATCA Tax Lawyer: IRS Form 8938

As a Minneapolis MN FATCA Tax Lawyer, I believe that IRS Form 8938 is one of the most important developments that came out of FATCA. Unlike the other forms listed in this article, this form needs to be prepared directly by the US taxpayers and filed with their US tax returns. The importance of this form cannot be overstated, because Form 8938 is a “catch-all” form which steps-in with its own reporting requirements when other international tax forms are not required. It also incorporates by reference some of the most important international tax compliance requirements even when other international tax forms contain detailed information.

Minneapolis MN FATCA Tax Lawyer: Other Forms

The four categories of forms above describe the US tax forms that have been impacted by FATCA in a direct and profound way. There are other forms that have been affected by implementation of FATCA, but this impact is a rather indirect one (by reference or implication).

FATCA at Home: Crackdown on Foreigners’ Accounts in U.S. banks

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As the IRS engages in negotiations with foreign governments to implement FATCA (Foreign Account Tax Compliance Act) overseas, there is a rising pressure from some countries for reciprocity – the implementation of FATCA-like disclosure of foreign clients’ U.S. accounts to those clients’ home governments.

FATCA Background

FATCA was enacted in 2010 and set to begin taking effect at the end of 2013. FATCA is the mother of many new international tax requirements. One of the most unique features of FATCA (and most relevant for the purposes of this article) is requiring foreign banks to disclose information about the accounts of U.S. persons to the IRS. The goal of this provision is, of course, to expose U.S. persons who are trying to avoid the payment of U.S. taxes through undisclosed offshore accounts.

IRS Engages In Negotiations With Foreign Governments to Implement FATCA

In order to effectively implement FATCA requirements, the Department of the Treasury has to secure the cooperation of foreign governments (especially since disclosure of information required by FATCA may constitute a violation of some countries’ privacy laws). This is why the IRS is engaged in negotiations with a broad range of foreign governments (actually, over 50 foreign jurisdictions) to implement the information reporting and withholding tax provisions of FATCA.

The Department of the Treasury pursues the policy of concluding a series of bilateral tax agreements based on the model treaty developed by the Treasury.

The Treasury Department has already concluded a bilateral agreement with the United Kingdom, Ireland, Denmark and Mexico. Additional jurisdictions with which Treasury is in the process of finalizing an intergovernmental agreement and with which Treasury hopes to conclude negotiations by year end include: France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway.

Jurisdictions with which Treasury is actively engaged in a dialogue towards concluding an intergovernmental agreement include: Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia, Hungary, Israel, Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, and Sweden. Treasury expects to be able to conclude negotiations with several of these jurisdictions by year end.

The jurisdictions with which Treasury is working to explore options for intergovernmental engagement include: Bermuda, Brazil, the British Virgin Islands, Chile, the Czech Republic, Gibraltar, India, Lebanon, Luxembourg, Romania, Russia, Seychelles, Sint Maarten, Slovenia, and South Africa.

Push for Reciprocity from Foreign Governments

As the implementation of FATCA begins, however, the ancient Roman principle of “quid pro quo” seems to have become the theme of the IRS negotiations with foreign governments. It appears that some countries, possibly including France, Germany and China, are demanding reciprocity in the disclosure – i.e. if their banks have to disclose to the IRS the foreign accounts of U.S. persons, then U.S. banks should also disclose U.S. accounts of foreign nationals.

U.S. Positively Responds to Reciprocity Requests

It appears that the general trend in the Obama administration is to agree with the foreign governments and engage in partial or even full reciprocity. The Department of the Treasure spokesman stated that: “the United States is committed to a policy of transparency and equivalence, where appropriate, in furtherance of international cooperation to combat offshore tax evasion.”

Actually, according to an October 2012 letter to members of Congress from the Assistant Secretary for Tax Policy, Mark Mazur, the completed FATCA pacts already include commitments “to pursue equivalent levels of reciprocal automatic exchange in the future.” Moreover, the United States appears to have already shared some taxpayer information with foreign countries with which it has a tax treaty or a formal information-sharing agreement. The IRS this year started disclosing to some foreign governments information about bank interest payments earned by their citizens with U.S. bank accounts.

Mexican Nationals Maybe Impacted First, but Europeans May Follow Soon

Despite the impression that reciprocity is mainly a demand of the European government, it appears that Mexican nationals may be the first to feel the impact of disclosure, especially since, as mentioned above, the IRS already started disclosing bank interest payments to some foreign governments, including possibly Mexico.

However, while Mexicans may be the first affected by the reciprocity disclosures, it appears that it will be only a matter of time before the European nationals will be affected. This particularly concerns the French and German nationals.