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Swiss-Indian AEOI Declaration Signed | FATCA Lawyer New York

On November 22, 2016, Switzerland and India signed a joint declaration on the introduction of the automatic exchange of information (AEOI) in tax matters on a reciprocal basis. The joint declaration (Swiss-Indian AEOI Declaration) was signed by Sushil Chandra, chair of India’s Central Board of Direct Taxes, and Gilles Roduit, deputy chief of mission of the Swiss Embassy in India.

Swiss-Indian AEOI Declaration Will Follow CRS

The Swiss-Indian AEOI Declaration foresees that AEOI will be based on the Common Reporting Standard (CRS) adopted by OECD. From the Swiss legal perspective, the AEOI with India will be based on the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA). The MCAA is based on the international standard for the exchange of information developed by the OECD. The OECD introduced the standard in February of 2014; the G-20 leaders approved it in November of 2015 during the G-20 summit in Brisbane, Australia.

Implementation Time Frame for Swiss-Indian AEOI Declaration

Both governments committed to start collecting the CRS-required data in 2018. The actual exchange of the CRS data will commence in 2019 and continue onwards. Both governments must notify each other of relevant developments regarding the implementation of the CRS in their domestic legislation.

Implications of Swiss-Indian AEOI Declaration for US Taxpayers

The Swiss-Indian AEOI Declaration increases the probability of the IRS being able to obtain FATCA data from both countries regarding noncompliant US taxpayers with assets in Switzerland and/or India. The reason is simple: as financial institutions comb through their client data, there is an increased probability that they may encounter that some of their taxpayers are US taxpayers whose information needs to be reported to the IRS under FATCA.

Moreover, under the Swiss-Indian AEOI Declaration, both countries anticipate that their taxpayers will participate in a local voluntary disclosure program as part of the transaction to the AEOI system. Both countries must notify each other about these programs and it is possible that more information than usual will be revealed during these voluntary disclosures. Hence, the local Swiss and Indian voluntary disclosure programs further increase the probability that the IRS may find out about the assets of noncompliant US taxpayers.

Contact Sherayzen Law Office for Help With the IRS Voluntary Disclosure of Your Unreported Foreign Assets and Foreign Income

If you are a US tax resident with undisclosed assets in India and/or Switzerland, you should contact Sherayzen Law Office for professional help with your IRS voluntary disclosure of these assets as soon as possible. In today’s world, the probability that the information regarding your undisclosed assets will be detected by the IRS has increased exponentially as the recent Swiss-Indian AEOI Declaration demonstrates. Combined with FATCA, you are running an unacceptable risk of IRS detection that may result in the imposition of draconian IRS penalties, including criminal penalties.

Over the past more than 10 years, Sherayzen Law Office has helped hundreds of US taxpayers with assets around the globe to bring their tax affairs into full compliance with US tax laws, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

UK FATCA Letters

While the United Kingdom signed its FATCA implementation treaty in 2014, UK FATCA letters (i.e. FATCA letters from UK financial institutions) continue to pour into the mailboxes of U.S. taxpayers. In this article, I would like to discuss the purpose and impact of UK FATCA Letters.

UK FATCA Letters

UK FATCA Letters play an integral role in the FATCA Compliance of UK financial institutions. Under the Foreign Account Tax Compliance Act (FATCA), the UK foreign institutions are obligated to collect certain information regarding U.S. owners of UK bank and financial accounts and provide this information to the IRS. The collected information must include the name, address and social security number (or, EIN number) of U.S. accountholders.

In order to collect the required information and identify who among their clients is a US person for FATCA purposes, the UK financial institutions send UK FATCA Letters to their clients, asking them to provide the information by the required date. If there is no response within the required period of time (which may be extended), the UK financial institutions report the account to the IRS with the classification as a “recalcitrant account”.

UK FATCA Letters and Undisclosed UK Bank and Financial Accounts

While UK FATCA Letters are important to FATCA compliance of UK financial institutions, they also may have important impact on U.S. taxpayers with undisclosed bank and financial accounts in the United Kingdom, particularly on the ability of such U.S. taxpayers to timely disclose their foreign accounts.

Once a U.S. taxpayer receives UK FATCA Letters, he should be aware that the clock has started on his ability to do any type of voluntary disclosure. This is the case because UK FATCA Letters demand a response within certain limited period of time. Then, the UK financial institutions will report the account to the IRS, which may prompt IRS examination which, in turn, may deprive the taxpayer of the ability to take advantage of any type of a voluntary disclosure option.

Furthermore, UK FATCA Letters start the clock for the taxpayers to do their voluntary disclosure in an indirect way. If the taxpayers do not complete their voluntary disclosure within reasonable period of time (which may differ depending on circumstances) after they receive the letters, the IRS may proceed based on the assumption that prior noncompliance with U.S. tax requirements by the still noncompliant taxpayers was willful.

Finally, UK FATCA Letters may impact a U.S. taxpayer’s legal position with respect to current and future tax compliance, because UK FATCA Letters can be used by the IRS as evidence to prove awareness of U.S. tax requirements on the part of noncompliant U.S. taxpayers. This is particularly relevant for taxpayers who receive these letters right before the tax return and FBAR filing deadlines.

Contact Sherayzen Law Office if You Received UK FATCA Letters

If you received one or more UK FATCA Letters from foreign financial institutions, you should contact Sherayzen Law Office as soon as possible. Attorney Eugene Sherayzen is one of the world’s leading professionals in the area of offshore voluntary disclosures and he will personally analyze your case and create the appropriate voluntary disclosure strategy. Then, under his close supervision, his legal team will implement this strategy, including the preparation of all required tax forms.

Call Us Today to Schedule Your Confidential Consultation!

DOJ Non-Prosecution Agreement with Bank Linth LLB AG

On June 19, 2015, the Department of Justice announced that Bank Linth LLB AG (Bank Linth) signed a Non-Prosecution agreement pursuant to the DOJ’s Swiss Bank Program.

Bank Linth Background

Bank Linth, one of the largest regional banks in Eastern Switzerland, was founded in 1848. It is headquartered in Uznach, Switzerland, which is approximately 35 miles southeast of Zurich. Bank Linth provided private banking and asset management services to U.S. taxpayers through private bankers based in Switzerland. It opened, serviced and profited from accounts for U.S. clients with the knowledge that many were likely not complying with their tax obligations.

Bank Linth’s cross-border banking business aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts. Bank Linth provided this assistance to U.S. clients in a variety of ways, including the following:

Opening and maintaining accounts in the names of sham entities;

Providing U.S. taxpayers with numbered accounts that hid the taxpayers’ identities;

Facilitating U.S. taxpayers’ withdrawal of cash from undeclared accounts; and

Agreeing to hold bank statements and other mail relating to accounts rather than sending them to U.S. taxpayers in the United States.

On several occasions, Bank Linth opened accounts for U.S. taxpayers through an external asset manager, and one of these accounts was opened in the name of a sham foundation. In that instance, Bank Linth knowingly accepted and included in account records forms provided by the directors of the sham foundation that falsely represented the ownership of the assets in the account for U.S. federal income tax purposes.

Participation in the Swiss Bank Program and the Non-Prosecution Agreement

In accordance with the terms of the Swiss Bank Program, Bank Linth described in detail the structure of its banking business, including its management and supervisory structure, and provided the names of management and legal and compliance officials. Bank Linth further provided detailed and specific information related to its illegal U.S. cross-border business, including the bank’s misconduct, policies that contributed to that misconduct and the names of the relationship managers overseeing the bank’s U.S.-related business. Bank Linth also obtained affidavits from bank employees regarding the bank’s conduct and related matters.

According to the terms of the non-prosecution agreements signed today, Bank Linth agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Bank Linth for tax-related criminal offenses.

Since August 1, 2008, Bank Linth held 126 U.S.-related accounts, with over $102 million in assets. Bank Linth will pay a penalty of $4.15 million (this is a post-mitigation penalty).

Consequences for US Taxpayers with Undisclosed Bank Linth Accounts

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts. On August 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. This means that, starting June 19, 2015, noncompliant Bank Linth U.S. accountholders will now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

BSI SA is the First Bank to Reach Resolution Under Swiss Bank Program

On March 30, 2015, the US Department of Justice announced that BSI SA, one of the 10 largest private banks in Switzerland, was the first bank to reach a resolution under the DOJ Swiss Bank Program.

Background Information

The Swiss Bank Program, which was announced on August 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by December 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared United States-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

“Because of the department’s continuing efforts to root out offshore tax evasion, Swiss banks are operating much differently today than they did just a few years ago, and the department’s Swiss Banking Program is a big part of that change,” said Acting Deputy Attorney General Sally Quillian Yates. “When we announced the program, we said that it would enhance our efforts to pursue those who help facilitate tax evasion and those who use secret offshore accounts to evade taxes. And it has done just that. We are using the information that we have learned from BSI and other Swiss banks in the program to pursue additional investigations into both banks and individuals.”

Since 2009, the department has charged more than 100 offshore bank accountholders, dozens of facilitators, and financial institutions. The department’s offshore enforcement efforts have reached far beyond Switzerland, as evidenced by publicly announced actions involving banking activities in India, Luxembourg, Liechtenstein, Israel and the Caribbean.

“Today’s action sends a clear message to anyone thinking about keeping money offshore in order to evade tax laws,” said Chief Richard Weber of IRS-Criminal Investigation (CI). “Fighting offshore tax evasion continues to be a top priority for IRS-CI and we will trace unreported funds anywhere in the world. IRS-CI special agents are our nation’s best financial investigators, trained to follow the money and enforce our country’s tax laws to ensure fairness for all.”

BSI – DOJ Non-Prosecution Agreement

According to the terms of the non-prosecution agreement signed on March 30, 2015, BSI agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts, and pay a $211 million penalty in return for the department’s agreement not to prosecute BSI for tax-related criminal offenses.

BSI had more than 3,000 active United States-related accounts after 2008, many of which it knew were not disclosed in the United States. In resolving its criminal liabilities under the program, BSI provided extensive cooperation and encouraged hundreds of U.S. accountholders to come into compliance. BSI is also assisting with ongoing treaty requests.

BSI’s Past Activities

BSI helped its U.S. clients create sham corporations and trusts that masked the true identity of its U.S. accountholders. Many of its U.S. clients also opened “numbered” Swiss bank accounts that shielded their identities, even from employees within the Swiss bank. BSI acknowledged that in order to help keep identities secret, it issued credit or debit cards to many U.S. accountholders without names visible on the card itself.

BSI not only helped U.S. clients shield their identity from the Internal Revenue Service (IRS), but helped them repatriate cash as well. BSI admitted that its relationship managers and their U.S. clients used code words in emails to gain access to funds.

Consequences for US Taxpayers With Undisclosed Foreign Accounts

The consequences of the BSI’s participation in the DOJ Program for Swiss Banks are far reaching for the US taxpayers with undisclosed foreign accounts, particularly BSI accounts.

First, the most immediate consequence of the BSI’s Non-Prosecution Agreement is the higher OVDP penalty. Most U.S. taxpayers who enter the IRS offshore voluntary disclosure program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts. On August 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. With today’s announcement of BSI’s non-prosecution agreement, its noncompliant U.S. accountholders must now pay that 50 percent penalty to the IRS if they wish to enter the OVDP program.

Second, as part of its participation in the DOJ Program for Swiss Banks, BSI provided a very large amount of information regarding its US accountholders as well as individuals who facilitated US tax evasion. This means that these individuals are at the very high risk of being investigated and/or prosecuted by the IRS for tax non-compliance.

Third, as part of its participation in the DOJ Program for Swiss Banks, BSI (and other banks in the Swiss Bank Program) also provided detailed information to the DOJ about transfers of money from Switzerland to other countries. The Tax Division and the IRS intend to follow that money to uncover additional tax evasion schemes.

This means that any US taxpayers who transferred the money out of Switzerland to avoid Swiss bank disclosure are at very high risk of the IRS detection.

What Should US Taxpayers with Undisclosed BSI and Other Swiss Bank Accounts Do?

If you are a US taxpayer who has (or had any point since 2008) undisclosed financial accounts at BSI and any other Swiss bank, you should contact an international tax lawyer to consider your voluntary disclosure options as soon as possible.

What if voluntary disclosure is no longer possible due to investigation by the IRS? The answer that your international tax lawyer will give you is likely to depend on the facts of the case. In some cases, it may be best to pursue a noisy voluntary disclosure option. In other cases, it may be best to contact the IRS and work with them directly to reduce the penalties.

“An individual is not culpable simply because he or she is identified by a bank within the program,” said Acting Assistant Attorney General Caroline D. Ciraolo of the department’s Tax Division. “With that said, the department strongly encourages those individuals and entities currently under indictment, under investigation, or who have concerns regarding their potential criminal liability to contact and fully cooperate with the department to reach a final resolution.”

Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts

If you have (had at any point since the year 2008) undisclosed foreign accounts (whether BSI accounts or any other foreign bank), you should contact the international tax law firm of Sherayzen Law Office for experienced professional help.

We have helped hundreds of US taxpayers around the globe to bring their US tax affairs in compliance with the simultaneous goal of reducing the penalty exposure to a reasonable amount under the IRS rules. And we can help You!

Contact Us to Schedule Your Confidential Consultation Now!

Foreign Accounts Tax Attorney: FATCA – Nowhere to Hide

As a foreign accounts tax attorney, I get a lot of questions from US taxpayers with undisclosed offshore accounts with respect to what FATCA means for the purposes of global transparency. As any foreign accounts tax attorney would tell you, FATCA will and already does make a huge dent in U.S. tax non-compliance. The purpose of this article is to explain why that is the case from a perspective of a foreign accounts tax attorney.

FATCA Background

The Foreign Accounts Tax Compliance Act (FATCA) was enacted as part of the Hiring Incentives to Restore Employment Act of 2010 (“HIRE Act” or “Act”). From the perspective of a foreign accounts tax attorney, there are two major parts of FATCA that make this law so unique.

First, FATCA imposed a new set of foreign asset disclosure requirements on U.S. persons which has to be filed with a U.S. tax return: Form 8938. Second, FATCA imposes an international reporting regime of offshore accounts owned by U.S. persons. This regime is enforced through a network of FATCA implementation treaties which are negotiated between the IRS and governments of foreign jurisdictions.

Form 8938 Reporting Requirement

Form 8938 compliance is one of the most immediate concerns for a foreign accounts tax attorney. In a previous article, I detailed Form 8938 reporting requirements. For the purposes of this article, I will briefly summarize these requirements here. In general, under IRC section 6038D, disclosure is required if the aggregate value of all “specified foreign financial assets” as defined in the statute, exceeds $50,000 (compare this threshold to the FBAR requirement of $10,000). This information must be attached to the current year tax returns. This provision of FATCA is effective as of tax year 2011. Covered individuals or entities must disclose the maximum value of the asset(s) during the year, as well as other pertinent information regarding the account, stock, financial instrument, contract, interest, or related items.

Worldwide Foreign Accounts Reporting

In addition to targeting U.S. taxpayers directly with Form 8938, FATCA also establishes the framework for the worldwide reporting of US-owned foreign accounts by foreign financial institutions (the “FFI”). Through a network of FATCA-implementation treaties with other foreign governments, the FFIs will be (and, in some countries, already are) required to report foreign financial accounts owed by U.S. persons and impose a withholding tax on the earnings of these accounts.

In essence, as a Foreign Accounts Tax Attorney would assert, FATCA turns the FFIs into the IRS withholding and reporting agents on an unprecedented, systematic scale of the entire globe (or, at least, the participating countries which are likely to include some of the largest world economies, particularly European countries and Japan).

Cumulative Impact of FATCA Provisions on the Non-Compliant US Taxpayers

In the long term, as a Foreign Accounts Tax Attorney, I believe that FATCA has the ability to create the environment of global tax compliance with respect to undisclosed foreign accounts – probably, not 100%, but close. Of course, a lot will depend on the ability of the US government to promote FATCA implementation treaties around the globe. As a Foreign Accounts Tax Attorney, I anticipate great unwilliness of countries like China and Russia to fully participate in the Program. Nevertheless, at this point, it appears that Western Europe, Canada, Australia and Japan are likely join the global web of FATCA enforcement. I predict that special pressure may be applied to certain Central American countries, Singapore and the Carribean countries to enroll them into FATCA compliance as soon as possible.

For non-compliant US taxpayers, this means that it is time to consider the impact of global FATCA enforcement as well as learn from the lessons of the Program for Swiss Banks. This means that the voluntary disclosure options should be considered as soon as possible to avoid dire consequences later. This type of analysis should be undertaken by an experienced Foreign Accounts Tax Attorney.

Contact Sherayzen Law Office for Help with the Voluntary Disclosure of the Offshore Accounts

If you have undisclosed offshore accounts, you should contact Sherayzen Law Office for help with you voluntary disclosure as soon as possible. Our experienced Foreign Accounts Tax law firm will thoroughly analyze your case, identify your voluntary disclosure options, prepare all of the necessary legal documents and tax forms, file your voluntary disclosure package and rigorously defend your case during the IRS negotiations.