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Nine Swiss AEOI Agreements in Force Since January 1 2017 | FATCA Lawyer

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Switzerland has recently become one of the most active countries with respect to expanding its network of automatic exchange of information agreements (Swiss AEOI Agreements). In fact, since January 1, 2017, nine Swiss AEOI Agreements entered into force.

Nine Swiss AEOI Agreements

All of the Swiss AEOI Agreements were signed via exchange of notes in late 2016 and entered into force from January 1, 2017. All of the Swiss AEOI Agreements were signed based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Protocol 10) in accordance with OECD CRS (common reporting standard). OECD CRS is the OECD version of FATCA.

Let’s list out the countries with which Swiss AEOI Agreements were signed in late 2016. They can be divided into two groups: the October Group and the December group.

The October Group includes Guernsey, Iceland, Isle of Man, Jersey, Norway and South Korea. All of the agreements were signed via an exchange of notes dated October 26, 2016 and October 28 (Iceland), November 1 (Jersey), November 10 (Guernsey), November 16 (South Korea), December 5 (Isle of Man) and December 13 (Norway).

The December Group includes Japan-Switzerland agreement signed via exchange of notes on December 8, 2016; Australia-Switzerland agreement that was signed via an exchange of notes dated December 8, 2016, and December 14, 2016; and Canada-Switzerland AEOI that was signed via an exchange of notes dated December 9, 2016, and December 22, 2016.

Indirect Impact of Swiss AEOI Agreements on US Taxpayers

This expansion of the information exchange network through Swiss AEOI Agreements poses an additional danger of the IRS detection of tax noncompliance by US taxpayers.

Why? The answer is simple – each of the countries that signed Swiss AEOI Agreements must also comply with its FATCA obligations with respect to US taxpayers. As the information exchange traffic increases through Swiss AEOI Agreements, there is a higher probability that FATCA-related information may be accidentally uncovered and transmitted to one of the Parties to the Swiss AEOI Agreements. Then, this Party may turn over this information to the IRS through FATCA reporting or an automatic exchange of information agreement with the IRS (present or future).

Therefore, US taxpayers with undisclosed foreign accounts in Australia, Canada, Guernsey, Iceland, the Isle of Man, Japan, Jersey, Norway, South Korea and Switzerland are at an increased risk of the IRS detection and should immediately consult with an experienced international tax law firm with respect to their voluntary disclosure options.

Contact Sherayzen Law Office for Professional Help With Offshore Voluntary Disclosures Concerning Foreign Assets and Foreign Income

If you have undisclosed foreign assets or foreign income, you should contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is a highly experienced international tax law firm that has helped hundreds of US taxpayers around the world to bring their tax affairs into full compliance with US tax laws, while reducing their noncompliance penalties and even lowering their tax liabilities (by utilizing missed opportunities for tax optimization in the years covered by voluntary disclosure). We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

H1B Holder FATCA Requirements

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There is a confusion in general public about the H1B holder FATCA requirements. The key concept that lies at the heart of the U.S. tax obligations of an H1B holder is tax residency (which is very different from the definition of a U.S. permanent resident in immigration law). In this article, I will discuss the concept of tax residency and the H1B Holder FATCA requirements.

H1B Holder FATCA Requirements: H1B Visa

H1B visa is a non-immigrant visa that allows U.S. companies to hire foreign workers to work in the United States. These workers have to be working in occupations that require theoretical or technical expertise in specialized fields such as in architecture, engineering, mathematics, science and medicine.

H1B Holder FATCA Requirements: FATCA

The Foreign Account Tax Compliance Act (FATCA) was signed into law in the year 2010. This law was passed by U.S. Congress with the specific purpose of combating tax noncompliance of U.S. taxpayers with undeclared offshore accounts. Today, FATCA is one of the most influential tax information exchange regimes in the world; through a huge network of bilateral treaties, the IRS managed to implement FATCA in the great majority of the countries.

FATCA consists of basically two parts. First, it obligates foreign financial institutions to turn over to the IRS certain information regarding foreign accounts owned by U.S. persons as well as certain information regarding the U.S. owners themselves. The H1B Holder FATCA information is also required to be turned over to the IRS.

The second part of FATCA imposes a new reporting requirement, IRS Form 8938, which must be filed with a U.S. tax return. Form 8938 requires U.S. taxpayers to disclose specified foreign assets to the IRS. “Specified Foreign Assets” includes various class assets, including foreign financial accounts.

H1B Holder FATCA Requirements: Tax Residency and FATCA Requirements

The key to understanding H1B holder FATCA requirements is the determination of whether an H1B holder is a tax resident of the United States. In order for an H1B holder to be classified as a U.S. tax resident, he must pass the “substantial presence test”. The substantial presence test determines the tax residency of a person based on the number of days this individual was physically in the United States.

If the substantial presence test is satisfied, the H1B holder is considered to be a tax resident of the United States. As a U.S. tax resident, the H1B holder FATCA requirements will be the same as those of any other U.S. tax resident, including U.S. citizens and U.S. permanent residents.

This means that, under FATCA, foreign banks should disclose to the IRS all of the foreign financial accounts owned directly, indirectly or constructively by the H1B holder. At the same time, the H1B holder FATCA obligations extend to filing Form 8938 for all of the required specified foreign assets, including foreign financial accounts, foreign stocks and other securities, foreign bonds, foreign derivatives and ownership of foreign businesses (unless such ownership is reported on another IRS form; in this case, Form 8938 should indicate the form on which such foreign business ownership is disclosed), and other assets.

H1B Holder FATCA Requirements: Late Disclosure

What if H1B holder FATCA obligations were not timely satisfied (i.e. Forms 8938 should have been filed, but they never were) and the H1B holder just found out about it? If an H1B holder did not file Forms 8938 timely, he may be subject to Form 8938 penalties. Moreover, in most such cases, such an H1B holder is likely to have failed to comply with other important U.S. international tax requirements such as FBAR and worldwide income reporting. The combination of FATCA, FBAR, income reporting and other penalties may create a huge tax liability that may even exceed the total value of the H1B holder’s foreign assets.

In such cases, the H1B holder should contact an international tax attorney experienced in offshore voluntary disclosures as soon as possible. Various offshore voluntary disclosure options offer varying rates of reduced penalties, sometimes even with the possibility of eliminating all penalties. However, time is of the essence – if foreign banks report the H1B holder’s foreign assets as part of their FATCA compliance and the IRS commences its investigation of the H1B holder FATCA noncompliance, then all of the voluntary disclosure options may automatically close.

Contact Sherayzen Law Office for Legal Help with H1B Holder FATCA Compliance

If you work in the United States on H1B visa, have foreign assets which are required to be disclosed under FATCA and have not done so, you should contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is an experienced international tax law firm that specializes in FATCA compliance for U.S. taxpayers, including voluntary disclosures for H1B holders.

Contact Us Today to Schedule Your Confidential Consultation!

Berner Kantonalbank Non-Prosecution Agreement

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On June 9, 2015, the Department of Justice announced that Berner Kantonalbank AG (Berner Kantonalbank), signed a Non-Prosecution Agreement with the DOJ pursuant to the department’s Swiss Bank Program.

Swiss Bank Program Background

The Swiss Bank Program, which was announced on August 29, 2013, provided 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 U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Swiss banks which meet the requirements of the Program are eligible for a non-prosecution agreement.

Berner Kantonalbank Background

Berner Kantonalbank was founded in 1834 as Kantonalbank von Bern, the first Swiss cantonal bank. Berner Kantonalbank is based in the Canton of Bern and presently has 73 branches in Switzerland. Berner Kantonalbank knew or had reason to know that it was likely that some U.S. taxpayers who maintained accounts at Berner Kantonalbank were not complying with their U.S. reporting obligations. Berner Kantonalbank opened, serviced and profited from accounts for U.S. clients who were not complying with their income tax obligations.

Berner Kantonalbank provided services that facilitated some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets in those accounts and related income. These services included opening and maintaining numbered accounts, allowing clients to use code names rather than full account numbers and providing hold mail services. Berner Kantonalbank opened accounts for account holders who exited other Swiss banks and accepted deposits of funds from those banks. Berner Kantonalbank also processed standing orders from U.S. persons to transfer amounts under $10,000 from their U.S.-related accounts. In one instance, a relationship manager asked an accountholder, who was a dual Swiss-U.S. citizen living in the United States, about the Foreign Account Tax Compliance Act (FATCA) and voluntary disclosure. When the accountholder failed to execute FATCA-related documents, Berner Kantonalbank took steps to close the account. In connection with that closing, the accountholder withdrew $70,000 and approximately 500,000 Swiss francs in cash.

Berner Kantonalbank: Participation in the DOJ Program for Swiss Banks

Berner Kantonalbank committed to full cooperation with the U.S. government throughout its participation in the Swiss Bank Program. As part of its cooperation, Berner Kantonalbank provided a list of the names and functions of 16 individuals who structured, operated or supervised its cross-border business. These individuals served as the chairman of the board of directors, members of the executive board, regional managers, heads of departments or heads of divisions. Berner Kantonalbank additionally provided information concerning its relationship managers and external asset managers, and it described in detail the structure of its cross-border business with U.S. persons, including narrative descriptions of high-value U.S.-related accounts and U.S.-related accounts held by entities.

Berner Kantonalbank Non-Prosecution Agreement

According to the terms of the non-prosecution agreement, Berner Kantonalbank 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 penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

Since August 1, 2008, Berner Kantonalbank held approximately 720 U.S.-related accounts, which included both undeclared and not undeclared accounts, with total assets of approximately $176.5 million. Berner Kantonalbank will pay a penalty of $4.619 million.

In accordance with the terms of the Swiss Bank Program, Berner Kantonalbank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.

Consequences for US Taxpayers With Bank Accounts At Berner Kantonalbank

While U.S. accountholders at Berner Kantonalbank who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

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 the noncompliant U.S. accountholders at Berner Kantonalbank must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts

If you have undisclosed foreign accounts at Berner Kantonalbank or any other bank outside of the United States, please contact Sherayzen Law Office as soon as possible to explore your voluntary disclosure options. Our professional experienced legal team has helped hundreds of US taxpayers worldwide to bring their US tax affairs in order. We can help you!

Contact Sherayzen Law Office NOW to Schedule Your Confidential Consultation!