Posts

Cyprus Tax Amnesty Extended | FATCA Lawyer & Attorney

/0 Comments/in , /by

For the second time now, the Cyprus Tax Amnesty has been extended. Let’s discuss in more detail the new deadline and the terms of the Cyprus Tax Amnesty.

Cyprus Tax Amnesty: Deadline Extensions

The original deadline for the Scheme for the Settlement of Overdue Taxes (the official name of the Cyprus Tax Amnesty) was October 3, 2017. The deadline, however, was extended for the first time to January 3, 2018. In early January of 2018, the deadline was further extended to the current deadline of July 3, 2018. Thus, the more recent extension gives Cyprus taxpayers another six months to bring their tax affairs in full compliance with Cyprus tax law.

Main Terms of the Cyprus Tax Amnesty

The Cyprus Tax Amnesty allows “qualifying applicants” to pay off their tax liabilities for prior years with up to 95% reduction in the interest and penalties that otherwise would have been or have already been imposed by the Cyprus tax authorities. The precise percentage of the reduction of interest and penalties depends on the number of monthly installment payments chosen by the taxpayer (i.e. if you pay off everything in full immediately, you get the full benefit of the 95% reduction in interest and penalties).

The Cyprus Tax Amnesty encompasses all outstanding tax liabilities that were incurred in the tax years up to and including 2015. The Amnesty also covers a great variety of taxes: income tax, capital gains tax, VAT, property tax, stamp duties, inheritance tax and certain special fees.

Cyprus Tax Amnesty: Qualifying Taxpayers

Since the main purpose of the Amnesty is to bring Cyprus taxpayers into full and ongoing compliance with Cyprus tax law, the emphasis is placed on assuring current compliance. This is done through the definition of “qualifying taxpayers” who are the only taxpayers eligible to participate in the Cyprus Tax Amnesty.

Qualifying taxpayers are defined as taxpayers who have been in full tax compliance from the tax year 2016 onwards – i.e. these taxpayers must have filed all of their Cyprus tax returns and paid all of their Cyprus tax liabilities for the tax year 2016 and all of the following tax years.

Cyprus Tax Amnesty is Part of a Trend Amplified by the IRS Offshore Voluntary Disclosure Program

The Cyprus Tax Amnesty is just one more example of the tax amnesty programs which have proliferated around the world in the recent years. This trend was greatly strengthened and really amplified to its current status by the establishment of the 2009 IRS Offshore Voluntary Disclosure Program (“2009 OVDP”). The 2009 OVDP, 2011 OVDI and 2012/2014 OVDPs together with enactment of FATCA have drawn the attention around the world and many countries began to imitate the successes of these US initiatives.

Sherayzen Law Office has helped clients deal with each of these major IRS voluntary disclosure programs as well as other voluntary disclosure options (like the Streamlined Domestic Offshore Procedures and the Reasonable Cause Disclosures). A voluntary disclosure program presents wonderful opportunities to taxpayers to settle their past tax noncompliance. This is why we sympathize with the Cyprus Tax Amnesty and see it as a positive development in the international tax law.

Swiss Voluntary Disclosures Rise as Swiss AEOI Compliance Nears

/0 Comments/in , /by

The voluntary disclosures by Swiss taxpayers jumped dramatically in 2017. The most likely reason for the increase is the fact that the Swiss government started to collect information under its numerous Automatic Exchange of Information (“AEOI”) agreements. Let’s analyze in more detail this connection between the Swiss voluntary disclosures and the Swiss AEOI Compliance.

Swiss AEOI Compliance: Increase in Swiss Voluntary Disclosures

The increase in Swiss voluntary disclosures between 2015 and 2017 is undeniable. The Swiss said approximately 350,000 voluntary declarations were made in 2016, compared to 328,000 in 2015. While the numbers for 2017 for the entire country are not available, we can extrapolate the 2017 numbers based on the canton of Zurich.

On January 4, 2018, the canton of Zurich reported that there were almost three times as many of voluntary disclosures of unreported assets by Swiss taxpayers in 2017 than in 2016. A total of 6,150 voluntary disclosures were submitted in 2017 whereas only 2,100 voluntary disclosures were made in 2016. The disclosures brought in about 104 million Swiss francs of additional tax income in 2017; the 2016 number was only 85 million Swiss francs.

The Swiss government also stated that the 2017 voluntary disclosures concerning ownership of real estate in Italy, Portugal and Spain were especially high.

Swiss AEOI Compliance Has a Direct Impact on Swiss Voluntary Disclosures

The connection between Swiss AEOI compliance and the increase in the voluntary disclosures is obvious. In fact, the cantonal government of Zurich directly stated that it attributed the jump in voluntary disclosures to the Swiss AEOI agreements, especially those related to the EU countries.

Already in 2017, the Swiss government started collecting financial information about Swiss taxpayers in order to turn it over to its partner jurisdictions under the Swiss AEOI agreements. The exchange of information under the Swiss AEOI compliance obligations is scheduled to begin in the fall of 2018 for the calendar year 2017 and 2019 for the calendar year 2018.

The Swiss AEOI compliance obligations are very broad due to the fact that Switzerland signed AEOI agreements with 53 jurisdictions already, including the European Union. The European Union is considered to be a single jurisdiction even though it consists of twenty-eight countries. The EU-Switzerland AEOI agreement was approved by the Swiss Parliament in 2016.

The Connection Between Swiss AEOI Compliance and FATCA

As Sherayzen Law Office has repeatedly pointed out in the past, the passage of FATCA in the United States has completely changed the international tax landscape concerning international information exchange with respect to foreign accounts and other foreign assets. In fact, FATCA and the DOJ Program for Swiss Banks have completely destroyed the vaulted Swiss bank privacy laws (though, the 2008 UBS case made the first hole in this bastion of offshore privacy).

After seeing the success of FATCA with respect to US tax compliance, the rest of the world joined the party. The new Common Reporting Standard or CRS was the OECD’s response to FATCA with an ambition to force even more transparency than required by FATCA and making this transparency apply to the United States. The US government refused to join CRS, but it did not prevent the CRS into growing in as important of an international tax compliance standard as FATCA.

Additionally, the enforcement of FATCA had another side-effect: a rapid proliferation of the AEOI agreements, both bilateral and multilateral. The new web of AEOI agreements is growing larger with the passage of time forcing an ever greater international tax transparency. The recent Swiss AEOI compliance is just the latest example of this trend.

Will we ever see a reversal of this trend? It is a real possibility, but it is unlikely that it will be able to destroy the legal groundwork for greater tax transparency that has been laid out by FATCA, CRS and the AEOI agreements.

Form 8938 Filing Thresholds | FATCA Tax Lawyer and Attorney Update

/0 Comments/in , /by

Form 8938 is one of the most important US international tax forms with its own sophisticated penalty structure. Hence, taxpayers should strive to understand when they are required to file the form. In this context, I would like to focus in this essay on the Form 8938 Filing Thresholds.

General Relevant Criteria in the Determination of the Form 8938 Filing Thresholds

There are three most relevant criteria for determining the Form 8938 filing threshold that may apply to a taxpayer: (1) whether the taxpayer is a Specified Individual or a Specified Domestic Entity; (2) the taxpayer’s tax return filing status; and (3) whether the taxpayer resides in the United States or outside of the United States.

I have already described in other articles the criteria for determining whether a taxpayer is a Specified Individual or a Specified Domestic Entity. Hence, for the purposes of this essay, I will assume that the taxpayer satisfies the requirements of one of these categories. Therefore, I will focus solely on the Form 8938 filing thresholds based the filing status and the place of residence.

Form 8938 Filing Thresholds for Unmarried Taxpayers

If a taxpayer files his US tax returns with an unmarried filing status (i.e. “single” or “head of household”) and resides in the United States, he will satisfy the Form 8938 reporting threshold if the total value of the taxpayer’s Specified Foreign Financial Assets (“SFFA”) is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.

If the unmarried taxpayer resides outside of the United States, then the values would go up to more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year.

Form 8938 Filing Thresholds for Taxpayers Whose Filing Status is “Married Filing Jointly”

If a taxpayer files his US tax returns as “married filing jointly” and resides in the United States, he will satisfy the Form 8938 reporting threshold if the total value of his SFFA exceeds $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year. If this taxpayer resides outside of the United States, then the Form 8938 reporting thresholds will increase to more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.

Form 8938 Filing Thresholds for Taxpayers Whose Filing Status is “Married Filing Separately”

If a taxpayer files his US tax returns as “married filing separately”, then his Form 8938 reporting thresholds are going to be the same as those of an unmarried taxpayer.

Form 8938 Filing Thresholds for Specified Domestic Entities

Finally, a Specified Domestic Entity has the same Form 8938 Filing Thresholds as those of an unmarried taxpayer who resides in the United States – i.e. SFFA value must be more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.

Contact Sherayzen Law Office for Professional Help With Form 8938

If you were required to file Forms 8938 in the previous years and you have not done so, you may be subject to Form 8938 penalties. In order to avoid or mitigate your Form 8938 penalties, you need to explore your offshore voluntary disclosure options as soon as possible.

Sherayzen Law Office can help You! We are an international tax law firm that specializes in offshore voluntary disclosures of unreported foreign assets and foreign income. We have successfully helped clients from close to 70 countries. You can be next!

Contact Us Today to Schedule Your Confidential Consultation!

Specified Domestic Entity: Domestic Entity | FATCA Lawyer & Attorney

/0 Comments/in , /by

This is the second article from the series of articles concerning the definition of a Specified Domestic Entity. Today, I will explore what business entities are considered to be “Domestic”.

Specified Domestic Entity Background Information

Specified Domestic Entity is a new category of FATCA Form 8938 filers. Under FATCA, Form 8938 has to be filed with a US taxpayer’s tax return in order to report his Specified Foreign Financial Assets (“SFFA”). Prior to tax year 2016, Form 8938 was applicable only to individual US taxpayers. Starting tax year 2016, however, Specified Domestic Entities are required to file Form 8938 as long as the total value of their SFFA meets the filing threshold.

Definition of a Domestic Entity for the Purposes of FATCA Form 8938

For the purposes of FATCA Form 8938, whether a corporation or a partnership is considered “domestic” is determined under the general definition found in 26 U.S.C. §7701(a)(4): “the term ‘domestic’ when applied to a corporation or partnership means created or organized in the United States or under the law of the United States or of any State unless, in the case of a partnership, the Secretary provides otherwise by regulations.” Thus, while the definition of a domestic corporation is fairly straightforward, it is not always the case with respect to domestic partnerships.

It should also be remembered that an LLC is never taxed as an LLC under the US tax law. Rather, LLC can be taxed either as a partnership or a corporation; it can also be treated as a disregarded entity if there is only one owner of the LLC and the LLC never elected to be taxed as a corporation.

A trust is considered to be a “domestic trust” if it meets the 26 U.S.C. §7701(a)(30)(E). The tests under this section of the Internal Revenue Code (IRC) can be fairly complex and may require additional analysis (see this article for further analysis).

Contact Sherayzen Law Office for Professional Help With FATCA Form 8938

If you need help with the FATCA Form 8938 compliance (including the definition of a Specified Domestic Entity), contact Sherayzen Law Office for professional help. Our experienced international tax team, headed by international tax attorney Eugene Sherayzen, Esq., will thoroughly analyze your case, determine whether you need to file Form 8938 and any other US international information returns, and prepare these forms for you. We can also help you with the voluntary disclosure of any of your offshore assets if you did not timely comply with your US tax obligations with respect to these assets.

Contact Us Today to Schedule Your Confidential Consultation!