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Treasury 2014 FBAR Currency Conversion Rates of December 31, 2014

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According to the June 2014 FBAR currency conversion rates instructions published by FinCEN, in order to determine the maximum value of a foreign bank account, the Treasury’s Financial Management Service (still called so even though Financial Management Service was consolidated into the Bureau of the Fiscal Service within the Treasury Department) rates must be used. In particular, the 2014 FBAR currency conversion rates instructions state:

In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury’s Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.

The 2014 FBAR Currency Conversion rates are highly important for any international tax attorney who deals with FBARs.  For your convenience, Sherayzen Law Office provides a table of the official Treasury FBAR currency conversion rates below (keep in mind, you still need to refer to the official website for any updates):

Country – Currency Foreign Currency to $1.00
AFGHANISTAN – AFGHANI 57.9000
ALBANIA – LEK 115.1000
ALGERIA – DINAR 87.8100
ANGOLA – KWANZA 104.0000
ANTIGUA – BARBUDA – E. CARIBBEAN DOLLAR 2.7000
ARGENTINA-PESO 8.3730
ARMENIA – DRAM 470.0000
AUSTRALIA – DOLLAR 1.2190
AUSTRIA – EURO 0.8220
AZERBAIJAN – NEW MANAT 0.8000
BAHAMAS – DOLLAR 1.0000
BAHRAIN – DINAR 0.3770
BANGLADESH – TAKA 79.0000
BARBADOS – DOLLAR 2.0200
BELARUS – RUBLE 13779.0000
BELGIUM-EURO 0.8220
BELIZE – DOLLAR 2.0000
BENIN – CFA FRANC 538.7000
BERMUDA – DOLLAR 1.0000
BOLIVIA – BOLIVIANO 6.8600
BOSNIA-HERCEGOVINA MARKA 1.6080
BOTSWANA – PULA 9.4970
BRAZIL – REAL 2.6570
BRUNEI – DOLLAR 1.2540
BULGARIA – LEV 1.6090
BURKINA FASO – CFA FRANC 538.7000
BURMA – KYAT 1028.0000
BURUNDI – FRANC 1550.0000
CAMBODIA (KHMER) – RIEL 4103.0000
CAMEROON – CFA FRANC 538.8200
CANADA – DOLLAR 1.1580
CAPE VERDE – ESCUDO 87.8710
CAYMAN ISLANDS – DOLLAR 0.8200
CENTRAL AFRICAN REPUBLIC – CFA FRANC 538.8200
CHAD – CFA FRANC 538.8200
CHILE – PESO 607.1600
CHINA – RENMINBI 6.2050
COLOMBIA – PESO 2372.6000
COMOROS – FRANC 361.3500
CONGO – CFA FRANC 538.8200
CONGO, DEM. REP – CONGOLESE FRANC 920.0000
COSTA RICA – COLON 533.2500
COTE D’IVOIRE – CFA FRANC 538.7000
CROATIA – KUNA 6.1500
CUBA-PESO 1.0000
CYPRUS-EURO 0.8220
CZECH – KORUNA 22.3260
DENMARK – KRONE 6.1240
DJIBOUTI – FRANC 177.0000
DOMINICAN REPUBLIC – PESO 44.1300
ECAUDOR-DOLARES 1.0000
EGYPT – POUND 7.1500
EL SALVADOR-DOLARES 1.0000
EQUATORIAL GUINEA – CFA FRANC 538.8200
ERITREA – NAKFA 15.0000
ESTONIA-EURO 0.8220
ETHIOPIA – BIRR 20.0900
EURO ZONE – EURO 0.82200
FIJI – DOLLAR 1.9580
FINLAND-EURO 0.8220
FRANCE-EURO 0.8220
GABON – CFA FRANC 538.8200
GAMBIA – DALASI 45.0000
GEORGIA-LARI 1.8700
GERMANY FRG-EURO 0.8220
GHANA – CEDI 3.2100
GREECE-EURO 0.8220
GRENADA – EAST CARIBBEAN DOLLAR 2.7000
GUATEMALA – QUENTZAL 7.5970
GUINEA – FRANC 7136.0000
GUINEA BISSAU – CFA FRANC 538.7000
GUYANA – DOLLAR 202.0000
HAITI – GOURDE 46.7500
HONDURAS – LEMPIRA 21.2700
HONG KONG – DOLLAR 7.7560
HUNGARY – FORINT 259.4400
ICELAND – KRONA 126.7500
INDIA – RUPEE 63.2000
INDONESIA – RUPIAH 12350.0000
IRAN – RIAL 8229.0000
IRAQ – DINAR 1166.0000
IRELAND-EURO 0.8220
ISRAEL-SHEKEL 3.8810
ITALY-EURO 0.8220
JAMAICA – DOLLAR 113.9000
JAPAN – YEN 119.4500
JERUSALEM-SHEKEL 3.8810
JORDAN – DINAR 0.7080
KAZAKHSTAN – TENGE 182.4000
KENYA – SHILLING 90.6500
KOREA – WON 1086.8700
KUWAIT – DINAR 0.2930
KYRGYZSTAN – SOM 58.7000
LAOS – KIP 8078.0000
LATVIA – LATS 0.8220
LEBANON – POUND 1500.0000
LESOTHO – SOUTH AFRICAN RAND 11.5660
LIBERIA – U.S. DOLLAR 82.0000
LIBYA-DINAR 1.1950
LITHUANIA – LITAS 2.8390
LUXEMBOURG-EURO 0.8220
MACAO – MOP 8.0000
MACEDONIA FYROM – DENAR 49.2000
MADAGASCAR-ARIA 2596.7300
MALAWI – KWACHA 505.0000
MALAYSIA – RINGGIT 3.4950
MALI – CFA FRANC 538.7000
MALTA-EURO 0.8220
MARSHALLS ISLANDS – DOLLAR 1.0000
MARTINIQUE-EURO 0.82200
MAURITANIA – OUGUIYA 305.0000
MAURITIUS – RUPEE 31.7000
MEXICO – NEW PESO 14.7020
MICRONESIA – DOLLAR 1.0000
MOLDOVA – LEU 15.5520
MONGOLIA – TUGRIK 1885.6000
MONTENEGRO-EURO 0.8220
MOROCCO – DIRHAM 9.0240
MOZAMBIQUE – METICAL 33.0500
NAMIBIA-DOLLAR 11.5660
NEPAL – RUPEE 101.4000
NETHERLANDS-EURO 0.8220
NETHERLANDS ANTILLES – GUILDER 1.7800
NEW ZEALAND – DOLLAR 1.2750
NICARAGUA – CORDOBA 26.6000
NIGER – CFA FRANC 538.7000
NIGERIA – NAIRA 182.9000
NORWAY – KRONE 7.3900
OMAN – RIAL 0.3850
PAKISTAN – RUPEE 100.9000
PALAU-DOLLAR 1.0000
PANAMA – BALBOA 1.0000
PAPUA NEW GUINEA – KINA 2.5440
PARAGUAY – GUARANI 4629.3000
PERU – NUEVO SOL 2.9000
PHILIPPINES – PESO 44.77500
POLAND – ZLOTY 3.5130
PORTUGAL-EURO 0.8220
QATAR – RIYAL 3.6420
ROMANIA – LEU 3.6850
RUSSIA – RUBLE 58.6760
RWANDA – FRANC 689.1900
SAO TOME & PRINCIPE – DOBRAS 20087.7110
SAUDI ARABIA – RIYAL 3.7500
SENEGAL – CFA FRANC 538.7000
SERBIA-DINAR 99.4600
SEYCHELLES – RUPEE 12.9800
SIERRA LEONE – LEONE 4990.0000
SINGAPORE – DOLLAR 1.3210
SLOVAK REPUBLIC – EURO 0.8220
SLOVENIA – EURO 0.8220
SOLOMON ISLANDS – DOLLAR 7.3100
SOUTH AFRICA – RAND 11.5660
SOUTH SUDANESE – POUND 3.0000
SPAIN – EURO 0.8220
SRI LANKA – RUPEE 131.1500
ST LUCIA – EC DOLLAR 2.7000
SUDAN – SUDANESE POUND 6.4000
SURINAME – GUILDER 3.3500
SWAZILAND – LILANGENI 11.5660
SWEDEN – KRONA 7.7130
SWITZERLAND – FRANC 0.9890
SYRIA – POUND 179.2000
TAIWAN – DOLLAR 31.6400
TAJIKISTAN – SOMONI 5.3000
TANZANIA – SHILLING 1730.0000
THAILAND – BAHT 32.9200
TIMOR – LESTE DILI 1.0000
TOGO – CFA FRANC 538.7000
TONGA – PA’ANGA 1.8700
TRINIDAD & TOBAGO – DOLLAR 6.3560
TUNISIA – DINAR 1.8590
TURKEY – LIRA 2.3270
TURKMENISTAN – MANAT 2.8400
UGANDA – SHILLING 2770.0000
UKRAINE – HRYVNIA 15.7680
UNITED ARAB EMIRATES – DIRHAM 3.6700
UNITED KINGDOM – POUND STERLING 0.6420
URUGUAY – PESO 23.9600
UZBEKISTAN – SOM 2461.0000
VANUATU – VATU 99.9300
VENEZUELA – BOLIVAR 6.3000
VIETNAM – DONG 21400.0000
WESTERN SAMOA – TALA 2.3530
YEMEN – RIAL 214.5000
ZAMBIA – KWACHA (NEW) 6.3750
ZAMBIA – KWACHA (OLD) 5455.0000
ZIMBABWE – DOLLAR 1.0000

1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM – former Yugoslav Republic of Macedonia.
4. Latvia’s Lats converted to the Euro on January 1, 2014. This means that the Euro 2014 FBAR Currency Conversion rate may also need to used for the determination of the highest balance of accounts in Latvia. Contact Sherayzen Law Office for more details.

Who Must File IRS Form 1042

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Form 1042 (“Annual Withholding Tax Return for U.S. Source Income of Foreign Persons”) serves a number of important reporting purposes. In general, it is used to report the tax withheld under chapter 3 of the Internal Revenue Code (“IRC”) on certain income of foreign persons (such as nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts), as well as to report the tax withheld under chapter 4 of the IRC on payments subject to tax withholding. It also utilized to report tax withheld pursuant to IRC Section 5000C (“Imposition of tax on certain foreign procurement”), and reportable payments from Form 1042-S under chapters 3 or 4.

In this article, we will cover who is responsible for filing Form 1042. US individuals involved with cross-border businesses or living overseas should be aware of this form as they may be subject to the form’s filing requirements for a variety of common reasons, without even knowing it. For instance, US-source alimony paid to a nonresident alien former spouse may be reportable by a withholding agent on Form 1042 (in addition to 1042-S), even if the entire amount is exempt under a tax treaty.

This article provides general information and is not intended to convey tax or legal advice. Please contact Mr. Eugene Sherayzen, an experienced tax attorney at Sherayzen Law Office, Ltd. if you have any questions about filing this form, or any other US-international tax questions.

Who is Responsible for Filing Form 1042?

As noted by the IRS, unless an exception applies, “every withholding agent or intermediary who receives, controls, has custody of, disposes of, or pays a withholdable payment, including any fixed or determinable annual or periodical income, must file an annual return for the preceding calendar year” on Form 1042. The IRS defines “withholding agent” to mean any person who is required to withhold tax. This definition is expansive and can include, in general, any individual, trust, estate, partnership, corporation, nominee, government agency, association, or tax-exempt foundation (both domestic and foreign) that is required to withhold tax. Withholding agents are personally liable for any tax required to be withheld, as well as interest and applicable penalties.

An “intermediary” means, “a person who acts as a custodian, broker, nominee, or otherwise as an agent for another person, regardless of whether that other person is the beneficial owner of the amount paid, a flow-through entity, or another intermediary.”

When Must Form 1042 Be Filed?

Form 1042 must be filed in a number of different circumstances. As stated by the IRS, an individual or entity must file the form if, “you are required to file or otherwise file Form(s) 1042-S for purposes of either chapter 3 or 4 (whether or not any tax was withheld or was required to be withheld to the extent reporting is required)…; You file Form(s) 1042-S to report to a recipient tax withheld by your withholding agent; You pay gross investment income to foreign private foundations that are subject to tax under section 4948(a); You pay any foreign person specified federal procurement payments that are subject to withholding under section 5000C; You are a qualified intermediary (QI), withholding foreign partnership (WP), withholding foreign trust (WT), participating foreign financial institution (FFI), or reporting Model 1 FFI making a claim for a collective refund under your respective agreement with the IRS.” Note, that the FFI classification may also require other extensive reporting under FATCA.

2014 Form 1042: Due Date and Place of Filing

The 2014 Form 1042 must be filed by March 16, 2015, to the IRS’ Ogden (UT) Service Center, and an extension of time to file may be granted by submitting Form 7004, (“Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns”).

Contact Sherayzen Law Office for Help With International Tax Compliance

US-International tax reporting and planning can involve many complex areas, and you are advised to seek the advice of attorneys practicing in this area. If you have any questions, please contact Sherayzen Law Office, Ltd. for all of your tax and legal needs.

FBAR Penalties: Outrageous, Draconian but Real

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If you have undisclosed foreign financial accounts that should have been reported on the Report of Foreign Bank and Financial Accounts (“FBAR”), you may be facing FBAR penalties. By far, the FBAR contains the most severe civil penalties and significant criminal penalties among all international tax forms. It is important to understand that these penalties, despite their apparently extreme nature, are real and you may be facing them.

FBAR Criminal Penalties

The two most common cases for criminal prosecution are willful failure to file an FBAR and willful filing a false FBAR, especially when combined with potential tax evasion. The criminal FBAR penalties in these cases may be up to the limit set in 31 U.S.C. § 5322. This means that, potentially, a person who willfully fails to file an FBAR or files a false FBAR may be subject to a prison term of up to 10 years, criminal penalties of up to $500,000 or both.

FBAR Civil Penalties

In addition to criminal penalties, FBAR penalties include a rich arsenal of civil penalties. The exact penalties that a person may be facing will depend on that person’s particular circumstances; these circumstances must be evaluated by an experienced international tax attorney.

In general, where the taxpayer willfully failed to file the FBAR, or destroyed or otherwise failed to maintain proper records of account, and the IRS learned about it (e.g. during an investigation), the taxpayer is likely to face the worst-case scenario with draconian penalties. The IRS may impose civil FBAR penalties of up to the greater of $100,000, or 50 percent of the value of the account at the time of the violation (in addition to the already discussed criminal FBAR penalties of up to $500,000, or 10 years of imprisonment, or both).

In certain circumstances, it is possible to mitigate the penalties, but this issue should be evaluated by an experienced international tax attorney. If mitigation is an option for you, then it may dramatically alter your calculation of willful penalties.

A less severe round of civil FBAR penalties may be imposed if a US person negligently and non-willfully failed to file the FBAR, and the IRS learned about it during an investigation. Unlike the first scenario, there are unlikely to be criminal penalties for the non-willful failure to file the FBAR. Rather, the taxpayer is likely to face non-willful FBAR penalties of up to $10,000 per violation (i.e. each unreported account in each year). However, where there is a pattern of negligence, additional civil FBAR penalties of no more than $50,000 may be imposed per each violation. Again, in limited circumstances, the taxpayer maybe eligible for the mitigation the penalties, but this issue should be evaluated by an experienced international tax attorney. While the impact of non-willful mitigation is not likely to be as dramatic as that of the willful penalties, such mitigation may still have a significant impact on the total number of penalties.

Reasonable Cause Exception and OVDP FAQ #17 (OVDP Is Now Closed)

There are two major exceptions to FBAR penalties. First, if you are able to establish reasonable cause, you may be able to escape all FBAR penalties. Again, an experienced international tax attorney should be consulted on whether you have a valid reasonable cause exception and the chances that this strategy will succeed. Second, in general, pursuant to OVDP FAQ #17 (obsolete), you may be able to avoid FBAR penalties if you have no additional U.S. tax liability as a result of  your voluntary disclosure and you already reported all of the income associated with the undisclosed foreign financial account on your tax returns. I cannot stress enough the importance of consulting an international tax attorney to  determine whether your case fits within the requirements of the OVDP Q&A #17.

IRS Offshore Voluntary Disclosure Program Closed

It is important to note that the FBAR penalty structure outlined above is not followed by the official IRS Offshore Voluntary Disclosure Program (OVDP) now closed. Rather, OVDP replaces this penalty structure with its own three-tiered penalty system with the emphasis on the aggregate balance of all accounts, rather than the number of accounts. Moreover, there is no reasonable cause exception to the OVDP (now closed) structure of penalties. However, OVDP FAQ #17 can still be applied to  the foreign financial accounts of the participating taxpayer whenever the situation warrants its application.

Given the enormous differences that exist between the IRS OVDP and the traditional statutory FBAR penalties, it is crucially important to consult an experienced international tax attorney in choosing your way to reduce your FBAR penalties.

Contact Sherayzen Law Office for Help With Your FBAR Penalties

If you have undisclosed foreign financial accounts and you are facing the FBAR penalties, contact Sherayzen Law Office as soon as possible. Our international tax firm will thoroughly analyze your case, estimate your FBAR penalties (both, under the traditional and OVDP (obsolete) penalty structures), determine the options and strategies that may be used in your Offshore Voluntary Disclosure, and implement your case plan (including the creation of any necessary legal documents and tax forms).

We are the tax experts you are looking for to handle your case!

FATCA Online Registration System – FATCA Lawyer Minneapolis

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On August 22, 2013, the Internal Revenue Service announced the opening of a new online registration system for financial institutions that need to register with the IRS under the Foreign Account Tax Compliance Act (FATCA).

Financial institutions that must register with the IRS to meet their FATCA obligations can now begin the process of registering by creating an account and providing required information. Financial institutions will also be able to provide required information for their branches of operation and other members of their expanded affiliate groups in which the financial institution is the lead organization.

The registration system, designed to enable secure account management, is a web-based application with around-the-clock availability.

Within a secure environment, the new registration system enables financial institutions to:

•establish online accounts;
•customize home pages to manage accounts;
•designate points of contact to handle registrations;
•oversee member and/or branch information; and
•receive automatic notifications of status changes.

Financial institutions are encouraged to become familiar with the system, create their online accounts and begin submitting their information. Starting in January 2014, financial institutions will be expected to finalize their registration information by logging into their accounts, making any necessary changes and submitting the information as final.

As registrations are finalized and approved in 2014, registering financial institutions will receive a notice of registration acceptance and will be issued a global intermediary identification number.

The IRS will electronically post the first IRS Foreign Financial Institution (FFI) List in June of 2014, and will update the list monthly. To ensure inclusion in the June 2014 IRS FFI List, financial institutions will need to finalize their registrations by April 25, 2014.

IRS Classification of Foreign Entities: “Per Se” Foreign Corporations

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For the U.S. tax compliance purposes, it is very important to properly classify foreign business entities, because there are special IRS requirements associated with ownership of foreign business entities. For instance, a list of various tax forms is tied to particular classification (for example, certain U.S. taxpayers are required to file Form 5471 with respect to foreign corporations; a similar requirement (form 8865) would apply to certain filers with respect to a foreign partnership) and esoteric tax reporting requirements may need to be disclosed on your personal tax returns (such as subpart F income in case of Controlled Foreign Corporation).

The process of a foreign entity classification can be very complex.  In this article, however, I would like to discuss a shortcut available in certain situations  –“per se foreign corporations”. This term means the IRS decided to treat certain business entities as a foreign corporation irrespective of the taxpayer’s position.  For practical purposes, this means that, if your entity is on the list of the “per se corporations”, then it is a foreign corporation, there is no need to explore the issue further and “check-the-box” rules will not apply

Where to Look For the IRS List of Per Se Corporations

Once you are able to determine that you are dealing with a foreign entity and this entity is a business entity, you should check with the Treasury Regulation to see if this business entity is part of the long list of entities that the IRS considers as foreign corporations.  The list is detailed in Treas. Reg. §301.7701-2(b)(8).

List of Per Se Corporations

Treas. Reg. §301.7701-2(b)(8) classifies the following foreign entities as corporations (keep in mind that this may not be the most up-to-date list and you will need to check with the relevant updates of this regulation):

American Samoa, Corporation

Argentina, Sociedad Anonima

Australia, Public Limited Company

Austria, Aktiengesellschaft

Barbados, Limited Company

Belgium, Societe Anonyme

Belize, Public Limited Company

Bolivia, Sociedad Anonima

Brazil, Sociedade Anonima

Bulgaria, Aktsionerno Druzhestvo.

Canada, Corporation and Company

Chile, Sociedad Anonima

People’s Republic of China, Gufen Youxian Gongsi

Republic of China (Taiwan), Ku-fen Yu-hsien Kung-szu

Colombia, Sociedad Anonima

Costa Rica, Sociedad Anonima

Cyprus, Public Limited Company

Czech Republic, Akciova Spolecnost

Denmark, Aktieselskab

Ecuador, Sociedad Anonima or Compania Anonima

Egypt, Sharikat Al-Mossahamah

El Salvador, Sociedad Anonima

Estonia, Aktsiaselts

European Economic Area/European Union, Societas Europaea

Finland, Julkinen Osakeyhtio/Publikt Aktiebolag

France, Societe Anonyme

Germany, Aktiengesellschaft

Greece, Anonymos Etairia

Guam, Corporation

Guatemala, Sociedad Anonima

Guyana, Public Limited Company

Honduras, Sociedad Anonima

Hong Kong, Public Limited Company

Hungary, Reszvenytarsasag

Iceland, Hlutafelag

India, Public Limited Company

Indonesia, Perseroan Terbuka

Ireland, Public Limited Company

Israel, Public Limited Company

Italy, Societa per Azioni

Jamaica, Public Limited Company

Japan, Kabushiki Kaisha

Kazakstan, Ashyk Aktsionerlik Kogham

Republic of Korea, Chusik Hoesa

Latvia, Akciju Sabiedriba

Liberia, Corporation

Liechtenstein, Aktiengesellschaft

Lithuania, Akcine Bendroves

Luxembourg, Societe Anonyme

Malaysia, Berhad

Malta, Public Limited Company

Mexico, Sociedad Anonima

Morocco, Societe Anonyme

Netherlands, Naamloze Vennootschap

New Zealand, Limited Company

Nicaragua, Compania Anonima

Nigeria, Public Limited Company

Northern Mariana Islands, Corporation

Norway, Allment Aksjeselskap

Pakistan, Public Limited Company

Panama, Sociedad Anonima

Paraguay, Sociedad Anonima

Peru, Sociedad Anonima

Philippines, Stock Corporation

Poland, Spolka Akcyjna

Portugal, Sociedade Anonima

Puerto Rico, Corporation

Romania, Societate pe Actiuni

Russia, Otkrytoye Aktsionernoy Obshchestvo

Saudi Arabia, Sharikat Al-Mossahamah

Singapore, Public Limited Company

Slovak Republic, Akciova Spolocnost

Slovenia, Delniska Druzba

South Africa, Public Limited Company

Spain, Sociedad Anonima

Surinam, Naamloze Vennootschap

Sweden, Publika Aktiebolag

Switzerland, Aktiengesellschaft

Thailand, Borisat Chamkad (Mahachon)

Trinidad and Tobago, Limited Company

Tunisia, Societe Anonyme

Turkey, Anonim Sirket

Ukraine, Aktsionerne Tovaristvo Vidkritogo Tipu

United Kingdom, Public Limited Company

United States Virgin Islands, Corporation

Uruguay, Sociedad Anonima

Venezuela, Sociedad Anonima or Compania Anonima

 

Exceptions, Inclusions and Complications With Respect To the List of Per Se Foreign Corporations

In addition to the list of entities above, the regulations also provide various inclusions, exceptions, and complications.  For example, a Nova Scotia Unlimited Liability Company (or any other company or corporation all of whose owners have unlimited liability pursuant to federal or provincial law) will not be treated as a corporation. The same applies to Sendirian Berhad of Malaysia and some companies in India.

On the other hand, the IRS regards the whole family of “Sociedad Anonima” entities are considered corporations, disregarding their variable capital provisions (such as, “Sociedad Anonima de Capital Variable”).

The regulations further clarify the scope of terms such as “public companies” and “limited companies”.  With regard to Cyprus, Hong Kong, and Jamaica, the term “Public Limited Company” includes any Limited Company that is not defined as a private company under the corporate laws of those jurisdictions.  In all other cases, where the term Public Limited Company is not defined, that term shall include any Limited Company defined as a public company under the corporate laws of the relevant jurisdiction.

Furthermore, with respect to limited companies, a Limited Company includes companies limited by shares and companies limited by guarantee.

What if the company is named in a different but means the same thing as in the usual name? The regulations specifically state that “different linguistic renderings of the name of an entity listed in paragraph (b)(8)(i) of this section shall be disregarded”.  Treas. Reg. §301.7701-2(b)(8)(v).  For example, an entity formed under the laws of Switzerland as a Societe Anonyme will be a corporation and treated in the same manner as an Aktiengesellschaft.

Finally, very important complications may arise where a business entity is formed under the laws of more than one jurisdiction.  Detailed complex rules will determine whether such an entity should be treated as a corporation for U.S. tax purposes, in some cases over-ruling the classification patterns described in this essay.  This is a topic for a future article, though.

Contact Sherayzen Law Office for Legal Help With Foreign Business Entity Classifications

Classification of a foreign business entity for U.S. tax purposes is a very complex process.  This article only describes one of many variations and it does NOT constitute legal advice; only an international tax attorney looking at the specific circumstances of your case may determine how your foreign business entity should be classified.

If you have a foreign business entity and you are not sure how you should classify it and what will be the U.S. tax compliance consequences of such classification, contact Sherayzen Law Office. Our experienced international tax firm will analyze your business entity in detail,  help you find the correct classification (or adopt a classification that is likely to withstand an IRS challenge), and identify the necessary IRS tax reporting requirements.