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Showing posts from 2015

FIRPTA Update

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Before reading this, please review this previous blog entry - http://www.mooresrowland.tax/2014/10/when-fatca-meets-firpta-some.html



An important tax update was made on December 18th.  President Obama, signed H.R. 2029, the tax (the “Protecting Americans from Tax Hikes Act of 2015”) and spending bills (Consolidated Appropriations Act, 2016) to fund the government for its 2016 fiscal year. The December The Act increases the rate of withholding from dispositions of U.S. real property interests under §1445 from 10% to 15%, but remains at 10% for residences sold for less than $1 million. The withholding exemption where the sale price is under $300,000US and the purchaser will acquire the property as their principal residence is still in effect. The rate increase in the withholding tax rate applicable to sale prices of over $1M should cause those taxpayers with losses or nominal gains to apply for a withholding certificate using IRS Form 8288-B to reduce the withholding to an amount equiva…

Singapore Lawyer Convicted and Jailed for Tax Evasion

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9 Dec 2015
Ong Cheong Wei, 51, a practising lawyer and former sole-proprietor of law firm Ong Cheong Wei & Co ("OCWC"), was sentenced to 4 weeks in jail for wilfully omitting $306,305.00 in his Income Tax Returns for Years of Assessment ("YAs") 2007 and 2008, thereby evading income tax amounting to $39,447.26. He was also ordered to pay a penalty of $118,341.78, three times the amount of tax evaded. 

Failure to keep proper records and declare income based on actual earnings Ong Cheong Wei was the sole-proprietor of OCWC from November 2000 to March 2014. He is currently practising as a sole-proprietor in Ong Cheong Wei Law Chambers. Investigations revealed that Ong Cheong Wei did not prepare or maintain any general ledger or accounts for OCWC. For YAs 2007 and 2008, Ong Cheong Wei filed his tax returns (Form B1) based on an estimation of his income, knowing that the actual amount earned was more than the estimated amount. His estimation was based on the assumpti…

Finance Monthly - November 2015 edition

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Are the days of banker-client secrecy over?

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Willfulness

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So much of the discussion around the IRS amnesty initiatives lies in the concept of "Willfulness". While nothing here should be construed as legal advice, here are some key points to consider -


31 U.S.C. § 5321 (a)(5)(C)imposes upon any person who "willfully violat[es]" or "willfully caus[es] any violation of ... section 5314," a penalty equal to the greater of $100,000 or 50% of the balance in the account(s) at the time of the violation. 31 U.S.C. §§ 5321 (a)(5)(C) and (D).
Willfulness is “a voluntary, intentional violation of a known legal duty.” United States v. Sturman,951 F.2d 1466 (6th Cir. 1991), quoting Cheek v. United States, 111 S. Ct. 604, 610 (1991); IRM 4.26. 16.4.5.3(1) 
A finding of willfulness under the Bank Secrecy Act must be supported by evidence of willfulness. IRM 4.26.16.4.5.3(2)
Willfulness is shown by the person's knowledge of the reporting requirements and the person's conscious choice not to comply with the requirements. In …

After Switzerland, is Singapore next?

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The Clock is Ticking for CRS (AEOI) Implementation

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There is so much buzz about CRS and BEPs now that the rest of the world has adapted and adopted the United States' much maligned FATCA initiative.  I'm enjoying going to seminar after seminar as I come to terms with how this impacts our firm and our clients.




CRS is essentially FATCA on steroids - which is why the U.S. has not signed up to it.



So far, nearly 100 countries have signed up and the first group of early adopters (mainly the Europeans) go live in 2017.  So in 2017 they will report 2016 accounts.


This essentially  means that CRS goes live in January 2016.  While some jurisdictions continue to be in denial (I'm not naming names), others like the Cayman Islands are staying ahead of the curve. It recently (October 2015) updated regulations to exclude certain Cayman incorporated entities from the CRS net.  Have a look at the language on page 25 - http://www.gov.ky/portal/pls/portal/docs/1/12254315.PDF

I suspect that other jurisdictions will soon follow.  Practition…

Nonresident Aliens Can Be Subject to the U.S. Estate Tax - But Usually Ignore It

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Here's an article from CNBC's website dated Nov 4th 2015 - 


Aleksandar Stojanov | Getty Images

They say the only certain things in life are death and taxes, but a large number of non-U.S. citizens may have found a way to avoid at least one of those.

Under U.S. tax law, the estates of foreign holders of U.S. assets, such as stocks, real estate, or valuables, are required to pay estate taxes on those assets after the death of the owner. There's even a handy piece of IRS paperwork — form 706-NA — to help calculate the tax.

But one veteran Swiss banker tells CNBC that this rule is widely ignored around the world, and the U.S. government has no way to know how much money it is owed under its own laws.

The result, the banker said, is that the U.S. Treasury is likely being deprived of billions of dollars each year.

The banker, who is wary of the controversy over American tax cheats in Switzerland and asked not to be identified publicly, said the battle over the potentially vast …

Structuring using St Vincent entities

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Among the up and coming offshore jurisdictions is St. Vincent and the Grenadines (SVG). At this point in time, the SVG IBC is not required to make public filings or disclosures of its directors, shareholders/members or beneficial owners. The SVG IBC is useful for asset protection, tax planning, or succession planning. SVG also offers international trusts, hybrid companies (limited by guarantee but also having a share capital), and mutual companies (limited solely by guarantee without a share capital).

In the international tax space, it is not unusual to hear buzzwords such as transparency and information exchange. Buzz words aside, the days of “hidden” or “secret” accounts are now over. Having said that, tax planning is still, and always will be, a useful exercise.

Below is an extract from SVG legislation -

EXEMPTIONS FROM TAXES AND DUTIES – International Business Companies Act 2007
Section 180.

(1) Notwithstanding any provisions of the Income Tax Act an international business comp…

Dormant Foreign Corporations and Form 5471 - Rev. Proc. 92-70, 1992-2 C.B. 435

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SECTION I. PURPOSE

This revenue procedure provides a summary filing procedure for filing Form 5471 with respect to dormant foreign corporations described in section 3 below. Persons complying with this revenue procedure satisfy their Form 5471 filing obligations under sections 6038(a)(1), 6038(a)( 4), and 6046(a)(3) with respect to dormant foreign corporations and will not be subject to penalties related to the failure to timely file a complete Form 5471 and to timely furnish information requested thereon.


SEC. 2. BACKGROUND

.01 Section 6038(a)(l) imposes information reporting requirements on any United States person who controls a foreign corporation. Pursuant to section 6038(a)(4), the information reporting requirements prescribed in section 6038 (a)( 1) also are imposed on any United States person who is treated as a United States shareholder of any foreign corporation that is treated as a controlled foreign corporation for any purpose under subpart F.

.02 Section 6046(a)(3) impos…

Changes in Due Dates

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Per H.R. 3236 "Surface Transportation and Veterans Health Care Choice Improvement Act of 2015" signed into law by President Obama on July 31, 2015, due dates of FinCEN 114 (aka FBARs) and some IRS tax returns just changed. For tax years starting after December 31, 2015:


Partnership tax returns (Form 1065) are due March 15th with a 6 month extension available. Partnership tax returns were previously due April 15th with a 5 month extension;Trust tax returns (Form 1041) are still due April 15th, now with a 5.5 month extension available; C corporation tax returns (Form 1120) are due April 15th with a 5 month extension available. C corporation tax returns were previously due March 15th with a 6 month extension. There are special rules for C corporations with fiscal years ending on June 30th; and FBARs - Report on Foreign Accounts (FinCEN Form 114) are due April 15th with a 6 month extension available under Treas. Reg. section 1.6081-5.FBARs were previously due on June 30th wi…

The New Money-Laundering Sting: Come to the U.S., Get Arrested

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Lawyer Patrick Poulin says he helped clients set up offshore corporations in the Caribbean. And that’s what he was working on when he flew to Miami from the Turks and Caicos last year to meet with two Americans who wanted him to invest $2 million from a real estate deal.


Instead, they arrested him at the airport.


The clients, who went by the names of “Bob” and “Abraham,” according to Poulin, were really federal agents who were targeting him as part of a money laundering sting. Poulin eventually pleaded guilty to conspiracy and spent a year in prison.














Lawyer Patrick Poulin Source: Patrick Poulin via Bloomberg
















“My lawyer told me I should have known,” Poulin, 42, said in a telephone interview from his home in Quebec.


The U.S. has since brought charges against at least four other businessmen working as “incorporators” -- people who help clients establish offshore shell companies for tax planning or other reasons. The cases come amid a campaign by U.S. prosecutors to pursue suspect foreign inc…

What is a PFIC ?!

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While many portions of the U.S. tax code possess confusing and sometimes harsh rulings, the tax regime for Passive Foreign Investment Companies (PFIC) is almost unmatched in its complexity and almost draconian features. Countless times, our international clients have come to us to prepare what they thought would be straightforward tax returns- only to later learn that the small investment they had made in a non-US mutual fund was now subjecting them to all the concomitant filing requirements and tax obligations. While it is beyond the scope of this article to cover all the numerous details related to PFIC reporting requirements, my hope is to provide guidance and insight into the world of PFICs.
History The PFIC tax regime was created via the Tax Reform Act of 1986 with the intent to level the playing field for US based investment funds (ie mutual funds). Prior to the legislation of 1986, U.S.-based mutual funds were forced to pass-through all investment income earned by the fund to it…

Aspects of Estate Planning for Persons with U.S. Connections

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E-Commerce and Taxation

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Many of our clients are entrepreneurial and some of these have online businesses. So taxation in the online space is always a hot topic. For US domestic persons, the question is somewhat simpler at the Federal level but becomes complex at the State level. For foreign persons selling goods to US consumers however, it can be complex at both the Federal and at the State level.


Let’s talk about the States first. At the moment, sales tax rates vary widely and range from less than 1% to over 10%. There are myriad exemptions and exceptions and rates vary across types of goods and services as well as cities and even counties. Clothing and footwear under $110 is tax free in New York City, for example. But buy something worth more than $110 in Manhattan and the item is subject to a 4.5% city sales tax and a 4% state sales tax. Sales taxes are collected in 45 states, the District of Columbia and Guam. Five states, including Alaska and Montana, do not collect sales taxes. Ok so you get…

What’s Form BE-10?

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Most know June 30th as the deadline for filing FBARs or Foreign Bank Accounts - http://derrenjoseph.blogspot.sg/2014/11/fbars-and-form-8938.html

But this year there’s a new kid on the block and that’s Form BE-10.




What’s Form BE-10?

It is not a tax form. The BE-10 is a Benchmark Survey from the Bureau of Economic Analysis (BEA) under the U.S. Department of Commerce. The BE-10 is conducted every five years and is meant to cover all U.S. direct investment abroad from both large and small companies; it’s related to the annual BE-11 Survey of Large Companies. According to the rules, the BE-10 treats people as “companies” and is required for even the smallest economic activity abroad by an individual — for instance, the BEA expects you to report if your small apartment in Trinidad generates $5,000 in income each year.



What’s the purpose?

A number of federal statistical reporting requirements apply to U.S. companies that

- Make investments abroad,

- Are the beneficiarie…