Switzerland and Japan are the latest additions to the list of countries that agreed to cooperate with US Treasury.
Treasury said on June 21, that the U.S. had signed separate joint statements with Japan and Switzerland to intensify cooperation in combatting international tax evasion by removing legal impediments to compliance with the Foreign Account Tax Compliance Act (FATCA). The approach taken under the joint statements with Japan and Switzerland permits foreign financial institutions (FFIs) to report information directly to the IRS, which is different from an earlier approach that called for FFIs to report information directly to their governments that would ultimately be shared with the U.S. on an automatic exchange of information basis.
The announcement expands the list of countries already cooperating with Treasury to implement FATCA. Treasury said in February it was negotiating with France, Germany, Italy, Spain and the U.K. (the so-called G5) to establish government-to-government information sharing arrangements. (See International Taxes Weekly, 02/14/2012). In April, Treasury also announced that Ireland had entered into discussions with Treasury regarding an intergovernmental approach to implementing FATCA.
Treasury’s joint statement with France, Germany, Italy, Spain and the U.K. envisages a two-step approach whereby FFIs report FATCA-required information to their own governments and then the governments exchange the information with the U.S. on an automatic basis.
Treasury’s separate joint statements with Japan and Switzerland contemplates the mutual intent to pursue a second model framework for intergovernmental cooperation, a senior Treasury official said. Under the second model for inter-governmental cooperation, FFIs would report information directly to the IRS to the extent permitted under the FFI’s domestic laws. Where consent is necessary and not granted by the account holder, the governments would then be able to obtain such information pursuant to a treaty request.
From Snell & Wilmer (www.swlaw.com)
Department of Homeland Security (DHS) Secretary Janet Napolitano announced today that certain qualified foreign nationals without immigration status who were brought to the United States as children, and meet other specific criteria, will be eligible for work authorization and will be considered for relief from removal. To be eligible, individuals must demonstrate that they meet the following criteria:
- Came to the United States under the age of 16 years;
- Have continuously resided in the United States for at least five years preceding June 15, 2012 and are present in the United States on June 15, 2012;
- Are currently in school, have graduated from high school, have obtained a general education development certificate, or are honorably discharged veterans of the Coast Guard or Armed Forces of the United States;
- Have not been convicted of a felony offense, a significant misdemeanor offense, multiple misdemeanor offenses, or otherwise pose a threat to national security or public safety; and
- Are not above the age of 30.
Only those individuals meeting all of the above criteria will be considered for deferred action and work authorization, and such action will be decided on a case-by-case basis. It will be the responsibility of the applicant to present verifiable documentation to establish all of the criteria.
Obtaining deferred action and work authorization will not grant the applicant any immigration status or pathway toward citizenship. Grants of deferred action will be given for a period of two years, subject to renewal.
While this directive takes effect immediately, U.S. Citizenship and Immigration Services (USCIS) and Immigration and Customs Enforcement (ICE) are expected to begin implementation of the application process within 60 days. We expect USCIS to provide further instructions regarding this process in the very near future. More information is available at www.dhs.gov.
Last week IRS updated the FAQs on its website regarding reporting on Form 8938 and added few more questions. Few noteworthy clarifications are:
- Tangible assets held for investment (e.g., art, antiques, jewelry, and cars) do not have to be reported.
- Safe deposit box is not a financial account.
- The omission of Form 8938 with the original return requires an amended return to be filed with the form attached.
- Filing of Form 8938 does not remove the requirement to file Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts), if otherwise required.
- Directly held precious metals, such as gold, are not specified foreign financial assets. Note, however, that gold certificates issued by a foreign person may be a specified foreign financial asset that you would have to report on Form 8938, if the total value of all your specified foreign financial assets is greater than the applicable reporting threshold.
This is an important development.
Here is the link: http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7180&Mode=0
Due to the recent fall of Rupee against the US dollar, repatriation from NRE accounts may not be attractive; it is a welcome change nevertheless.
Foreign Account Tax Compliance Act (FATCA) come into force from January 1, 2013 when financial institutions worldwide must report US owners’ names to the IRS. Australia’s Financial Services Council (FSC) has expressed concerns that the Australian financial services industry will be unable to comply with the proposed regulations. The FSC has conveyed this to US Treasury seeking relief. It appears US Treasury is open and receptive to these concerns.
The FATCA provisions will require Australian foreign financial institutions, including superannuation funds, to collect detailed information on their members in order to determine whether an individual member’s financial and residency arrangements make them a US taxpayer. If a member is a US taxpayer, the FATCA regime requires the fund to report this information to the IRS. However, if the account holder does not provide the necessary information the fund will be required to withhold a 30% tax on US – connected payments for that member.
Nonresident alien (NRA) athletes and entertainers performing independent personal services or participating in the U.S. and embassy and consulate employees in the U.S. can expect more enforcement and litigation, an IRS official said May 12.
Speaking at the American Bar Association Tax Section meeting in Washington, Lindsey D. Stellwagen, Special Counsel International, Office of Chief Counsel said that although there had been a lot of publicity on IRS measures to enforce compliance on U.S. persons with offshore wealth, her agency is also stepping up enforcement of NRAs and resident aliens (e.g. green card holders) that owe U.S. tax. She discussed the IRS programs pertaining to athletes and entertainers and the embassy project.
Foreign athletes and entertainers may pose a challenge to IRS enforcement because they come into the U.S. for a brief period of time, earn a lot of money, then leave. Such persons may be able to evade paying tax on their U.S.-source income and enforcement may be futile if they money earned has exited the U.S. without the imposition of withholding at source.
Nonresident alien entertainers or athletes performing independent personal services or participating in athletic events in the U.S. are generally subject to a 30 percent withholding on gross income. Stellwagen explained that under the central withholding agreement (CWA) program, such persons may be subject to reduced withholding provided that certain requirements are satisfied. The agreement is entered into by the NRA athlete or entertainer, a withholding agent and the IRS and is valid for a specific tour or series of events. Withholding is based upon the budget provided and estimated net profits.
CPA Global Tax & Accounting PLLC can assist athletes and entertainers with the CWA program and work with the IRS to minimize the exposures.
In a legal advice, the IRS Office of Chief Counsel has concluded that compensation paid to a U.S. permanent resident employed by a foreign government is not exempt from tax under the Belgium-U.S. income tax treaty.
The facts provide that a taxpayer lives and works in the U.S. as an employee of Belgium. The taxpayer, although not a U.S. citizen, is a lawful permanent resident (i.e. a green card holder).
In general, U.S. income tax treaties contain a “savings clause” that provides that a treaty will not affect the taxation by the U.S. of its residents and citizens (see e.g. Article 1(4) of U.S. Model Income Tax treaty.) An exception to the savings clause is provided for in almost all income tax treaties, but it is not extended to persons who are permanent residents or citizens of the U.S. (permanent residents are treated as U.S. residents under Code Sec. 7701(b)(1)(A)(i)).
The memo notes that Rev Ruling 75-425 has given rise to some confusion with respect to employees of Belgium as it provided that income under the 1948 Belgium-U.S. income tax treaty exempted from tax the compensation paid to employees who were citizens of the employing country. Prior to the publication of the ruling, however, the new 1970 income tax treaty between both countries was signed and did not exempt such income from taxation. Rev Rul 75-425 was not updated, but was subsequently obsoleted by Rev Ruling 2007-60.