Archive for Virginia La Torre Jeker, J.D.

Help, I Want to Expatriate, But They Won’t Let Me… Part II

This is a two-part blog post with Part I available HERE.

Renouncing US Citizenship if the Individual is a Minor

“Jus soli” (the law of the soil) is a rule of common law followed by the United States, under which the place of a person’s birth determines his citizenship. In addition to common law, this principle is embodied in the 14th Amendment to the US Constitution which states, in part, that: “All persons born in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.” Citizenship is also determined under various US citizenship and nationality statutes, such as the Immigration and Nationality Act (INA). Read More

Written by | Posted in FATCA • IRS

Help! I Want to Expatriate, But They Won’t Let Me… Part I

Lately, renouncing United States citizenship has become more and more fashionable with the full implementation of the “Foreign Account Tax Compliance Act (also known as “FATCA”), looming on the horizon.

I am now more often receiving inquiries about expatriation from the foreign parents of a child born in the United States while the parents were studying there or were there on some other temporary basis. Increasing inquires are also coming from parents of a child who was born overseas but to parents, only one of whom was a US citizen and who resided in the US for a certain time period before the child was born. In both of these cases, the children have acquired US citizenship “at birth”. In these sometimes frantic phone calls, the parents are protesting the child’s “involuntary” acquisition of US Read More

Written by | Posted in FATCA • IRS

NIIT-Picky Nuances for Americans Overseas or With Offshore Investments

If you meet the requirements, your 2013 tax return will reflect the new 3.8% Medicare surcharge imposed on high wage earners. This tax is more commonly called the “Net Investment Income Tax” or (“NIIT”). Many people are confused with the taxation of capital gains and the NIIT. There is even greater confusion because the rules governing application of the NIIT contain nuances with regard to Americans working overseas and with regard to so-called nonresident alien individuals (NRA).

Let’s start with some basics:

What is the NIIT / 3.8% Medicare Surcharge?

The NIIT is, broadly speaking a 3.8% surtax on “net investment income”. It applies only to Read More

Written by | Posted in Expatriate • Individual

Swiss Continue To Cave In

Kathryn Keneally, assistant attorney general in the tax division at the US Department of Justice (DOJ) stated just a few days ago that 106 Swiss banks have already signed on to the Swiss-DOJ non-prosecution program (Program) announced at the end of August 2013. The Program is designed to encourage all Swiss banks to come forward and admit the role they played in assisting US persons to evade tax. Participating banks that meet all of the demands made by DOJ are eligible for non-prosecution agreements (employees and agents of the banks are not protected). Any Swiss bank that was already a target of US criminal investigation could not apply – 14 Swiss banks are ineligible under this provision.

The number of banks signing on to the Program (approximately one-third, as it was Read More

Written by | Posted in FATCA • FBAR

United Arab Emirates – Actively Helping FATCA Express Move On Through

In March 2013 United Arab Emirates Central Bank Governor, Sultan bin Nasser Al Suwaidi, announced that the UAE was considering signing an IGA with the United States in order to facilitate compliance with FATCA. He stressed the need for the UAE regulatory authorities to prepare procedures to facilitate FATCA compliance and set clear instructions for financial institutions under their supervision. Very recently, the UAE Central Bank issued Notices to financial institutions in the Emirates that clearly move the FATCA express steadily along its inevitable path of destruction.

While no IGA has yet been signed, all indications are that this may happen pretty soon. The Model that would be implemented with the UAE would apparently be a so-called “Model 1B IGA” – which is “nonreciprocal”. This means that only the UAE would provide Read More

Written by | Posted in Europe, Middle East • FATCA • IRS

United States Corporations With Foreign Shareholders? Form 5472 – Part II

Part I of the topic exploring Form 5472, was posted last week and covered the situation when Form 5472 must be filed by a US corporation that is at least 25% owned by a foreign shareholder. Today’s post covers the other type of case requiring the filing of this form – when a foreign corporation that is engaged in a US trade or business (USTB) has a “reportable transaction” with either a US or a foreign related party.

Generally, the purpose of the form is to disclose the nature and amount of foreign and domestic transactions that occur with related-parties, since these types of transactions can give rise to abuse (for example, in transfer-pricing or in attempts to siphon off taxable earnings and profits in disguised non-taxable forms). Read More

Written by | Posted in Corporate • United States

Rumor Has It – Another FATCA Delay?

A report published by the China Post in Taiwan on Sunday, hinted that another six-month delay may be likely in implementing the Foreign Account Tax Compliance Act (“FATCA”). If the report is correct, this would be the third delay in rolling out what has been described by many as the most over-reaching and egregious US legislation to come down the pike. In October 2012 and again in July of 2013, the US announced six-month delays in implementing FATCA due to the practical difficulties in setting up the measures required to have foreign financial institutions around the world reporting about their United States customers.

If the latest report is true, it would be the third time that the US has delayed implementing FATCA. Perhaps, third time, the charm? Read More

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United States Corporations With Foreign Shareholders? Form 5472 – Part I

The United States market is a promising one for foreign investors and companies, but complicated issues must be addressed to avoid fines and penalties. One of these issues involves the completion of Form 5472.

US companies that are at least 25% owned by non-US shareholders and foreign companies that are engaged in a US trade or business must disclose information to the IRS on this somewhat confusing form. The IRS uses Form 5472 in developing information about the company and its related parties. Information provided on the form helps the IRS identify potential audit issues. Certain information on the Form 5472 might raise bright red flags for the IRS, too. Read More

Written by | Posted in FATCA • Tax Policy • Tax Provision/Tax Reporting

IRS Gives Good News on Passive Foreign Investment Companies

Creeping up to the New Year, the Internal Revenue Service (“IRS”) showed an uncharacteristic sign of holiday goodwill. On December 30, 2013 the IRS issued Temporary Treasury Regulations providing guidance with regard to so-called “passive foreign investment companies” (“PFIC”). The areas covered in the Regulations include guidance in determining ownership of a PFIC (specifically, attributing ownership of PFIC stock through partnerships, estates and trusts), the annual filing requirements for shareholders of PFICs and guidance on the exception to the requirement for certain shareholders of foreign corporations to file Form 5471, “Information Return of U.S. Persons with Respect to Certain Foreign Corporations.’

Broadly speaking, the US tax laws impose a special tax and interest charge on a US person that is a shareholder of a PFIC when the investor receives an “excess distribution” from the Read More

Written by | Posted in FATCA • FBAR • IRS

FATCA Update – Final FFI Agreement Just Released by IRS

The Internal Revenue Service has just issued Revenue Procedure 2014-10 which provides guidance to foreign financial institutions (FFIs) entering into an FFI agreement with the IRS for FATCA (Foreign Account Tax Compliance Act) purposes. The final version of the FFI agreement is set forth in meticulous detail in the Revenue Procedure. The final FFI agreement contained in the Revenue Procedure contains a number of changes to provisions of the draft FFI agreement set out in an earlier IRS Notice (Notice 2013-69 2013-46 I.R.B. 503), on October 29, 2013.

Who Should Sign the FFI Agreement?

FFIs signing the FFI agreement will be treated as “participating FFIs”. Generally, these are Read More

Written by | Posted in FATCA • International • IRS

FATCA Registration in Full Swing; More Countries Signing FATCA IGAs

Foreign Financial Institutions are not getting the best of Christmas presents this year. Instead of getting sugar plums in their stockings, they are getting FATCA and GIIN!

By brief background, under the Foreign Account Tax Compliance Act, (FATCA), foreign financial institutions (FFIs) and non-financial foreign entities (NFFEs) must agree to verification and due diligence procedures – meaning they must be on the look-out for customers, owners or beneficiaries evidencing any “US indicia”. They must identify and report directly to the United States Internal Revenue Service (IRS) or their own government via an intergovernmental agreement (IGA), information on US account holders/owners. They must look through their customers and counterparties’ ownership to find “substantial United States owners” (generally, more than 10 percent ownership). Read More

Written by | Posted in FATCA • IRS
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