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IRS Reminds Taxpayers with Tax Debt over $52,000 to Resolve Their Debt to Avoid Revocation of U.S. Passports

In the Issue IR-2019-141, the IRS indicated that they are required to notify the State Department on taxpayers with more than $52,000 in tax debt which could lead to denial or revocation of the taxpayer’s passport. Under the Fixing America’s Surface Transportation (FAST) Act, the IRS notifies the State Department of taxpayers with seriously delinquent tax debt. Any amount above $52,000 is treated as seriously delinquent tax debt. The FAST Act authorized the State Department to reject such taxpayer’s passport application or renewal application. The law can limit a taxpayer’s ability to travel outside the United States by revoking the passport. A taxpayer should receive the Notice CP508C when the IRS certifies or notifies a taxpayer to the State Department. There are different paths to resolve tax issues. The taxpayer can enter various programs that can bring relief for unpaid taxes. These options can reverse the adverse actions taken by the State Department which could hinder the taxpayer’s ability to travel or conduct business around the world. ABOUT THEVOZ ATTORNEYS, PLLC The THEVOZ Attorneys, PLLC is an international law firm that advises on domestic and international tax matters. The law firm has offices in the United States and Europe. As…

The United States Treasury Issues GILTI Final Regulations and Proposed Regulations for Stock Ownership and GILTI.

Summary On June 14, 2019, the Treasury Department issued section 951A Global Intangible Low Taxed Income (GILTI) final regulations and proposed regulations related to stock ownership and excluding foreign hightaxed income from GILTI. Final rules reject the hybrid approach and adopt the aggregate approach for determining a partner’s GILTI inclusion amount due to CFC stock owned by a domestic partnership. GILTI final regulations also contains modifications to the pro rata share rules, clarification of anti-abuse rules, foreign tax applicability to direct or indirect share ownership of CFC, clarification of “allocable earnings and profits”, and clarification of the rule requiring appropriate adjustments to the allocation of allocable E&P that would be distributed in a hypothetical distortion. Proposed regulations address allowing an election to exclude certain high-taxed foreign income from the calculation of tested income in determining GILTI. In the same publication, authorities discuss treatment of domestic partnerships for the purpose of section 958 (stock ownerships) and section 951A (GILTI). These regulations are scheduled to be published in the Federal Register on June 21, 2019. Below is a summary of key provisions of the final and proposed regulations. If you would like to obtain further information on these rules, please contact our…

FATCA: Looks Harmless, but Can Be Vicious

Information sharing is now a worldwide trend International exchange of offshore financial account information and tax records between governments has become the norm when it comes to international taxation. The United States initiated the trend of exchange of information by implemented the Foreign Account Tax Compliance Act (the “FATCA”) then, the OECD followed by introducing the Common Reporting Standard (CRS) for Automatic Exchange of Information (AEOI) in 2014. The main purpose behind both of these programs is to combat tax evasion and improve financial transparency. FATCA was enacted on March 18, 2010, under the Hiring Incentives to Restore Employment (the “HIRE”) Act. It was a response to a series of scandals. The most famous is the 2009 Swiss banking scandal which concluded UBS agreeing to pay $780 million in penalties to the U.S. government.1 The UBS scandal is whole another story where the actual whistleblower (UBS private banker) received prison time, but when he got out a check of $104 million waiting from the U.S. government (so basically, he earned $3.5 million per month while in prison). FATCA requires foreign financial institutions (FFIs) to register with the Internal Revenue Service (IRS) and obtain a Global Intermediary Identification Number (GIIN) unless there is an…

IRS Changes the Procedure to Obtain an EIN Starting May 13

IRS announced that starting May 13, 2019, only individuals with either Social Security Number (SSN) or individual taxpayer identification number (ITIN) may request a federal Employer Identification Number (EIN). (IR-2019-58). The new change will not allow entities to be listed as the “responsible party” and use their EIN to obtain other EINs.  EIN is a nine-digit number assigned to employers, sole proprietors, corporations, partnerships, estates, trusts, certain individuals, and other entities for tax filing and reporting. Form SS-4 is used to apply for an EIN.  The responsible party for an entity is normally the person who owns or controls the entity or the one who has the power to exercise control over the entity (Instructions for Form SS-4). For example, if the entity is a corporation, the responsible party may be the principal officer and if the entity is a partnership, the general partner may be the responsible party.  The new changes to obtaining EIN especially affects international entities who are applying for EIN to make an entity classification for U.S. tax purposes. Under the changes, a responsible party of an international entity that has no U.S. presence or U.S. officers, first would have to obtain TIN (File Form W-7)…

The U.S. Treasury Department Issued Proposed Regulations Allowing Individual U.S. Shareholders Making 962 Election The Section 250 Deduction with Respect to Their GILTI.

The U.S. Department of Treasury issued much awaited proposed regulations (REG-104464-18) under Internal Revenue Code (the “Code”) section 250 to provide further guidance to determine the amount of the deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). Background One of the new provisions added to international tax provision by the Tax Cut and Jobs Act of 2017 (the “Act”) is the section 951A, the Global Intangible Low Taxed Income (GILTI). Under this section, U.S. shareholders of a Controlled Foreign Corporation (CFC) are taxed on the CFCs GILTI. Many international tax professionals have seen that the new international tax provisions somewhat favor corporate U.S. shareholders over non-corporate shareholders of a CFC. The Congress enacted IRC section 250 that provided corporate U.S. shareholders a deduction of 50 percent on their GILTI. However, the Act did not allow this 50 percent deduction for individual or partnership U.S. shareholders with GILTI. Another example of this favoritism is GILTI provisions of a corporate U.S. shareholder is taxed at the U.S. corporate tax rate (21%) and non-corporate U.S. shareholder is taxed at ordinary income rate (highest been 37%). This can cause a significant disadvantage for non-corporate U.S. shareholders of Control Foreign Corporations…

What is Happening in the International Tax realm?

Proposed Digital Service Tax (DST) and the Impact on the United States There could be a new tax that directly affects U.S. technology companies. The European Union has proposed to implement a tax on digital business activities conducted within the EU member states. Major countries like U.K., France, and Germany have shown support. But, recently Germany has shown less enthusiasm towards the new tax (where) countries like Sweden, Ireland, and Netherland oppose it. While EU countries debate on the tax, U.K. soon to leave the EU has decided to take matters on its own hand. November 2018, U.K. Treasury proposed DST that would go into effect in April 2020. Because U.K.’s proposed DST is closer to be brought in front of the parliament, we will look into implications of DST in the U.S. The government of UK believes that the current international tax framework has failed to keep up with changes in the digital age, thus need an international tax system fit for the digital age. UK will tax DST at 2%, of gross revenues of companies that generate their income from social media platforms, online-marketplace, and search engines. Such a company could be subjected to DST if it generates…

U.S. Tax News

GILTI Proposed Regulations Tax Cuts and Jobs Act 2017 introduced the section 951A Global Intangible Low-Income (GILTI) tax, which imposes a minimum tax on offshore earnings of controlled foreign corporations. The Treasury and IRS have published proposed regulations providing clarity on new Global Intangible Low-Tax Income. Proposed regulations provide definitions, calculation of GILTI, and US shareholder’s GILTI inclusions. However, we expect more clarifications from the Treasury because Proposed Regulations have not provided clarifications for all the unanswered GILTI issues. For example, Proposed Regulations do not include rules relating to foreign tax credits, electing Section 962, and Section 250 deduction. Base Erosion and Anti-Abuse Tax Proposed Regulations (BEAT) Another change to the U.S. international tax system under Tax Cuts and Jobs Act 2017 is the Base Erosion and Anti-Abuse Tax (BEAT). Under the new section 59A, there will be a tax equal to the base erosion minimum tax amount for certain taxpayers from the beginning of 2018. One of the parties this provision mainly affect are corporate taxpayers with gross receipts averaging more than $500 million over a three-year period who make deductible payments to foreign related parties. The proposed regulations issued by the IRS, provide details on which taxpayers can…

Swiss Attorney

The group T&CO decided to open a law firm in the United States to accompany its clients in the development of their business on an international level. Therefore, a law firm called Thevoz LLC was set up in Austin ( TX). Our partner, Olivier THEVOZ is in charge of the development of this new entity. Thevoz, LLC 1801 Domain Blvd 3rd floor Austin, TX 78758

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