The Netherlands a Tax Haven, but Please Don’t Call us That

According to Foreign Affairs, Dutch officials really don’t like it when someone calls their country a tax haven.

In 2009, the Obama administration did just that, naming the Netherlands as one of a number of countries where scores of major American firms had established subsidiaries in order to avoid paying U.S. taxes. In a press briefing, the White House also noted that, taken together with Bermuda and Ireland, the Netherlands claimed nearly a third of all foreign profits reported in 2003 by U.S. corporations.

These statements provoked outrage in the Netherlands and a protest from the Dutch ambassador in Washington. “We’re not happy,” said Jan Kees de Jager, the Netherlands’ finance secretary.

“I Expect There’ll Be A Clarification and We’ll Not End Up On Lists Like This In Future,
Between Bermuda And Ireland.”

After all, the Dutch response seemed to suggest, everyone knows that those places and others, such as the Cayman Islands and Switzerland are tax havens, and to lump the Netherlands in with them was apparently a profound insult.

Shortly afterward, de Jager claimed that the Americans had agreed to stop describing the Netherlands in those terms. Doing so might have been justified by a desire to placate an aggrieved U.S. ally. But the truth is that the Netherlands absolutely belonged on a list of major tax havens—and still does, today.

In 2017, foreign direct investment in the Netherlands totaled $5.2 trillion. But the vast majority of that money wasn’t invested at all: only $836 billion actually entered the Dutch economy.

 

The Other $4.3 Trillion Went Into Shell Companies or Subsidiaries Set Up To Avoid Paying Taxes Elsewhere.

As such numbers should indicate, this isn’t the work of a few shady players trying to hide their illicit gains: some of the biggest players in the global economy are in on the game.

Google and IBM are among the many U.S. companies that have established operations in the Netherlands in order to reduce their tax bills back home. Most people consider Fiat Chrysler an Italian-American multinational; technically, however, it is a Dutch company, having decided for tax purposes to establish its official headquarters in Amsterdam in 2014.


In 2016, the Netherlands, with a population of barely 17 million, accounted for 16 percent of all foreign profits claimed by U.S. companies. Needless to say, that is not because American firms just happen to sell an extraordinary amount of goods and services to the Dutch.

Rather, it’s because the Netherlands lets those companies park the money they make elsewhere in Dutch subsidiaries or shell companies, or move those profits through “letterbox” entities in the Netherlands, from which it can be sent on to other tax havens.  

For Example, In 2017, Google Took $22.7 Billion In Profits It Made Outside The United States

And Transferred It Via The Netherlands To Bermuda,

Where The Money Avoided Being Taxed Altogether.

The Dutch government has always contended that things weren’t meant to work out this way. All those shell companies and all that money, officials have claimed, are just the accidental byproducts of innovative tax politics that intend merely to give Dutch companies a leg up in a hypercompetitive global economy.

Despite these protestations, the truth is that for decades the Netherlands has deliberately established itself as a tax haven at the direct expense of its European neighbors, the United States, and developing countries. And until recently, the Dutch have gotten away with it. But in the last few years, more and more journalists and researchers have started to sound the alarm.  

Want to Use The Netherlands in Your Tax Planning?
 

 

 

Contact the Tax Lawyers of
Marini & Associates, P.A. 

  

For a FREE Tax Consultation contact us at:

www.TaxAid.com or www.OVDP.com or

Toll Free at 888-8TaxAid ( 888 882-9243) 

 

 

US Expatriation Continues Fueled By Taxes Reporting Penalties & Political Environment

The fourth quarter 2018 citizenship renunciation numbers have been published by the Office of the Federal Register. What these numbers mean and how they differ from recent trends.

Why Do Expats Care About Citizenship Renunciation?

Every quarter, the Federal Register publishes an update of American citizens who have renounced their citizenship. Citizenship renunciation is an issue that especially affects expat since they are faced with the lifelong burden of reporting American expatriate taxes (and sometimes, depending on the amount of income the expat generates, a tax paying burden as well!). Currently, the only way to rid themselves of this requirement is to renounce citizenship – a very permanent decision.

For a long time, expats have wanted to have a bigger say in the political sphere about tax fairness, but have felt ignored by politicians and are stuck with a requirement to pay or report American expatriate taxes.

The stakes are particularly high for expats, who are often unaware of the lingering filing requirements and can have their passports revoked if they are too far behind on filing American expatriate taxes.

Recently, the Tax Fairness for Americans Abroad Act was proposed, which would exempt expats’ foreign earned income from US taxation. Though this is good news, the bill is still far from becoming law, and for now, renunciation is the only recourse to what many feel are unfair taxation and financial reporting requirements.

A Brief History of Citizenship Renunciation Numbers

In 2017, the breakdown of the 5,132 renunciation numbers was as follows:

• Q1: 1,313
• Q2: 1,758
• Q3: 1,376
• Q4: 685

In 2018, the 4,050 renunciation numbers were:

• Q1: 1,168
• Q2: 1,093
• Q3: 1,104
• Q4: 685

Overall, in 2018 the numbers were lower than 2017 by around 20 percent, so it seems that, in general, we’re experiencing a return to more normal renunciation rates.

However, the fourth quarter drop off occurred again, suggesting that expats and American residents in general don’t renounce as often in the fourth quarter, whatever their reasons may be.

Perhaps the last three months of the year are so holiday-laden that Americans worldwide find their wallets light and the expense to renounce too much to bear. The cost to renounce is $2,350 after having undergone a 422% increase in 2015, which is the highest fee in the world. Plus, if you meet certain thresholds, you may also have to pay the exit tax, which can be extremely costly. The thresholds are met if any of the following are true:

• Your average annual net income tax for the five years before the date you renounce exceeds a certain amount that is adjusted for inflation each year (in 2018, the amount is $165,000).
• Your net worth is $2 million or more on the date of your expatriation.
• You did not certify on Form 8854 that you are fully compliant with your US tax obligations for the five years prior to your expatriation.

The way the exit tax is calculated is by deeming all your assets sold on the day before you expatriate; you would then be taxed on the associated capital gain, which can be taxed at a rate as high as 23.8%. But for some, this is still the best option in order to bypass the reporting and financial headaches that come along with American expatriate taxes.

Because of the exit tax, the ideal way to prepare to renounce is to become tax compliant. Even if you are a few years behind, you may be able to get caught up penalty free with the Streamlined Filing Procedures!

 

Former U.S. citizens also will face difficulty in even coming back into the United States for visits.

And it's a choice you can't change. The State Department's website page devoted to renunciation of U.S. citizenship elaborates on the rules and process of surrendering your American persona. The final section notes: 

"Finally, those contemplating a renunciation of U.S. citizenship should understand that the act is irrevocable, except as provided in section 351 of the INA (8 U.S.C. 1483), and cannot be canceled or set aside absent successful administrative or judicial appeal. (Section 351(b) of the INA provides that an applicant who renounced his or her U.S. citizenship before the age of eighteen can have that citizenship reinstated if he or she makes that desire known to the Department of State within six months after attaining the age of eighteen. See also Title 22, Code of Federal Regulations, section 50.20).
 

Renunciation is the most unequivocal way in which a person can manifest an intention to relinquish U.S. citizenship. Please consider the effects of renouncing U.S. citizenship, described above, before taking this serious and irrevocable action.

 

 

So you better make sure you know all the costs, tax and otherwise, of no longer being a citizen of the United States."

"Should I Stay or Should I Go?"

 

Need Advise on Expatriation?


 

Contact the Tax Lawyers of
Marini & Associates, P.A. 

  

For a FREE Tax Consultation contact us at:

www.TaxAid.com or www.OVDP.com or

Toll Free at 888-8TaxAid ( 888 882-9243)

Ten Facts About Tax Expatriation - Part I

• Has the passage of ObamaCare with its associated additional 3.8% Obama Care Tax make you feel like leaving the country?
• Or perhaps you're so sick of liberal Democrats trying to socialize the United States by taxing wealthy people?
• Or maybe you're a naturalized U.S. citizen or permanent resident who has prospered here, but would now like to move back the old country for retirement or to start a new venture?

Whatever your motives, just because you leave the United States and renounce your citizenship, don't assume you can leave U.S. taxes (or U.S. tax forms and complexity) behind, particularly if you are financially well-off.

For those who expatriate after June 16, 2008, the rules are different, since Internal Revenue Code Section 877A applies instead of Section 877. You are subject to an immediate exit tax, which deems you (for tax purposes) to have sold all of your worldwide property for its fair market value the day before your departure from the U.S.

In 1994 a Forbes cover story described how such wealthy Americans as Campbell Soup heir John (Ippy) Dorrance III, the late Carnival founder Ted Arison and Dart Container heir Kenneth Dart had given up their U.S. citizenship and avoided U.S. income or estate tax. Perhaps the most clever was Dart, who managed to come back "home" as the Belize ambassador to the U.S., manning a newly opened Belize embassy in Sarasota, Fla., right where he had previously lived! Since that time, Congress has repeatedly tightened the screws on tax-motivated expatriation.

10 things you need to know about Expatriation:

(set forth below and in two subsequent blog posts)

1. Uncle Sam taxes income worldwide.
The U.S. is unusual in that it asserts the right to tax the worldwide income (and at death assets) of its citizens and those who have become permanent residents. It doesn't matter where you live, where the income is earned, or where else you might pay tax. Yes, you may receive foreign tax credits on your U.S. Form 1040 for taxes you pay elsewhere and those credits will offset some (but typically not all) of the financial burden of paying tax in multiple jurisdictions. But the key point is that if you are a U.S. citizen or a permanent U.S. resident, no matter where you move, Uncle Sam will assert a claim on your wealth. So being a U.S. citizen can be expensive.

2. Expatriating means really leaving.
To even think about putting himself beyond the reach of the Internal Revenue Service, a citizen must give up U.S. citizenship and (in the case of citizens subject to Internal Revenue Code Section 877) severely limit the time spendy in the U.S. to not more than 30 days a year. Under that section, a person who attempts to renounce U.S. citizenship but then spends more than 30 days a year in the U.S. will be treated as a U.S. citizen or resident for that year. You may think no one has ever done this, but many have. Permanent U.S. residents (holding green cards) also pay U.S. tax on their worldwide income. They may find it easier to take the expatriation plunge, particularly if family or business opportunities beckon in their country of origin.

3. The old 10-year window is closed.
Back in 1966 Congress enacted the Foreign Investors Tax Act of 1966, signed into law by Lyndon B. Johnson. Essentially expatriates were subject to U.S. tax on their U.S.-source income at normal U.S. tax rates for a full 10 years following their expatriation. Significantly, though, a person could avoid this tax entirely if he did not have as one of his principal purposes the avoidance of U.S. federal income, estate or gift taxes. Of course few people would admit they had a principal purpose of tax evasion, and the government had a hard time proving it. Suffice it to say that there were lots of people (with good lawyers) marrying foreigners, returning to the country of their birth, etc. The system didn't work very well, and little tax was collected.

"Should I Stay or Should I Go?"

 

 

Need Advise on Expatriation? 
 

 

Contact the Tax Lawyers of
Marini & Associates, P.A. 

 

For a FREE Tax Consultation at:

www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid ( 888 882-9243)  

 

Increased Surge in Expats has Increased the Need for International Tax Advice

According to International Investment, the number of expats hits a record high of 258 million, this increasing global movement of people is driving significant demand for international tax advice. 

Quoting the International Organization of Migration, one in every 30 (about 258 million people) were living outside their country of origin in 2017. 

That is both a record high and a number that has beaten all expectations. A 2003 projection anticipated that by 2050, there would be around 230 million based outside their birth nation. But the latest projection has been dramatically revised upwards, there will be more than 405 million living away from their country of birth by 2050.

The demand for international tax advice is set to grow further still as the world becomes increasingly globalized and as the cross-border regulatory landscapes continue to evolve at a faster pace.

 

This can be attributed, we believe, to three key factors: 

1. First, is the increasing movement of people. Whether driven by geopolitical, work or lifestyle reasons, more and more individuals are on the move around the world.  In addition - and despite the rhetoric of some populist politicians - globalization in the world of trade and commerce is here to stay and is, if anything, gaining momentum as it encourages economic growth, creates jobs, makes firms more competitive, and lowers prices for consumers," he added.
2. Second, since the global financial crisis both individuals and companies have become more financially literate and aware of the importance of specialist financial advice, especially when it comes to cross-border affairs. and
3. Third, the reporting and tax filing requirements are increasing in most jurisdictions.  For instance - and this is just one example - in the US where the Foreign Account Tax Compliance Act, or FATCA, is almost universally recognized as being burdensome, onerous and complex."

"The enquiries are coming from both internationally-mobile individuals and firms who are seeking advice on compliant and up-to-date tax filing, residency issues, inheritance tax, self-assessment, property tax structuring and disclosures, national insurance contributions, trusts and wills," director of deVere Tax Consultancy, Mitch Young, said.

 

Need International Tax Advice?

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

 for a FREE Tax Consultation Contact US at

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).

 

 

 



 

 

 

 

Tax Court Decision May Create Challenges To Deduction Denials for Legal Marijuana Businesses!

According to Law360, a recent U.S. Tax Court decision may open up a new avenue to challenge a tax code provision that prohibits deductions and credits for marijuana businesses, as several court judges said the provision may amount to an unconstitutional excessive penalty.

Earlier this month, the Tax Court in an opinion with multiple partial dissents, upheld a $1.2 million tax deficiency for a California medical marijuana company, rejecting its arguments that Internal Revenue Code Section 280E is a penalty and an unconstitutional excessive fine that violated the Eighth Amendment.

Section 280E, which forbids a business to take credits or deductions when trafficking in a controlled substances, was enacted under Congress’ “unquestionable authority” pursuant to the 16th Amendment , which grants Congress the power to collect taxes on income, the majority opinion said. Section 280E does not violate the Eighth Amendment , which prohibits excessive fines, because the disallowance of deductions is a matter of “legislative grace,” not a penalty, the opinion said.

However, in an opinion dissenting in part, Judge David Gustafson said he would have held Section 280E unconstitutional because the 16th Amendment authorizes Congress to tax “income,” which is a gain or profit, but the disallowance of all deductions under Section 280E results in a tax on something that is different from someone's “income” within the meaning of the 16th Amendment.

 

“Even if it’s not an excessive fine, the fact that it’s a fine means it’s effectively a penalty for crime,” he said.

“That puts 280E in a whole new light.

It’s no longer a tax; it’s a penalty."

 

Judge Gustafson also said in his dissent that the Tax Court's reliance on the Tenth Circuit’s decision in Alpenglow Botanicals LLC v. United States , which upheld the IRS’ disallowance of $50,000 in business expenses for a Colorado marijuana dispensary under Section 280E, was not persuasive because the Tenth Circuit did not perform an Eighth Amendment constitutional analysis.

Since then, 10 states have legalized marijuana, Illinois is slated to legalize cannabis beginning Jan. 1, 2020, and 33 other states and Washington, D.C., have permitted the use of medical marijuana. As marijuana use becomes more mainstream, Section 280E is effectively penalizing businesses trying to legally operate at the state level, according to Rachel K. Gillette, who is chair of the cannabis law group at Greenspoon Marder LLP.

Have a Tax Problem?

 

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

 for a FREE Tax Consultation Contact US at

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).

 

 

 

 

 



 

2nd Circ Orders Trump's Accountant To Hand Over Tax Returns

According to Law360, President Donald Trump and his accounting firm must comply with a subpoena from the Manhattan district attorney and hand over tax returns, the Second Circuit ruled on November 4, 2019, in a decision that will likely be appealed to the U.S. Supreme Court.

The Second Circuit disagreed with U.S. District Judge Victor Marrero of the Southern District of New York that the federal court should abstain from the case under the U.S. Supreme Court's 1971 case Younger v. Harris, which bars federal courts from interfering in matters a state court can handle.

The Second Circuit said that even though the Younger case does not apply, presidential immunity from the state criminal process does not extend to investigations such as grand jury subpoenas at issue in the case.

Manhattan District Attorney Cy Vance is seeking Trump's personal tax returns and other records from Mazars USA LLP as part of an investigation into hush-money payments to two women alleged to have had affairs with Trump, Stephanie Clifford, also known as Stormy Daniels, and Karen McDougal, and how those payments were recorded in the Trump organization's records, the district attorney's office has said. The case is Trump v. Vance Jr., case number 19-3204, in the U.S. Court of Appeals for the Second.

Being Audited by the IRS?

 



Contact the Tax Lawyers at
Marini & Associates, P.A.

 

 for a FREE Tax Consultation Contact US at

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).

 

 

 

 

IRS Auditors Set to Audit Companies that Owe Repatriation Tax

The Internal Revenue Service said on November 4, 2019 that it would begin examinations of U.S.-based multinational companies’ 2017 and 2018 returns to ensure they comply with the repatriation tax provision of the tax overhaul enacted two years ago.

To promote compliance with Internal Revenue Code Section 965 , the IRS said it would start scrutinizing affected multinationals’ returns as part of its campaign announced in July 2018 on that facet of the Tax Cuts and Jobs Act .

The agency said its focus will start with examining 2017 returns and “generally require” looking at companies’ 2017 and 2018 filings. In addition to examinations, the campaign will provide technical assistance to IRS teams working on Section 965 matters, with a focus on identifying and addressing taxpayer populations with potential material compliance risk, according to the agency’s announcement.


The agency also said the audit could expand beyond reviewing taxes paid on offshore profits, it could trigger an examination of other changes companies made to their tax strategies after the 2017 law, which cut the corporate rate to 21% and overhauled the international tax rules.

“It is anticipated that returns selected as part of the 965 campaign will also be risked and, if appropriate,
examined for other material issues,
especially issues related to”
corporate planning
in response to the tax law,

the IRS said on its website, referring to the code section 965.

Affected companies were given the option of paying the tax interest-free over eight years, though as November 4, 2019's notice said, the “vast majority” of Section 965 liability has been expected to arise on corporate returns for 2017 and 2018.

The LB&I division currently has 53 active compliance campaigns listed on the IRS website.

 

Being Audited by the IRS?

 

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

 for a FREE Tax Consultation Contact US at

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).

 

 

 

 

 

 

 

 

 

 

Sources:

 

IRS

 

Law360

 

Bloomberg