www.CostaRicaTicas.com

Expats may face more rules with U.S. tax changes

By the A.M. Costa Rica staff


Proposed U.S. legislation to restrict the use of so-called tax shelters would invoke the Patriot Act to punish firms that are deemed to be impeding U.S. tax enforcement.

The legislation also would deny uncooperative foreign banks the authority to issue credit cards that would be valid in the United States. The use of the Patriot Act now is reserved for institutions that are active money launderers.

In addition, U.S. citizens who deposit money or receive a benefit from a private foreign corporation would be considered to have control of that firm for U.S. tax purposes. Under current law U.S. citizens who hold a foreign bank account that accumulates more than $10,000 at any time in the year have to file paperwork with the U.S. Internal Revenue Service. The legislation would expand that requirement to all foreign bank accounts located in one of 34 countries identified as a tax haven.

Costa Rica is one of those countries.

The legislation and President Barack Obama's plan to clamp down on offshore corporations is starting to generate opposition in foreign countries as officials there begin to understand the ramifications.

The U.S. Stop Tax Haven Abuse Act bill actually is two separate pieces of legislation. U.S. Sen. Carl Levin, a Michigan Democrat introduced Senate bill 506 March 2. It was sent to the Senate Finance Committee for study. The bill has five cosponsors.

The next day Rep. Lloyd Doggett, a Texas Democrat with 64 co-sponsors, introduced a similar H.R.1265 in the House. That bill went to the Subcommittee on Courts and Competition Policy.

The legislation would have wide impact in Costa Rica because many expats here own corporations. Some are involved in business but others are used to hold the ownership of real estate or automobiles. Even a U.S. citizen with a minor interest in a corporation could become involved in reporting and tax requirements under the proposal because the bill presumes that the person owned and exercised control over such entity, regardless of the paper ownership.

In other words, the U.S. citizen would have to provide clear and convincing evidence to the contrary if he or she really did not operate the corporation.

Levin and Doggett this month asked Obama to make approval of the Panama Free Trade Agreement contingent on Panama’s cooperation with efforts to combat international tax evasion.

“In this time of economic distress, we can no longer afford to ignore the billions of dollars of tax revenue lost to the U.S. Treasury due to the bank secrecy practices of Panama and other tax havens,” wrote Doggett and Levin, adding:

“Implementing an agreement on trade while ignoring Panama’s status as one of the world’s recognized tax havens would not only undermine your efforts to address offshore tax evasion, but would also thwart the best opportunity our nation will have to obtain cooperation from a country that has resisted for years American efforts to encourage changes to its secretive banking and regulatory practices.”

The United States taxes the income of its citizens even when they are overseas, although individuals get an $87,600 annual earned income tax exemption on money from foreign sources.

Another element of the twin bills would be to consider a foreign corporation as a U.S. entity for


tax purposes if the management of the company lived in the United States.

Costa Rica found itself labeled a tax haven April 2 when the Organization for Economic Co-operation and Development put it on its so-called black list with three other small countries. Guillermo Zúñiga, minister of Hacienda, quickly announced that lawmakers would be given a bill to end bank secrecy. In other words, bank records of individuals and corporations would become open to tax collectors here and elsewhere in the world.

Zuñiga, in a press release, said that Costa Rican tax authorities can only open bank accounts with the authorization of a judge and that the lifting of bank secrecy for tax purposes would be a very valuable tool to fight tax fraud. He noted that the Arias administration had a program to fight tax fraud.

It was not reported at the time that the U.S. Treasury Department maintains its own list of 37 countries it labels tax havens. Panamá and Costa Rica are on that list. They are called "offshore secrecy jurisdictions."

According to the proposed legislation transferring anything of value to or from a foreign corporation in a secrecy jurisdiction by a U.S. citizen will be presumed to represent previously unreported income in the year of transfer.

"These presumptions are needed in civil judicial and administrative proceedings because the tax, corporate, or bank secrecy laws and practices of these jurisdictions make it nearly impossible for U.S. authorities to gain access to needed information," said a U.S. Senate summary of the bill. "Presumptions may be rebutted by clear and convincing evidence. No evidence may be accepted from a non-U.S. person unless the person appears to testify in the proceedings."

The proposed legislation also orders foreign banks to file an IRS Form 1099 report on any account that has a U.S. citizen as an owner. The same rule applies when a U.S. citizen opens an account.

The bills also increase to five years from three the amount of time that the IRS has to investigate cases in offshore secrecy jurisdictions.

The legislation also addresses trusts and requires reporting of real estate distributions, securities, personal property or objects such as artwork, furnishing or jewelry.

The bills also limit the protection taxpayers would receive from legal opinions about their tax situation if they were involved in an offshore secrecy country. Usually taxpayers elsewhere who receive bad advice pay no or reduced penalties.

Ambassador to the United States from the Bahamas and from Barbados both were critical of the proposals in a discussion on the Levin-Doggett bills Wednesday, according to Carib World News. Officials from Bermuda were said to have met with congressional leaders.

The widespread reach of the Patriot Act once again.

Uh, yeah...whatever he said.....

So I guess you dont care for the politicos of the US.....its the same everywhere.....

_________________
still going Strong!

It also doesn't appear he has much goodwill invested in the scamsters of the tax-cheat havens around the world. Plus there was a whiff of an allusion to one or more Greek tragedies.
A side note: That US income tax from foreign sources Brother Pidd mentioned is for earned income only--not dividends, capital gains or any other type of unearned income, though they may be elsewhere excluded. Don't know how much tax revenue will be gained from this measure but judging by the major howls of protest coming from the Pharma and Tech sectors, gazillions will be repatriated and taxes raked in from ending rampant abuse of "transfer pricing". See Below for details:

http://en.wikipedia.org/wiki/Transfer_pricing
As Wikipedia seems to be a suspect reference in some quarters, here's an ad from a law firm:

www.jonesday.com/transfer_pricing/

_________________
"A man accustomed to hear only the echo of his own sentiments, soon bars all the common avenues of delight, and has no part in the general gratification of mankind"--Dr. Johnson
"Amen, brother"-ED

I Believe the term is world wide income.....and capital gains is included in that....I know because I had to pay it on Canadian land I sold a few years back.....I thought it was unfair but that is the law

_________________
still going Strong!

...and so the noose tightens ...
more W4 requests to come...

PIDD

==========================
Lloyds Bank hit by Obama tax purge
Banking group drops American customers in UK ahead of costly proposals to stamp out tax evasion
By Louise Armitstead
Published: 9:39PM BST 13 Jun 2009


President Obama is planning a crackdown on tax evasion Lloyds Banking Group is ditching American customers based in Britain pending a crackdown on international tax evasion planned by President Barack Obama.

This week American private client account-holders at Lloyds's received letters informing them of an "important change in policy regarding clients who are resident, domiciled or linked to the United States by property or asset holdings". They were told the bank had "no choice" but to "cease acting as your investment manager."

One letter sent to Bank of Scotland's portfolio management division, which is now part of Lloyds, said: "The USA has a mature regulatory environment governed by its Securities and Exchange Commission. These regulations mean that we are not licensed to manage portfolios for US clients."

The letter added: "Unfortunately we cannot offer an equivalent service from within Lloyds Banking Group." Clients have been advised to transfer their assets.

One recipient, who has lived in the UK for over 25 years, said: "After all this time, I've suddenly been told I must take my money elsewhere and I don't understand why. Now I'm scared that other banks won't take me on either."

In its letters to clients, Lloyds has not referred to specific legislation. But last month, The Sunday Telegraph reported that British banks and stockbrokers were threatening to close down accounts held by American citizens due to concerns over new international tax proposals could make it too expensive for them to service the clients.

The proposals, which were unveiled in the President's first budget, have been designed to clamp down on American tax evaders abroad. But bank bosses say that in practice they could be asked to take on the task of collecting American taxes at a cost and legal liability that make servicing the clients inexpedient. The rules have not yet been finalised and are still subject to debate in Congress.

So far Lloyds has started dropping its "mass affluent" clients who have investment portfolios of up to a few hundred thousand pounds but that its "high-net-worth individuals" are not yet effected.

A source said: "Until the new rules are properly explained, we don't know how expensive they will be to implement. But it's clear that Lloyds believes that any extra cost to the system will be too much when it comes to the mass affluent."

The letters also contained four comprehensive descriptions of the bank's definition of clients that are effected. These included clients that hold green cards, pay American taxes, are American domiciled or even those where there is "any indication" that a client spent more time in the US than "normal holidays currently or in the past or future."

President Obama's proposals are built on the so-called Qualified Intermediary system introduced in 2001 that were intended to ensure Americans paid the correct tax wherever they were domiciled. Under the rules, foreign financial institutions that handle American money have to fill in a US tax form on behalf of the client that has to be audited too.

In return, the banks receive a QI seal of approval as a qualified intermediary. Bank bosses say that under plans to extend the system, which includes paying for the figures to be audited twice, the costs and legal liabilities of the system will soar.

APCIMS, the trade body whose members manage £400bn of Britain's wealth and employ 25,000 people, sent a letter to the US Treasury's Internal Revenue Service (IRS) complaining that the "unfair'' proposals represent "no benefit but . . . significant cost'' to its members.

Last night Lloyds declined to comment.

http://www.telegraph.co.uk/finance/news ... purge.html

http://www.telegraph.co.uk/finance/econ ... ystem.html

"Mass affluent" is a term I'd not heard before--"mass effluent", yes--that you find in the ocean off Playa Jaco.
I tell you, I get tears in my eyes thinking of the plight of the affluent. Truly. What were those new unemployment figures last quarter again? Which figures understate the true number of unemployed by about 50%.

_________________
"A man accustomed to hear only the echo of his own sentiments, soon bars all the common avenues of delight, and has no part in the general gratification of mankind"--Dr. Johnson
"Amen, brother"-ED

This is now reality in Costa Rica.

Received this email from my insurance agent this morning.

Nice... Need to "document your income" to buy car insurace...
I'm sure this is just the beginning... waiting for my bank to demand a W-4
be signed.

In no time we'll be required to file a "report"to the IRS on how & to whom we spent our money... "

"neither buy or sell without the mark of the breast""
=========================================




Tel: (+506) 2233 2455 Fax: (+506) 2222-0007
Apartado 5478-1000, San José, Costa Rica
info@InsuranceCostaRica.info http://www.InsuranceCostaRica.info

ANTI MONEY LAUNDERING AND DISCLOSURE

Law No. 8204 “Estupefacientes, Sustancias Psicotrópicas, Drogas de Uso No Autorizado, Actividades Conexas, Legimitación de Capitales y Financiamiento al Terrorismo” (the anti money-laundering law), requires that financial institutions complete a dossier on clients whose financial movements exceed $10,000. INS, as a financial institution, is not excluded, and now has a Compliance Office, with a full-time staff to make sure of full compliance.



Their first objective is to integrate a data base of clients, known as Base Unificada de Clientes, or “BUC”. To do this, it has ruled that as of July 1st, 2009, applications for new insurance or applications to modify existing policies must attach a form “Información del Cliente” (copy attached).

Excepted are the simpler one-shot policies, such as Flight insurance, Students’ insurance, Traveller’s Accident insurance, Domestic Workers’ Compensation, etc.

The form is detailed, and requires from the client the usual identity and contact information. If the client is a corporation, the information is required of the corporation itself and also of the person representing the corporation (“apoderado”), whose power-of-attorney (“personería”) must be attached.

The form must be signed by the client or by the legal representative, if a corporation. Must attach:

Copies of the client’s and signer’s ID’s.
Proof of address (light, phone, or water bill)
Proof of income and sources of income.
“Personería” of the signer (for corporations.)

Once a client has complied by filling out the “Información del Cliente” form and providing the additional info, there will be no more disclosure requirements from that client for two years – after which the information in the BUC is considered obsolete, and the form, etc. has to be done again.

Further information can be found on our web site www.SegurosGarrett.com
======================================

So what does this really mean for all of those espats who have corporations for a cell phone, a car or a home?

Surely the mere presence of a corporation does not automatically invoke more tax liability. Especially if the corporation does no business.

Are there any tax pros out there who can expound?

_________________
Women are like beers. I've never had one that I didn't like. Just some that I like more than others! --Western

Hang in there folks. It won't be long before these Socialist Democrats have control of all monies (domestic and foreign). What did the people expect from the "CHANGE WE CAN BELIEVE IN" crowd? Wealth envy is (defined in the book of Don), as the thought or belief that if someone has $.05 more than they do, then it's not fair and they should be taxed until it is fair. Well, I hope you IDIOTS that voted these IDIOTS in are happy. Your only getting the 'CHANGE YOU CAN BELIEVE IN" that you so richly deserve....NUFF SAID

P.S My mattress is getting awfully lumpy, roflmao.

OK, now that we're done with the unasked-for political rant, has anybody got more substantive info on this important subject?

_________________
"A man accustomed to hear only the echo of his own sentiments, soon bars all the common avenues of delight, and has no part in the general gratification of mankind"--Dr. Johnson
"Amen, brother"-ED

Gentlemen: Do I need to remind you that we do not discuss Politics here. Obviously the subject is relative to CR Residents but it does not mean we need to start the political rants and raves. Either remember this or post elsewhere.

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Thank you for supporting CRT!