International Tax Newsletter - Spring/Summer 2012 - United States
As in our prior International Tax Newsletters, we include here brief descriptions and links for several U.S. international tax matters covered by EisnerAmper during recent months:
RETIREMENT AND SIMILAR PLANS OF INTERNATIONAL CONTROLLED GROUPS
The controlled group and affiliated service group tax rules as they apply to qualified retirement and similar plans are extremely important, as they must be followed in order to maintain the tax-favoured status of a plan! These basically state that, if two or more businesses are part of a controlled group, then the controlled group members are treated as a single employer when applying certain employee benefit plan requirements. For foreign based corporations with U.S. subsidiaries, the level of awareness and compliance with these rules is frequently not very high. As a result, each company in the controlled group may have its own retirement and similar plans with completely different benefits and separate third-party administrators, and none of the parties are aware that a controlled group exists. There are essentially two options for compliance with the controlled group rules: a single employer-wide plan or multiple plans, and the latter itself has two alternatives. These solutions are covered in our Article dated June 15, 2012.
ALTERNATIVE INVESTMENT FUNDS
Implications of the recent Vodafone decision and other international tax developments in India for investors in Alternative Investment Funds are described in our Alert dated March 5, 2012.
NEW REPORTS OF U.S. BANK DEPOSIT INTEREST OF NONRESIDENT ALIENS
The Internal Revenue Service (IRS) has released final regulations requiring reporting of interest paid on deposits maintained at U.S. offices of certain financial institutions by nonresident alien individuals beginning on January 1, 2013. The regulations require reporting only for interest paid to a resident of a country with which the U.S. has an exchange of information agreement in effect. In addition, the rules seek to reassure stakeholders that strict confidentiality will be maintained not only by the U.S. but also by the foreign jurisdiction receiving the information. For more details, please see our Alert dated April 30, 2012.
FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA)
FATCA adds to the Internal Revenue Code, inter alia, new Chapter 4 to provide generally that Foreign Financial Institutions (FFIs) – including not only foreign banks but also foreign hedge funds, private equity funds and others – must register with the IRS in order to avoid a 30% withholding tax on their U.S. source passive income and sales of U.S. securities. FFIs and those doing business with them should prepare now for revised withholding tax Form W-8BEN and new Form W-8BEN-E, as well as for a new online FATCA registration process. These are described in our Alert dated June 7, 2012 and our Press Release dated June 21, 2012.
In related developments, recently the Swiss Parliament voted to approve amendments to the existing Income Tax Treaty with the U.S. to allow U.S. tax authorities to identify more easily U.S.
Taxpayers with undeclared Swiss financial accounts. In addition, France, Germany, Italy, Spain and the U.K. recently expressed support for proposed regulations under FATCA and are engaged in negotiations with the U.S. on intergovernmental agreements to comply with FATCA.
International Tax Newsletter - Spring/Summer 2012 Issue