Can I pay the IRS in payments
As the fourth state on the Gulf Cooperation Council, Oman is introducing a sales tax of five percent. The law was promulgated by the Tax Authority - Sultanate of Oman on October 12, 2020 and is expected to come into force on April 16, 2021, 180 days after publication in the Official Gazette. This still excludes basic foods, health services, education, financial services, rental income, deliveries of crude oil, petroleum products and natural gas.
The standard rate of five percent is also levied on imports into the Sultanate
The US Treasury has changed the filing and payment deadlines for the 2019 tax year due to the President's Stafford Act.
The general deadline for filing US tax returns has changed from April 15, 2020 to July 15, 2020. No form 4868 is required for this extension and expressly applies to any payments.
The deadline for submitting FBAR reports in 2019 has also been postponed to July 15, 2020.
This does not automatically mean an extension of the submission deadline for the state tax. Here it must be checked for each state whether the submission deadline has been extended.
On September 6, 2019, the IRS issued new instructions for US citizens who have given up their US citizenship but have not yet complied with the obligation to file US tax returns.
The Relief Procedure is only aimed at people who have not yet submitted their US citizenship but have not yet submitted a US Tax Return and who have assets of no more than USD 2 million. Furthermore, these persons are not allowed to owe more than USD 25,000.00 in taxes and have no filing history in the past six years. The procedure also closes the information returns, e.g. B. Form 8938 and the FBAR messages.
Furthermore, the procedure can only be used by people who have given up their citizenship after March 18, 2010. In addition, the procedure can only be applied for by private individuals and not by estates, trusts, corporations, partnerships or other entities.
The IRS expressly points out once again that people who have given up their US citizenship, but not the US tax return of the last 5 years prior to the surrender of citizenship, can face serious consequences.
23 frequently asked questions on this topic were made available on the IRS homepage (www.irs.gov)
Oman: Investing in Vacation Properties
Oman is one of the most stable and prosperous countries on the Arabian Peninsula.
Numerous incentives to promote investment are currently being offered in Oman. The aim is also to promote tourism. Foreigners have recently been allowed to purchase property in the so-called ITC "Integrated Tourism Complex". These are located in the tourism centers "The Wave", Muscat, Jebel Sifah and Salalah Beach. Due to the high standards of the centers, not only Omanis but also residents from neighboring countries and Europeans are being recruited to buy holiday properties.
When investing in a holiday property in Oman, it should be noted that a visa is generally granted for two years, which can then be extended on request. There is also a double taxation agreement with the Sultanate of Oman, which has not yet been ratified. We can support you with the following activities:
- Application for the acquisition of property in the ITC / Oman
- Application for the two-year visa
- Application for the tax card
- Review of tax liability in Oman
- Registration for tax on vacation rentals
- Assistance in contacting the Omani authorities
- Handling of correspondence in Arabic / German / English
Contact person: Ms. Amani El Ghoti
FBAR report I: How high can (may) penalties be?
Under current law, the IRS may impose a penalty of up to $ 10,000.00 for failing to submit FBAR reports.
So far, however, it has been questionable whether the regulation should be understood as "per year" or "per account". For historical reasons, the regulation was understood as "per year".
The US District Court for the Central District of California at in the US case against Boyd on April 23, 2019 passed a noteworthy judgment. According to this, the court considers it "more reasonable" that the rule "per account" is to be understood.
This means that the IRS can set a penalty of a maximum of $ 10,000.00 per year for any unreported account. This would result in a total fine of $ 90,000.00 for three unreported accounts in three years.
The ruling in the US / Boyd case again underlines the importance of checking and complying with the relevant reporting obligations in the context of compliance.
FBAR report II: Must accounts be given in virtual currency?
US citizens and green card holders are known to report foreign accounts to the Department of Treasury if the account held at least $ 10,000.00 on any day of the year. (so-called FBAR report FIN 114)
So far, it has been questionable whether the inventory of virtual currencies also falls under the regulation and whether such accounts are also to be reported.
FinCEN has now clarified that accounts with virtual currency do not fall under the regulation (31 C.F.R § 1010.350 (c)) and that such accounts are currently not to be reported.
It is, however, relatively unlikely that this will remain the case, so that further developments can be observed.
Furthermore, it should be noted that this only affects the FBAR report and NOT the reporting requirement of form 8938 in the tax return
Possible changes in US tax law under Trump
OAlthough the actual changes in US tax law by the Trump administration are still uncertain, significant changes can currently be assumed. The basis for this is the “Blueprint” (A Better Way: Our Vision for a Confident America), which the Republicans adopted under the Bush administration, and the statements on the Trump Campaign homepage. (Trump Proposal) In summary, the following changes could occur:
- Corporate tax
- The highest corporate tax rate should drop from 35% to 15% (blueprint: 20%)
- Blueprint and Trump Proposal want the AMT (Alternative Minimum Tax) to be abolished
- According to the Trump proposal, most credits and domestic production activities deduction should also be eliminated
- According to the blueprint, it should be possible for net losses to be carried forward but not to be carried back. The losses should, however, bear interest but only be able to reduce the taxable income by 90%
- Burden on imported products, services and intangible assets as well as their export from the USA on a cash flow basis. This would be comparable to the EU VAT system (blueprint) and import sales tax
- Under the blueprint, a tax rate of 25% is planned for active income from small businesses including partnerships, limited liability companies and S-corporation. It is unclear whether the 25% tax rate should also apply to large partnerships and S-corporations
- Individual Tax
- Under the Trump proposal, as under the blueprint, there should be the tax brackets 12%, 25% and 33%. For spouses taxed together, the top tax rate should apply for income in excess of $ 225,000, and for singles from $ 112,500.
- The Trump proposal provides for tax brackets of 0%, 15% and 20% for captial gains
- Blueprint and Trump Proposal want to abolish the Net Investment Income Tax and the AMT (Alternative Minimum Tax)
- Significant increase in standard deductions (blueprint and Trump proposal)
- Gift Tax and Estate Tax
- The Blueprint and Trump Proposal provide for the abolition of the estate tax
- It is unclear in both concepts whether changes are planned in the gift tax
Overall, it can be assumed that tax rates will tend to decrease or allowances will be increased. Profit-generating measures should therefore, if possible, be postponed until actual changes in the law become known.
USA: Changes to US tax numbers / ITIN must be renewed
The IRS is changing the rules for ITIN (US tax numbers for people who do not have an SSN, are non-resident or only file a US tax return on request) for the tax year 2017.
All persons who currently have an ITIN must renew it if
- the ITIN was not required to file a US tax return in the past three years
- or the ITIN has expired (ITIN with middle digits 78 and 79, e.g. 9XX-79-XXXX)
In order to renew the ITIN, Form W-7 must be completed in full and sent to the IRS with the relevant documents. The new ITIN program started on October 1st, 2016.
China: Comments by the Zhejiang tax office on Announcement No. 16
On June 30th, 2015 the Zhejiang tax office published a “Guideline for Tax Risk Management of Fees paid to Overseas related parties”. This should be used as an additional interpretation of Announcement No. 16/2015 to be understood. (see our note from April 14, 2015)
The guideline provides examples of the information in Announcement No. 16, which lead to the non-deductibility of the expenses and describes the test methods that the Zhejiang tax authorities should use to examine the facts.
These test methods are listed individually (autenticity test, necessity test, benefit test, value creation test, duplication test, remuneration test) and give an insight into what the Chinese financial authorities will test and how.
However, the guideline also gives recommendations. The Chinese companies with related parties abroad should, if possible, comply with the reporting obligations according to Announcement No. 40 with the CIT filing (Notice regarding certain issues related to the documentation filing with tax authorities for foreign exchange payment under service trade item)
All parent companies with Chinese subsidiaries are well advised to study the guideline and analyze the payment flows in detail. Even if this guideline was published "only" by the Zhejiang tax office, it can be assumed that other tax offices will also examine it accordingly.
Voluntary disclosure in the USA
For years, the USA has been trying to combat tax evasion by closing “tax loopholes” and tracking down previously untaxed assets (including FATCA) and also by making a voluntary disclosure.
For this reason, voluntary disclosure programs were created in 2009 (Offshore Voluntary Disclosure Program / OVP), 2011 (Offshore Voluntary Disclosure Initiative / OVDI) and 2012 (Offshore Voluntary Disclosure Program / OVDP) to give taxpayers the opportunity to avoid criminal charges Prosecution and appropriate penalties to allow the return to tax honesty.
In the SFCP regulations that will apply from 2014, the options for use have been expanded. Especially for taxpayers whose misconduct is not based on intent ("not the result of willful conduct") but on negligence or oversight. This must be explained to the IRS with a corresponding application and the required documents submitted. There is then an OVDP closing agreement with which the process is ended.
There is also a simplified procedure for making up for late FBAR reports. The prerequisite here, however, is that this has not resulted in a tax reduction in the past.
The decision for all procedures is that the taxpayer can provide a comprehensible reason for the previous failure to submit the declarations (reasonable cause). Further information can be found at the link of the IRS: http://www.irs.gov/uac/2012-Offshore-Voluntary- Disclosure program
China: New corporate tax forms for non-resident companies
On April 30, 2015, the SAT published new forms for the CIT (Corporate Income Tax) of non-resident companies. (SAT Announcement No. 30)
The forms have been changed for:
Annual tax returns for non-resident companies that pay tax on an actual basis
Quarterly tax returns for non-resident companies that pay tax on an actual basis
Annual and quarterly tax returns from non-resident companies that are deemed taxed, non-resident companies with no permanent establishment in China
The announcement no. 30 comes into force on July 1st, 2015. The forms can be downloaded from: www.chinatax.gov.cn/n810341/n810755/c1602504/content.html
China: SAT on payments to "related parties" abroad (SAT Announcement No. 16/2015)
The Chinese tax authorities have also used the international discussion about BEPS to regulate the outflow of tax substrates abroad. The announcement no. 16/2015, which focuses in particular on the payments of service fees and licenses by Chinese companies to related parties.
The following fees to related parties abroad should no longer be deductible in China:
- Remuneration paid to related parties who have no economic substance (e.g. pure offshore letterbox companies / holding companies as the parent company)
- Remuneration that is paid to related parties without these persons or companies bearing substantial risks
- Payments made to related parties even though they do not perform any functions
- Costs for control and administration that the foreign related party receives from the Chinese company and to secure the investment serve license payments to the foreign related party if the foreign related person holds the rights to the license but has not made any contribution to the intangible asset itself .
It should be decisive that the "arms-length principle" is adhered to. The Chinese financial authorities can review these transactions 10 years back and discard them if necessary.
The complete announcement can be viewed: www.chinatax.gov.cn/n810341/n810755/c151931/content.html
02/24/2015 US tax debt? Make an offer to the IRS!
The IRS has recently published the "Offer in Compromise" program and Form 656. The aim of the program is to pave a pragmatic way for US tax debtors to get rid of their old tax debts. Thereafter, the tax debtors can submit an offer to the IRS to repay the tax debt. However, the IRS does not have to agree to this offer. In addition, the way there is quite rocky.
The following requirements must be met:
- You have to submit all tax returns that you are required to and
- have made all tax payments for the current year,
- There may be no pending insolvency proceedings.
Furthermore, the IRS will reject the offer if the tax liability can be repaid through installment payments. If the filing of current tax returns leads to reimbursements from the IRS, these can be withheld by the IRS until a decision on the application has been made. Penalties and interest initially continue to run while the application is being processed.
For the application, forms 433-A (OIC) and 433-B as well as 656 must be completed and submitted and a fee of $ 186 must be paid.
According to the IRS, the number of accepted offers rose to 42% of the applications in 2013, but without specifying how many applications were received in total.
05.01.2015USA: Tax Season 2015 submission deadlines
The 2015 tax season has started. The following deadlines must be observed:
January 15, 2015: Final advance payment for the tax year 2014 (Form 1040-ES)
02/02/2015: If the last advance payment has not been made on 01/15/2015, the 2014 tax return must be submitted by 02/02/2015 in order to avoid penalties.
April 15, 2015: Deadline for all 2014 income tax returns from US citizens and resident aliens living in the USA (Form 1040, 1040A and 1040EZ) as well as the deadline for the extension of 6 months (Form 4868)
June 15, 2015: Deadline for filing income tax returns for US citizens and resident aliens who do not live and work in the US.
October 15, 2015: Deadline for submitting income tax returns with an extension of the deadline
10/28/2014 USA: Increased requirements from W-8BEN
In practice, inquiries from clients who are asked by their US business partners to return the W-8BEN form are increasing. What's it all about? The US tax authorities would like to identify recipients of recurring income from the US in order to determine corresponding outflows and, if necessary, subject them to withholding tax. Again, the starting point is the FATCA agreement. US companies have been obliged to "identify" their business partners using the specified forms. If withholding taxes are to be paid on the transaction with the foreign partner, the US company must also register and pay this. If this is not done, the US company can be held liable. In principle, however, there is a deduction obligation in accordance withSection 1473 1 A of the FATCA provisions only applies to interest, dividends, rent, wages and salaries, pensions, periodically recurring amounts and the gross proceeds from the sale of assets located in the USA. “Normal” deliveries of goods are therefore not covered by the agreement. Nonetheless, many US companies send a W-8BEN to their foreign contract partners "as a precaution" even if only goods are being delivered.
May 13, 2014 New double taxation agreement with China
Germany and China signed a new double taxation agreement at the end of March. The new DBA has not yet come into force. The most important changes to the existing agreement are:
If there is a minimum participation rate of 25%, the withholding tax rate for certain distributions is reduced from 10% to 5%. In other cases, a withholding tax rate of 10% remains.
One of the most important changes results from the amendment to Article 5 of the new DTA. The deadline for accepting a permanent establishment (and thus the link to tax liability in the other country) is now 12 months for construction and assembly activities instead of the previous 6 months. A 183-day period within 12 months applies to service establishments.
In practice, this was one of the main points of contention with the Chinese tax authorities in the past, as the acceptance of a permanent establishment meant that the employees employed there were also subject to Chinese tax liability.
The 183-day rule, which up to now had to be checked primarily for expats, was previously based on the calendar year. With the new DBA, the 183-day rule is based on a 12-month period and no longer on the calendar year.
4. Capital gains on sale of shares
The new Art. 13 Para. 5 DBA must be observed with regard to the sale of shares. Thereafter, the sale is generally taxable in the seller's country of residence. This does not apply to company shares whose value is more than 50% based on immovable property located in the other country. This also applies if the seller held at least 25% of the company in question in the last 12 months.
There is a withholding tax of 10% for license payments. For certain license payments (industrial, commercial and scientific equipment) a withholding tax of 10% of 60% of the gross amount (6%) is due.
6. Stricter activity clause
The exemption method continues to apply to Art. 7-10 DTA. According to Art. 23 (2) c DBA, however, there is now an activity clause with reference to Section 8 (1) No. 1-6 AStG. Thereafter, there is a change to the crediting method if proof of active activity according to § 8 AStG is not available. Germany also uses the credit method for income from immovable property, which, however, can be allocated to a Chinese permanent establishment.
03/16/2014 Beware of self-disclosures and Spanish holiday homes listed in the S.L. being held
We had already reported on the judgment of the BFH of June 12, 2013 (R 109-111 / 10). (see October 25, 2013) According to the old DBA, a hidden profit distribution is to be assumed if the holiday home is kept in the Spanish S.L. and the shareholders of S.L. use the holiday home free of charge.
In practice, this has resulted in cases that are not immediately apparent. Example: The German entrepreneur X acquired a Spanish S.L. bought a holiday home in Mallorca. The money comes from untaxed funds from Switzerland. The holiday home has been used exclusively by the X family for years. Due to the current situation, X decides to submit a voluntary disclosure regarding its untaxed funds in Switzerland. At the same time, out of ignorance, he refrains from using the holiday home for years by the family as income within the meaning of the above. To indicate the judgment in the voluntary disclosure. Since an “all or nothing” principle applies with regard to the voluntary disclosure, the relevant tax office evaluates the voluntary disclosure as not validly submitted. There is thus no impunity within the meaning of § 371 AO.
Result: People who want to display themselves and holiday homes in Spain through an S.L. should urgently ensure that the uses of the last few years are also stated in the voluntary disclosure. If necessary, the value of the use should be estimated on the basis of an arm's length comparison.
January 31, 2014 USA: Tax season and tax obligations for 2013
The IRS has opened the tax season for 2013. Tax returns can now be submitted.
Deadlines for submission:
April 15, 2014:
- Form 1040, 1040A, 1040Z, IRA contribution, gift tax returns for gifts over $ 14,000.00 (Form 709, 709 A) for all US citizens living in the United States
June 16, 2014:
- Form 1040 for all US citizens NOT live or work in the United States
01/06/2014 China: Important for expats: The taxation of tax-free salary components must be below
Circumstances in Germany
According to the administrative instruction of the Chinese Ministry of Finance dated May 20, 1995, foreign employees who work for local employers or permanent establishments in China B. the rental costs are reimbursed tax-free by the employer. The costs must be borne directly by the employer, then they are exempt from Chinese taxation. This also applies to the costs of language training or the costs of schooling for the children. Such agreements are generally popular designs to reduce the tax burden in China. In Germany, the employer is responsible for paying the costs.
The Federal Ministry of Finance has now commented on the application of the subject-to-tax clauses in a letter dated June 20, 2013 (Federal Tax Gazette I p. 980). So-called subject-to-tax clauses are used to avoid white income. This means that the taxation right reverts to the country of residence if the source country does not tax the matter in order to prevent "no-time taxation". According to the BMF letter, this is the case if the income is not included in the tax assessment base of the source country.
For expats residing in Germany who have the usual employment contracts in China, there is therefore the risk that the salary components that are not subject to taxation in China are taxable in Germany and lead to corresponding back payments.
10/25/2013 Spain: Hidden profit distribution for free use of the Spanish holiday property of an S.L.
When buying holiday property in Spain, it has often been recommended in the past that the acquisition be carried out by a Sociedad Limitada (S.L.) founded specifically for this purpose. The aim of this design was usually to avoid the sometimes high Spanish wealth tax.
In its decision of June 12, 2013 (I R 109-111 / 10), the BFH decided that there is a hidden profit distribution if the holiday property is used free of charge by the German shareholders. The plaintiffs had an S.L. acquired, who owned a 1000 sqm plot of land with a finca in Port Andratx. The property was available to the shareholders of S.L. Available for stays throughout the year. The tax office treated the free transfer as a hidden profit distribution. The BFH confirmed this view in its decision. The decision on Art. 10 Para. 4 DBA Spain 1966 ("old" DBA) was made explicitly. Due to the changes in the new DBA Spain 2011, the tax situation has been moved from Art. 10 (Dividends) to Art. 6 Para. 4 (Income from immovable property).
Spain would then be entitled to the right to tax and Germany would offset this tax in accordance with Article 22 (2) DBA Spain 2011. Nevertheless, it is recommended to agree on the use as rental in advance and also to carry out this agreement.
08/16/2013 China: New regulations for permanent establishments in Chinese tax law - increasing risk of double taxation
In practice it can be observed that the Chinese tax authorities are increasingly checking the existence of tax permanent establishments. Especially when foreign workers were posted to China, the determination of whether and when a tax establishment existed in China was prone to disputes. In addition, the SAT published Announcement No. 19, which came into force on June 1st, 2013, but also applies to all open cases. The first step is to check:
1. Does the posting company or the Chinese company bear all or part of the business risk of the posting?
2. Does the posting company carry out a performance assessment of the posted worker?
If the non-resident company fulfills both of these points, there is basically a permanent establishment in China. The announcement also lists five points which, in addition to the points mentioned above, lead to the acceptance of a permanent establishment:
1. The Chinese company pays management fees to the posting company
2. Payment of additional amounts as salary, social security amounts for the posted workers
3. The posting company does not pay the full amount paid by the Chinese company for a posted person (freelancer!)
4. The Chinese income tax on wages and salaries has not yet been paid in full in China
5. The posting company decides on the number, qualifications or location of the posted people
A permanent establishment should NOT be present if the posted persons are located in China solely for the purpose of exercising the shareholder rights of the Chinese company.
The definition of permanent establishment by Announcement No. 19 goes beyond Art. 5 DBA China. This means that qualification conflicts can arise if, for example, China is B. a permanent establishment according to the above. Principles, the German tax authorities with reference to Art. 5 DBA China not. This is to be expected because the German tax authorities are skeptical of the lowering of the definition of permanent establishment in other countries (cf. Ditz / Quilitzsch, FR 2012, p. 493 ff.)
06/27/2013 USA: Check voluntary disclosure for FATCA!
Germany signed the agreement on the exchange of information with the USA on the basis of the FATCA legislation on May 31, 2013. (see our news from 02/17/2013)
The consequence is that with the entry into force of the agreement, German banks are obliged to report accounts and account movements of US citizens and green card holders to the IRS.
It can be assumed that the IRS will cross-check the data in the future to identify individuals who have either failed to file US tax returns or have filed incorrect US tax returns.
People who have US citizenship (including double) as well as green card holders who have not submitted a US tax return or have submitted an incomplete US tax return in recent years should therefore consider the possibility of filing a voluntary disclosure.
In US tax law, this is possible with the so-called "Voluntary Disclosure Program". In many cases, voluntary disclosure might make more sense than risking penalties from the IRS.
06/18/2013 The "end" for the "Goldfinger model"
With the passing of the Administrative Assistance Directive Implementation Act, the end of the “Goldfinger” tax-saving model, which had already been planned with the JStG 2013, was sealed.
The so-called Goldfinger model was based on the design that a German taxpayer participated in a foreign personal property law that was located in a country that had concluded a corresponding double taxation agreement with Germany. This PersG now acquired current assets (e.g. gold). In determining the profit in accordance with Section 4 (3) EStG, this resulted in a corresponding expense. If this led to a loss, this had an effect on the German tax rate via the progression proviso under Section 32b EStG, which enabled the tax burden in Germany to be reduced. If the gold was sold at a profit in the following year, the profit remained tax-free in Germany and only had an effect on German tax in the progression proviso. If the taxpayer's income was subject to the top tax rate, the positive progression proviso did not come into effect.
The legislature put a stop to this structure by changing Section 32b (2) sentence 1 no. 2 sentence 2 c EStG. In future, acquisition costs for current assets can only be recognized as operating expenses when they are sold or withdrawn. The regulation applies to all current assets acquired or manufactured after 02/28/2013.
04/30/2013 The end of the foreign activity decree ?!
In the Petersen & Petersen proceedings (C-544/11), the ECJ had to decide whether the so-called foreign activity decree (BMF letter of October 31, 1983, Federal Tax Gazette 1983 I p. 470) violated EU law. The initial case was the action brought by the Petersen couple, which the Rhineland-Palatinate District Court had submitted to the ECJ.
Mr Petersen is a Danish citizen and was involved in a development aid project in Africa. Subsequently, Mr Petersen assumed that the wages paid by the Danish employer would not be subject to German income tax. (Mr. Petersen is based in Germany)
Among other things, he referred to the Decree on Foreign Activities. The tax office contradicted this view. The FG Rhineland-Palatinate then already determined that there is fundamentally a tax liability for the conscious income in Germany. The Abroad Decree is not relevant in this case, as the employer is based in Denmark. At the same time, the tax court saw the potential restriction of the freedom to provide services and referred the matter to the ECJ for a preliminary ruling.
The European Court of Justice has now ruled that the national restriction in the decree for activities abroad violates the free movement of workers in accordance with Article 45 TFEU. It can therefore be assumed that the foreign activity decree will be completely abolished in the foreseeable future. Taxpayers who are currently referring to the decree should follow the further development carefully.
02/17/2013 USA: FATCA - Effects and consequences from 2013 and who is affected?
Due to the effects of the financial crisis, the US government passed the Hiring Incentives to Restore Employment Act on March 18, 2010. Part of this law is the "Foreign Account Tax Compliance Act" (FATCA)
1. Aim of the law
The aim of the law is to combat tax evasion by US taxpayers when investing (money) abroad.
2. Who is affected by the law?
The law affects all US citizens, holders of green cards and people who have stayed in the US for a certain period of time (Substantial Presence Test).
Under certain circumstances, however, third parties who deal with the above People are related (e.g. keep a joint account)
3. How is this to be achieved?
The USA is introducing an additional withholding tax of 30% on withholdable payments from US sources, i.e. interest, dividends and the sale of securities. For this purpose, the IRS uses foreign banks (FFI) that conclude a contract with the IRS. The foreign bank then asks its customer whether it can report the relevant data to the IRS. If the customer refuses, the bank or the financial service provider (FFI) is obliged to end the business relationship with the customer.
The FFI are obliged to check all accounts in a three-stage process to determine whether they have a so-called US account.
4. What are the consequences of FATCA?
The consequences of FATCA are very far-reaching. The FFIs are supposed to act as an extension of the IRS. Occasionally, banks that do not want to operate as FFIs have already terminated their business relationship entirely with customers. However, even for US citizens and green card holders who only live abroad and have not submitted a US tax return for years, the probability of being targeted by the IRS due to the annual FATCA reports of the banks is higher.
01/31/2013 USA: The deadline for submitting the 2012 tax returns is 04/15/2013!
The following deadlines are to be observed by April 15, 2013:
- 2012 US income tax returns must be filed using Form 1040, 1040 A, and 1040 EZ and the calculated income tax must be paid to the IRS
- To extend the deadline, complete Form 4868 and send the estimated tax to the IRS. Form 1040 and 1040 A must then be submitted by October 15, 2012. Form 1040EZ cannot then be countered
- For a gift of more than $ 13,000 / recipient in 2012, the gift tax return must be submitted using Form 709 or 709-A and the calculated amount transferred to the IRS
- US citizens living abroad and foreigners with a residence permit in the US and Puerto Rico can file their US tax return until June 17th, 2013.
12/13/2012 New DTA with Switzerland failed
The new double taxation agreement negotiated with Switzerland on 09/21/2011 was finally rejected in the mediation committee by the countries led by the SPD. The Swiss President Widmer-Schlumpf has already ruled out renegotiations for Switzerland.The current status quo with regard to the double taxation agreement remains, that is, administrative assistance remains on request.
The German tax authorities will now continue to try to buy data from Switzerland, which will then lead to further "discoveries".
On the other hand, there is a “risk” for the German tax authorities that purchases or discoveries are accidental and that further (tax) years become statute-barred.
We have already pointed out several times that, in many cases, the most favorable procedural and monetary solution can be to submit a voluntary disclosure in accordance with § 371 AO regarding untaxed assets in Switzerland. This recommendation is still relevant, also or precisely because of the rejection of the DTA in the mediation committee, as there will probably not be a new agreement with Switzerland in the next few years either.
04.12.2012 Spain: Law to Combat Tax Fraud (Ley 7/2012)
With effect from November 19, 2012, the Spanish Council of Ministers approved the bill according to which action should be taken against tax fraud under the impression of empty budget coffers in Spain. To summarize the measures:
1. Obligation to provide information about foreign assets
In this regard, the Spanish tax code has been changed. Persons with unlimited tax liability in Spain are obliged to provide information about assets and bank accounts located abroad. However, the obligation to provide a declaration only begins with a value of at least € 50,000.00. The corresponding tax return must be submitted within the first 3 months of the new year by the key date December 31. submit.
2. Stricter liability in the event of liquidation
With immediate effect, shareholders are jointly liable for the liquidation of their company up to the amount of their liquidation rate. Under certain conditions, liability can also extend to the transferred assets up to two years before liquidation.
3. Cash transactions
In order to limit abuse in cash transactions, the cash transactions are limited to € 2,500.00 if at least one of the parties involved is an entrepreneur and / or a freelancer. An increase to € 15,000.00 occurs when doing business with non-residents. Banking transactions are expressly excluded from this. If cash transactions are carried out despite the ban, these must be reported with a period of 3 months. Failure to do so will result in the parties committing an administrative offense.
11/14/2012 China: Accounting treatment of sales tax
As already reported several times in our news (03.10.2012 / 20.04.2012), China will gradually convert its sales tax system to a uniform sales tax system.
In practice, this repeatedly leads to application and delimitation difficulties. The Chinese Ministry of Finance (MOF) has now issued a statement on the accounting treatment of sales tax (No. 13/2012 of July 5, 2012).
A distinction must be made between whether a company is participating in the VAT pilot phase or not. According to this, the sales tax (VAT) should be shown below the sales revenue.
Corresponding accounts (tax payable, VAT payable) should be opened on which the payment load etc. should be accounted for.
11/14/2012 ECJ: German regulation on input tax refunds for foreign companies is contrary to EU law
Foreign companies can have the input tax paid in Germany reimbursed within the framework of § 59 ff. UStDV if, among other things, they do not make any taxable or tax-exempt sales and are based abroad.
With its decision of October 25, 2012 (case C-318-11 / Daimler AG), the ECJ ruled that a company is only excluded from the input tax refund procedure if it has a permanent establishment in another country AND output services that are taxable from this establishment he brings. Daimler AG had sued the Swedish state. Although Daimler AG has a 100% subsidiary in Sweden, it does not have its "own" branch from which taxable sales were made in Sweden. Sweden refused the input tax refund on the grounds that Daimler AG was a domestic company in this regard. The ECJ did not see it that way.
This means that the German regulation in § 59 No. 2 UStDV is also contrary to Union law and no longer applicable. According to German law, the input tax refund procedure is already excluded if the foreign company has a branch in Germany.
October 26, 2012 DTA with Spain entered into force
The new double taxation agreement with Spain came into force on October 18, 2012 (see our news from September 14, 2012 / July 10, 2011 and May 15, 2011). It now applies to payments from 01/01/2013.
October 3rd, 2012 China: Expansion of the pilot zones in sales tax
The Chinese sales tax law still recognizes the separation between sales tax and business tax. The most important difference between VAT and business tax is the possibility of deducting VAT as input tax, while this is not possible with business tax. The separation between VAT and business tax often leads to difficulties in practice, especially with mixed sales.
China is therefore now trying to convert the system to a uniform VAT system. That is why a pilot zone was introduced in Shanghai. (see our news from April 20th, 2012)
From September 2012 the regions Beijing, Jiansu, Anhui, Fujian, Guangdong, Hubei, Zhejiang and Tianjin will follow one after the other. Affected companies should therefore immediately start preparing to implement the corresponding measures.
14.09.2012 Spain: Tax changes as of 01.01.2013 - need for action when buying or selling real estate?
With Royal Decree 20/2012 of July 13th, the Spanish government adopted far-reaching measures to ensure budget stability.
The general VAT rate will be increased from 18% to 21%. At the same time it was decided that for areas that were previously subject to the reduced tax rate of 8%, the general VAT of 21% should now be applied. This concerns the z. B. theater, film and sporting events. The reduced tax rate increases from 8% to 10%. These changes came into force on September 1st, 2012.
The VAT rate is also increased for the delivery of new buildings and extensions. The lower rate of 4% applies until December 31, 2012. This will be increased to 10% on 01/01/2013 and of course also applies to foreigners. If you are thinking of buying or selling real estate in Spain, you should consider whether the transaction would make sense this year with a lower VAT rate.
In order to relieve the employer, it was also decided to reduce the employer's share of the social security contribution in 2013 by 1%. In 2014, the AG share will decrease by a further percentage point.
August 7, 2012 Income of a pilot of an Irish airline is not taxed in Germany / Treaty Override and white income in the judgment of the BFH of January 11, 2012 (I R 27/11)
The BFH had to decide on the case of a pilot who moved from England to Germany in March 2007 and thus became fully taxable in Germany. He worked for an Irish airline. Upon request, the Irish tax authorities reimbursed him in full for the income tax withheld there. The German tax office made the amount subject to German taxation with reference to Section 50d (9) sentence 1 no. 2 EStG and took the view that Art. XXII (2) sentence 1 letter a double letter. aa of the DTA Ireland would not apply. According to this, the income in Germany would have to be excluded from the assessment base for the tax.
The BFH justifies its decision by stating that in this case Section 50d (8) EStG supersedes the treaty override clause in Section 50d (9) EStG as a more specific norm. It should also be noted that the application of Section 50d (9) EStG should be limited to genuine qualification conflicts. Exactly this was not the case here, as Ireland had deliberately waived taxation and the taxpayer was able to prove this.
The tendency of the legislature to prevent white income (income that is not taxed in any country in cross-border situations) by all means has, inter alia. led to the treaty override clauses § 50d Para. 8 and 9 EStG. The BFH submitted the question of whether these provisions violate the constitution to the Federal Constitutional Court (judgment of January 10, 2012, I R 66/09).
In its statement of July 6, 2012, the Federal Council asks for future legislation to ensure that Section 50d (8) and Section 50d (9) of the Income Tax Act can be applied in parallel.
However, the legislature should endeavor to prevent white income by concluding appropriate double taxation agreements and avoid unilateral individual measures. In the newly negotiated but not yet entered into force DTA Ireland z. B. a corresponding fallback clause agreed.
07/07/2012 Spain: OFD Frankfurt's new ruling on properties in Spain
With regard to the rental, owner-occupation and sale of properties in Spain, OFD Frankfurt published an order dated May 16, 2012. (S 1301A - ES.08-St56)
In the ruling, it is first stated once again that, unlike many other double taxation agreements, both countries have the right to tax income from immovable Spanish property and double taxation by offsetting (Art. 23 Paragraph 1 b ee Double Taxation Agreements Spain) of those paid in Spain Tax is avoided. At the same time, it should be noted that, conversely, the losses from Spain are also offset against income.
Regarding the alienation of Spanish property, the letter stipulates the following:
1. Sale of real estate until the new DBA Spain comes into force:
The heads of the external tax departments follow the opinion of the FG Münster. Profits from the sale are exempt from German taxation. The exemption method in accordance with Section 23 (1) a DBA Spain applies, taking into account the progression proviso
2. Sale of real estate after the entry into force of the new DBA Spain:
Double taxation of a capital gain after the entry into force of the new DBA Spain is avoided according to Art. 22 Para. 2 Letter B No. vii DBA Spain by offsetting the taxes paid in Spain.
It remains to be seen when the new DBA Spain will finally come into force.
It is also noteworthy that if the taxpayer is unable to provide information, the letter is explicitly informed that the information procedure should be carried out with the Spanish tax authorities.
05/30/2012 BMF on the granting of relief to foreign companies
The anti-shopping clause of Section 50d (3) EStG was introduced by the legislator in order to prevent improper arrangements in the context of withholding tax reductions on distributions to foreign companies. The European Commission considered the provision to be incompatible with European law. Furthermore, the ECJ has consistently ruled that a clause violates European law if there are no provisions to prevent abuse. B. by means of counter-evidence, inter alia. can be refuted. Such a possibility contained the § 50d Abs. 3 EStG a. F. not. For this reason, Section 50d, Paragraph 3, No. 1 of the Income Tax Act was revised with the Contribution Directive and came into force on 01.01.2012. On January 24, 2012, the BMF published a letter on Section 50d (3) EStG in order to clarify any doubts about the changes as of January 1, 2012. (BMF of January 24, 2012, IV B 3 - S 2411/07/10016.
The main point of criticism of the old regulation was the regulation according to which the withholding tax reduction was denied if the company in question did not generate at least 10% of its gross income from its own economic activity. A sharing clause has now been introduced. This states that the refusal of the exemption from withholding tax deduction only has to take place proportionally according to the ratio of “harmful” vs. “harmless” gross income.
According to Section 50d (3) sentence 2 EStG, only the circumstances of the foreign company should be decisive for the consideration to be made. It is questionable whether this requirement of the legislature does not already constitute discrimination under EU law.
Overall, the BMF letter has contributed to some clarifications, but not to an easier handling of Section 50d (3) EStG in practice.
20.04.2012China: VAT pilot project started in Shanghai
The Chinese sales tax system consists of value added tax (VAT), business tax and consumption tax. An input tax deduction was basically only possible for value added tax, which led to a cascade effect for sales in the area of business tax (e.g. services, etc.). The Chinese Ministry of Finance (MOF) and the State Administration of Taxation (SAT) published the Caishui 110 and Caishui 111 on November 16, 2011, which started as a pilot project in the Shanghai region on January 1, 2012. As part of the pilot project, transport and logistics services, research and development services, sales from licensing, sales from operating and finance leasing, software services, advertising (advertising services), the aim of the pilot project is to provide these services that were previously subject to business tax have inferred to charge VAT and therefore allow an input tax deduction.
In addition, VAT payers are divided into two categories. The first category consists of VAT payers who have an annual turnover of more than 5 million RMB, the second category concerns companies with an annual turnover of less than 5 million RMB. (VAT small scale taxpayers / can apply to be treated in the same way as category 1)
The sales tax rates on the respective services performed depend on the classification. Conversely, the VAT invoiced is deductible as input tax for participants in the pilot project. (Input VAT) The place of performance in the context of the pilot project is considered to be China if the supplier or recipient is based in China.
The experience of the MOF and SAT from this pilot project will determine whether the changed sales tax system will also be introduced in other parts of the country. In general, the further development of sales tax law is to be welcomed. The separation of sales according to value added tax and business tax alone has repeatedly led to considerable difficulties in practice.
02/18/2012 Paradigm shift due to the EU initiative on cross-border inheritance taxation?
Due to the fact that there are currently only very few double taxation agreements in inheritance tax matters between the European states, the EU Commission has started an initiative that is intended to eliminate the problems resulting from this. The inheritance tax in Europe is characterized by the fact that there are no individual EU-wide regulations and the individual states are free to design their national regulations accordingly. This fact, as well as the finding that some countries no longer levy inheritance tax at all, often lead to problems with cross-border inheritance in practice. Several proceedings have already been submitted to the ECJ in this regard (cf. e.g. case Jäger C 256/06)
The EU initiative therefore proposes to rely more on tax exemptions in the legal systems of the individual member states. According to the EU Commission, this could e.g. B. can be done through the exclusive taxation of immovable property in the state where the property is located, i.e. in fact through the "exemption". However, this runs counter to the efforts of the Federal Republic of Germany. In Germany, a resident is taxed within the framework of unlimited tax liability with the entire acquisition, i.e. worldwide. If foreign inheritance tax is to be paid, this can be credited within the framework of § 21 ErbStG. (For the problems, see our Tax News from April 25, 2011)
Result: If the proposals of the EU Commission are implemented, the Federal Republic of Germany will not be able to avoid concluding more double taxation agreements in inheritance matters than before in order not to lose a tax base. The Commission's proposals can be found at: http://ec.europa.eu/taxation_customs/taxation/personal_tax/inheritance/index_en.htm
02/10/2012 Spain: Crediting of withholding taxes in the assessment procedure - New decision of the OFD Münster
In our Tax News on October 31, 2011, we mentioned the BMF letter regarding the reimbursement of Spanish withholding tax after the withholding tax was introduced. The OFD Münster has now pointed out with an order of January 3rd, 2012 (S1301-35-St45-32) and (S1301-13-St45-32) that the refund of Spanish withholding tax (e.g. if the tax exemption is exceeded ) can also be applied for as part of the assessment in accordance with Section 32d (5) EStG in Germany. The assessment and payment of the Spanish tax by the taxpayer must be proven, which can be done by submitting the dividend statement.
04.01.2012 China: Note the deadline for registering foreign employees!
With Decree No.113 the Ministry of Labor and Social Security has specified the rules for registering foreign workers for social security. According to this, employers must register their foreign employees by December 31, 2011 and pay the social security contributions that have accrued since October 15, 2011. Due to the holiday-related absence of many foreigners, the Chaoyang district has extended the deadline for paying contributions until January 20th, 2012. If registration or payment of the contributions is not made in time, there is a risk of a fine.
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