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by Brian Mahany
During the last three years there has been a global push towards tax transparency. Some countries like the U.S. have taken he heavy handed approach by passing laws requiring foreign banks to provide information on U.S. taxpayers who maintain accounts in those banks. By and large, however, most efforts have been between individual countries. For example, this morning we read of an agreement between Ireland and Uzbekistan. The big news this week, however, is the signing of an agreement by the United Arab Emirates.
The UAE includes the capital of Arab commerce, Dubai and oil rich Abu Dhabi. The finance minister of the UAE signed a memorandum of understanding with the Secretariat of Global Forum of Tax Transparency and Exchange of Information for Tax Purposes. If that sounds like a propaganda statement with some advocacy group, you are wrong.
The Global Forum of Tax Transparency folks are part of the G20 group of nations and the OECD. These two groups consist of the big developed nations including the United States and have been pushing hard to get all the countries in the world to cooperate on the exchange of tax information and money laundering.
The UAE will likely take its participation seriously. Part of the behind the scenes negotiations leading to the signing includes a provision putting the small but wealthy nation on the steering committee. They are also the first Arab nation to come to the table.
The agreement at this point is a memorandum of understanding but that is the important next step to the free exchange of information between tax officials in the the UAE and the IRS.
Opening a bank account in a foreign country is completely legal. In fact, it often makes economic sense. Not telling Uncle Sam, however, is a federal felony and carries huge monetary penalties. If you have or had an unreported offshore account that wasn’t properly reported, time is running out to make amends with the IRS.
Foreign bank and brokerage accounts are reported annually on a Report of Foreign Bank and Financial Account or FBAR form. This year, some taxpayers may also have to report under the new FATCA law as well (Foreign Account Tax Compliance Act). Income from foreign accounts must also be disclosed on your income tax form.
Many Arab Americans maintain accounts in their own home country. The intent of most folks, of course, isn’t to commit tax evasion. Unfortunately, most people simply don’t understand the complex foreign reporting requirements. There is presently an amnesty program called the Offshore Voluntary Disclosure Program or OVDI for those who wish to avoid criminal prosecution and come forward. For those who truly did not know of the reporting requirements, a tradional disclosure may offer even lower penalties.
If you have an unreported bank or brokerage account in the UAE, Dubai, Abu Dhabi or anywhere else in the world, give us a call. Time is running out. Amnesty is not available once you have been contacted by the IRS or if the IRS gets your name from a cooperating foreign bank or tax authority. With the UAE and many other nations pledging transparency, the risks of getting caught grow daily.
For more information, contact attorney Wassim Malas at wmalas@mahanyertl.com or by telephone at (414) 223-0464 or the author attorney Brian Mahany at (414) 704-6731 (direct). All calls protected by the attorney - client privilege and are kept in strict confidence. Translation services are available.
Mahany & Ertl - America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. San Francisco, California coming soon. IRS services available worldwide.
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