Year 2022 is here and it is time to start planning ahead for tax payments.

It is advisable that you follow this tax diary and comply with your tax obligations in order to avoid paying unnecessary penalties and interest.

Tax diary can be downloaded using the following link

Our experienced tax team is available if you need professional consulation.

NOTE: Tax information contained in our publication is accurate as of the day of release.

We kindly remind you that under the provisions of the Income Tax Law, every Company resident in the Republic is deemed to have distributed 70% of its profits after taxation (as adjusted for DDD purposes) in the form of dividends within two years from the end of the tax year in which such profits were generated. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time.

SDC – Special defense contribution is imposed to the extent that the ultimate direct/indirect shareholders of the company are Cyprus tax resident and domiciled individuals at the rate of 17%.

GHS – General healthcare system contribution is imposed to the extent that the ultimate direct/indirect shareholders of the company are Cyprus tax resident individuals at the rate of 2.65% (gross emoluments earned by individuals subject to GHS are capped to EUR 180,000 per annum).

Both SDC and GHS on deemed dividend distribution for profits generated in the year 2019 are payable by the company for the account of the shareholders by 31/01/2022.

Late payment of the SDC and GHS due will be subject to interest at the current rate of 1.75% per annum and to a 5% penalty on the tax due. An additional penalty of 5% on the tax due may be imposed if the tax remains unpaid two months after the above due dates.

We are at your disosal to assist you with the calculations, the administration of the payment and the submission of the relevant declarations.

15% corporate minimum tax

The bill introduces a new 15% minimum tax on corporations to help pay for climate and health care measures. The tax applies to companies that generate $1 billion in annual earnings. The Joint Committee on Taxation (JCT) estimates the tax will raise $313 billion in revenue over the next decade. Exemptions from the tax demanded by Sen. Kyrsten Sinema (D-Ariz.) to secure her 'yes' vote include: Exemption for companies that use accelerated depreciation to help pay for new investments. Exclusion of small businesses that are subsidiaries of private equity firms.Prescription drug pricing reformThe bill allows Medicare to negotiate prices for some drugs for the first time. This is a policy Democrats have attempted to enact, over objections from the pharmaceutical industry, for many years. The provisions are expected to save $288 billion over 10 years according to analysis by the CBO.Enhanced IRS tax enforcementThe Inflation Reduction Act of 2022 allocates $80 billion to increase enforcement by the IRS. Supporters of the measure hope that additional employees and better technology will allow the IRS to catch more tax cheats, especially among the ultra-wealthy. The CBO believes this could boost IRS revenue by at least $124 billion over the next decade.Stock buybacks will be subject to an additional tax once the legislation becomes law. A 1% excise tax on buybacks is expected to generate $74 billion by 2031.In a bid to recoup tax revenue lost to private equity, the act imposes a limit on losses businesses can deduct from their taxes. These measures are designed to prevent wealthy individuals from reducing or even wiping out their income tax liability.Energy security and climate change investmentThe largest investment made by the Inflation Reduction Act of 2022 is for energy security and climate change. It totals $369 billion and consists of the following:3Business Incentives and Tax Credits Incentives to businesses to deploy lower-carbon and carbon-free energy sources. Tax credits for energy production and investments in wind, solar, and geothermal energies. Tax credits for investment in battery storage and biogas. Tax credits for investments in nuclear energy, hydrogen energy coming from clean sources, biofuels, and technology that captures carbon from fossil fuel power plants. Bonuses for companies based on worker pay and the manufacture of steel, iron, and other components in the U.S. New tax credit rules make EV tax credit hard to get:3 EV must be made in North America. Eliminates credits for pricey EVs, i.e., Hummer EV, Lucid Air, and Tesla Model S and Model X. Lowers tax credit on new EVs with battery minerals sourced from countries other than the U.S.Business and Consumer Incentives Incentives to companies and consumers who make cleaner energy choices. Tax credits for residential clean energy costs including rooftop solar, heat pumps, and small wind energy systems. 30% credit through 2032—phases down after 2032. Electric vehicle tax credits of up to $7,500 on new EVs and $4,000 on used. Tax credit for energy efficiency in commercial buildings. Grants and loans to help companies reduce emissions of gas methane from oil and gas. Fees levied on producers with excess methane emissions. $27 billion toward additional incentives for clean energy technology. Some provisions of the Inflation Reduction Act of 2022 actually increase fossil fuel production on public lands.Use of Public Lands New requirements to hold lease sales that open up new oil and gas production.Affordable Care Act extensionThe legislation extends financial assistance to help people enrolled in ACA through 2025.

The Lithuanian State Tax Inspectorate (STI) has announced that over 39,000 taxpayers who have been included in the affected-by-COVID-19 list have already concluded more than 14,000 interest free tax– loan agreements with STI.

Lithuanian taxpayers, included into the list of affected-by-COVID-19 and having tax debts to STI accrued before August 31 2021, are eligible for interest–free set out of those debts up until December 31 2022. The deadline to apply for this incentive was August 31 2021. 15,000 applications have been received.

Taxpayers also have an option to extend the repayment of tax debts for a maximum period of 5 years, however, starting as of January 1 2023, unpaid tax debts will bear an interest of 0.01 % per day.

It is worth to mention that taxpayers, included into the list of affected-by-COVID-19, having tax debts to STI and not applied for the above incentive, are required to settle their tax debts in full not later than until 31 October 2021. As of November 1 2021 all unsettled tax debts will be charged with interests and enforced by STI.

The competent authorities of the United States and Malta signed a competent authority arrangement (CAA) confirming their understanding of the meaning of pension fund for purposes of the United States–Malta income tax treaty (Treaty). The competent authorities have entered into this agreement after becoming aware that U.S. taxpayers with no connection to Malta were misconstruing the pension provisions of the Treaty to avoid income tax on the earnings of, and distributions from, personal retirement schemes established in Malta.

The CAA confirms the U.S. and Malta competent authorities’ understanding that (except in the case of a qualified rollover from a pension fund in the same country) a fund, scheme or arrangement is not operated principally to provide pension or retirement benefits if it allows participants to contribute property other than cash, or does not limit contributions by reference to income earned from employment and self-employment activities.



Because Maltese Personal Retirement Schemes Contain These Features, They Are Not Properly Treated As A Pension Fund
For Treaty Purposes And Distributions From These Schemes
Are Not Pensions Or Other Similar Remuneration.

The IRS put taxpayers on notice earlier this year that it was reviewing the use of Maltese personal retirement schemes and that some U.S. citizens and residents are relying on an interpretation of the U.S.-Malta Income Tax Treaty (Treaty) to take the position that they may contribute appreciated property tax free to certain Maltese pension plans and that there are also no tax consequences when the plan sells the assets and distributes proceeds to the U.S. taxpayer. Ordinarily gain would be recognized upon disposition of the plan's assets and distributions of the proceeds.

The IRS is actively examining taxpayers who have set up these arrangements and recognizes that other taxpayers may have filed tax returns claiming Treaty benefits as a result of their participation in these arrangements. These taxpayers should consult an independent tax advisor prior to filing their 2021 tax returns and take appropriate corrective actions on prior filings.

The IRS also cautions taxpayers against entering into any substantially similar arrangements that would seek to misconstrue the provisions of a bilateral income tax treaty of the United States to avoid income tax. IRS enforcement, both the civil and criminal divisions, is committed to pursuing abuse and those who market and participate in abusive transactions.

The CAA is available on irs.gov and will be published in the Internal Revenue Bulletin.

Have an IRS Tax Problem?

Interests in some foreign accounts holding digital assets such as cryptocurrency would have to be disclosed to the Internal Revenue Service under a proposal put forth Monday by the U.S. Department of the Treasury.

The proposal outlined in Treasury's ''Green Book'' explanation of tax policies would impose a reporting mandate for foreign digital asset accounts under Internal Revenue Code Section 6038D(b).

The Mandate Would Apply To Taxpayers Who Have
More Than $50,000 In Cryptocurrency,
Financial Accounts And Other Assets Held Overseas.

The proposal would cover any account housing digital assets maintained by a foreign digital asset exchange or asset service provider, and Treasury would be permitted to issue regulations expanding the scope of the accounts, according to the Green Book. The proposal would be effective for returns that have to be filed starting in 2023.

Section 6038D, created by the Foreign Account Tax Compliance Act, already requires reporting from anyone holding an interest in at least one specified foreign financial asset with a total value of at least $50,000, according to the Green Book. Treasury said in the Green Book that mandating people to specifically report offshore holdings of accounts with digital assets, subject to big penalties if they don't, is vital to curbing potential use of digital assets for tax avoidance.

''Tax Compliance And Enforcement With Respect To
Digital Assets Is A Rapidly Growing Problem,''
Treasury Said In The Green Book.

The Green Book also calls for increased reporting from financial institutions and digital asset brokers for purposes of exchanging information with foreign governments. Some financial institutions would have to report the account balance for all accounts housed at U.S. offices and held by foreign individuals, according to the Green Book.

Furthermore, if adopted and combined with existing law, the proposal would force brokers to report gross proceeds and other required details regarding sales of digital assets with respect to customers and substantial foreign owners in the case of some passive entities, the Green Book said.

That proposal would allow for the automatic exchange of information with other countries and provide Treasury with details on U.S. taxpayers who directly or through passive entities engage in digital asset transactions outside the country, according to the Green Book.

Treasury also wants to allow actively traded digital assets and derivatives or hedges of them to be marked to market if dealers or traders elect to under rules similar to those applying to actively traded commodities, the Green Book said.

The Green Book was released the same day President Joe Biden's administration released its budget proposal, which calls for raising the corporate tax rate to 28% and imposing a minimum tax rate of 20% on taxpayers whose incomes top $100 million.

The digital assets proposals in the Green Book together would raise about $11 billion, according to Treasury. In total, the Biden administration's budget is proposing $2.5 trillion in revenue increases.

The Ministry of Finance, UAE has released a Public Consultation Document on Corporate Tax

On April 28, 2022, the Ministry of Finance (MoF) of the United Arab Emirates (UAE) release a Public Consultation Document on the proposed UAE Corporate Tax regime to obtain input from stakeholders.

Recognizing the importance of consultation with the business community and other interested stakeholders the MoF has requested the stakeholders to send in their clear and concise comments by 19 May 2022, focusing on aspects of the proposed Corporate Tax regime that may help to reduce compliance cost and complexity, and improve certainty for both the tax administration and taxpayers alike. Ministry also invited comments on areas that are otherwise not covered in this document.

UAE Tax authority announces whistleblower program

The Federal Tax Authority (FTA) has launched its ‘whistleblower’ programme for tax violations and evasion The new program, named ‘Raqeeb’ is a reporting mechanism that aims enhance transparency and competitiveness in the field of doing business, raise tax compliance rates, and boost tax awareness and society’s confidence in the tax system.

Effective from April 15, the programme allows FTA to receive reports from individuals on tax evasion cases, tax-related fraud and violations of tax legislation. It also enables the authority to verify the reports and grant monetary rewards to informants if the report leads the authority to collect tax amounts worth more than Dhs50,000.

The FTA’s whistleblowing program applies to excise and valued-added taxes at present. The program could take on more significance in 2023 when the UAE introduces a corporate tax for the first time.

UAE Cabinet approves establishment of UAE Council for Digital Economy

The UAE Cabinet met in second week of April 2022 and approved a new Digital Economy Strategy that aims to increase the contribution of this sector to the GDP to 20 percent over the next 10 years.

The meeting was chaired by Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai and was held at Qasr Al Watan Abu Dhabi.

The UAE Digital Economy Strategy aims to double the contribution of the digital economy to the GDP from 9.7 per cent to 19.4 per cent within the next ten years, according to state news agency WAM.

The strategy includes more than 30 initiatives and programmes targeting six sectors and five new areas of growth. It will define the digital economy, with a unified mechanism for measuring its growth while measuring its indicators periodically.



The Cabinet also approved the establishment of the UAE Council for Digital Economy chaired by Omar bin Sultan Al Olama, Minister of State for Artificial Intelligence, Digital Economy, and Teleworking Applications.

The UAE Council for Digital Economy will support the aim to double the contribution of the digital economy to the UAE’s GDP in the year 2031 and enhances the implementation of the Digital Economy Strategy initiatives in all economic sectors.

Among the several resolutions adopted during the meeting was the decision in the form of cabinets approval to adopt an agreement to link the payment systems of the Gulf Cooperation Council (GCC) countries.

FTA issued clarification on gold making charges

The Federal Tax Authority (FTA) in UAE has recently issued a public clarification – VATP029 on Gold Making Charges confirming that the suppliers of the gold jewellery are required to pay VAT on the making charges. This clarification only applies to gold and products consisting mostly of gold, that do not qualify for zero-rating. These goods are collectively referred to as “Gold Items”.

Public Clarification on Missing or deficient Excise Goods released

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published an Excise Tax Public Clarification (EXTP007) on Excise goods that are deficient or missing and the process for the destruction of Excise goods within a Designated Zone (DZ).

As per the clarification, the FTA needs to be notified of the deficiency or shortage within 30 days of discovering the deficiency through a declaration along with supporting documents. An approval from competent authority is also required to be provided in case of destruction of goods that were expired and can be destroyed only on sanction from the FTA.

The scenarios of deficiency, procedure for filing the Declaration and the requirements of supporting documents have been detailed in the clarification. It has also been clarified that there is no ability under the Executive Regulation for businesses to secure relief on products which have been subject to excise tax previously but are then considered as ‘wastage’.

FTA issued clarification regarding time limit for claiming refund of VAT by tourists

FTA in its Decision No. 4 of 2022 has decided that the operator of the Tax Refunds for Tourist Scheme shall set a one-year time limit for tourists to claim the refund of Value Added Tax through bank card or by cash, from the date of verification of the refund request.

Ministry of Economy released circular in connection with AML/CFT Compliance for Licensed Real estate brokers and agents

The UAE Ministry of Economy has on 24 June 2022 released Circular No. 05/2022 instructing all real estate brokers and agents to inter alia submit a ‘Real Estate Transaction Report’ (“REAR”) via the Financial Intelligence Unit’s (“FIU”) goAML platform in following circumstances:

Cash transaction equal to or exceeding AED 55,000

Method of payment is virtual asset

In case of funds used for transaction has been converted from a virtual asset.

Chilean Senate Approves Tax Treaties with United Arab Emirates, alongwith India and the Netherlands

On 8 June 2022, the Chilean Senate (upper house of Congress) approved the laws for the ratification of the pending tax treaties with the United Arab Emirates along with India and the Netherlands. The laws were approved by the Chamber of Deputies (lower house) on 3 March 2022.

The income tax treaty between Chile and the United Arab Emirates was signed on 31 December 2019. The treaty will enter into force once the ratification instruments are exchanged and will generally apply from 1 January of the year following its entry into force.

Comprehensive Economic Partnership Agreement between India and the United Arab Emirates [UAE] has Entered into Force

The UAE-India CEPA was signed on 18 February 2022 and entered into force officially on 1 May 2022. The immediate benefits will include:

Simpler customs procedures – the process will be much smoother and near-frictionless

Clear and transparent rules on trade
Lower tariffs
Enhanced market access
Government procurement opportunities
Greater information and guidance for SMEs

UAE exporters can now benefit from greater market access through preferential tariff rates. Some products will be subject to zero tariffs from day one - others will see them reduced over time. The Ministry of Economy website lists the tariff classification (based on HS code of the product), This is help business to determine the preferential tariff rate for their product and estimate the charges.

An American couple who lived in Australia is not owed tax refunds for claimed foreign earned income exclusions because they failed to properly file their returns with the Internal Revenue Service, the Federal Circuit ruled in Brown v. U.S., case number 21-1721, in the U.S. Court of Appeals for the Federal Circuit, on January 5, 2022.

George and Ruth Brown can't claim approximately $13,000 in refunds from the IRS for tax years 2015 and 2017 because they failed to sign their amended returns directly and didn't tender power of attorney to a legal representative, the appeals court said.

The Browns failed to comply with the signature and verification requirements under Internal Revenue Code Section 7422(a), the three-judge panel said in a published, unanimous opinion.


''The Browns Admit That They Neither Signed Their Refund Claims Nor Tendered Powers of Attorney To Permit Their Tax Preparer To Sign The Claims On Their Behalf,''
U.S. Circuit Judge Alan David Lourie Said In The Court's Opinion.



The Browns lived in Australia for the 2015 and 2017 tax years, during which time George Brown worked for the American company Raytheon, according to the opinion.





John Anthony Castro, an attorney who worked for the Browns, filed three amended tax returns on their behalf that sought refunds relating to the foreign earned income exclusion — outlined under IRC Section 911, which is meant to exclude foreign-sourced income from taxable income.

In a decision letter from April 2019, the IRS explained to the Browns that they wouldn't be receiving the refunds they requested and that as an employee of Raytheon, George Brown may have permanently waived his right to the foreign earned income exclusion by signing a closing agreement with the company, the opinion said.

In June 2019, the Browns filed suit against the government in the Court of Federal Claims, arguing their refunds had been inappropriately denied. In response, the IRS asked the court to dismiss the case, citing a lack of subject matter jurisdiction, which the court granted.

The appellate court, however, found that the lower court incorrectly ruled that the ''duly filed'' requirement in Section 7422(a) is a jurisdictional matter. Instead, the higher court concluded, it's more of a ''claims-processing rule.''

The Browns were also incorrect in arguing that the IRS had somehow waived the signature and verification requirements of Section 7422(a) by merely processing their refund claims, the appellate court ruled, saying those requirements derive from statute and the IRS doesn't possess the power to waive them.

Have an IRS Tax Problem?

A judgment by the District Court in Tel-Aviv-Jaffa was published on the subject of an appeal by the Nawi Brothers Group Ltd. (hereinafter – The Company) against an assessment order, in which it was determined that the Company is not entitled to offset losses that had accumulated prior to its acquisition.

Background

At the beginning of the year 2011, the Nawi Brothers acquired a shell type stock exchange company (by way of a private allocation of 85.5% against the injection of an amount of NIS 47 million into that company), which was ''clean'' (i.e., without assets or liabilities whose operations had been discontinued about half a year beforehand) which had approximately NIS 153 million of accumulated losses at the end of 2010 (approximately NIS 44 million in business losses carried forward and approximately NIS 109 million in real capital losses on securities carried forward) and new activity and profitability were transferred from a private company that they owned, in the field of deferred notes (''the discounting of checks''). In the years 2011 – 2013, all of the accumulated losses were offset against the Company's chargeable income from the discounting of checks.

The assessing officer based himself on a claim of artificiality, and using the special authority that is afforded to him within the framework of the general anti-abuse rules, he reclassified the transaction and determined that the accumulated losses (brought forward) cannot be offset within the framework of the Company's activity in the field of the discounting of checks.

It should be mentioned that after the assessment was issued under an order, a partial assessment agreement was signed with the assessing officer for the years 2011 to 2013 pursuant to which the offsetting of the real loss on securities (in an amount of approximately NIS 109 million) from the Company's chargeable income was cancelled, apparently because of the fact that they had not been offset from the Company's capital gains (which did not exist in those years) pursuant to the provisions of the Ordinance, but rather from the chargeable business income .

As a rule, the Court determined that on grounds of the principle of justice in the imposition of tax, the legislator permitted the offsetting of losses against profits from different businesses owned by the same assessee (an individual or a company), however, ''the watershed line in the implementation of this principle is that on the sale of control in a company to new shareholders, who have the ability to direct its operations and who have an economic interest in it''. And therefore, the Court went further and emphasized regarding the acquisition of a company with accumulated losses: ''…that the principle that prohibits the purchase of losses that have been incurred (indirectly) by other shareholders, only applies where there is no fundamental commercial ground for the acquisition of the control in the company and the transfer of new profitable activity into it. In other words, ''the baby will not be thrown out with the bathwater'' in every case, because'' in light of this, there is nothing in the fact that the new controlling interests did not incur the losses that have accumulated in the company from the economic perspective and there is nothing in the fact that there is not necessarily a connection between the previous activity and the new activity that has been entered into it, in and of itself, that is necessarily enough to prevent the offsetting of the losses''.

And therefore, the Court determined that: only in a case in which the control is sold in a company, without a fundamental commercial ground, apart from the desire to utilize the losses, distort the balance in the direction of the principal of the prohibition of the purchase of losses that have been incurred by the previous shareholders''.

The Court went further and stated that it had indeed already been determined in a previous judgment that not every purchase of a stock exchange shell with losses is an artificial transaction and that one should even view the ''public visibility'' that is associated with a stock exchange shell as being a sort of ''commercial ground'' and in the appropriate circumstances, even a fundamental one. However, the Court determined that every case is to be determined on its own merits and in particular the issue of what the fundamental commercial ground that formed the basis for the acquisition of the specific stock exchange shell was.

The Court determined, that in order to negate a claim of artificiality of a transaction, one needs to weigh up the commercial ground and the fiscal ground therein, and to show that (at least at the level of a reasonable expectation) the transaction is accompanied by a fundamental commercial ground (where the burden of objective proof is placed upon the assessing officer), and at the same time it must also be shown that the importance of the fiscal ground in the transaction (i.e. the tax shield that is inherent in offsetting the accumulated losses, where the burden of subjective proof is placed on the assessee) is of a less fundamental level, and all this is to be measured and examined at the time of the execution of the transaction and not retrospectively.

And in brief, when operating the anti-abuse rules, the assessing officer has to be the first in order and to show that the transaction would not have been executed were it not for the tax advantage (the fiscal ground) and only if he succeeds in doing so is the burden on the assessee to prove (subjectively) that the transaction would not have been executed were it not for the commercial- economic ground therein.

Regarding the fiscal ground (the tax asset that is inherent in the losses), the Court adopted the assessing officer's figures, in the formula for the calculation (the level of the accumulated losses, the corporate income tax rate, the withholding rate in the Company – and all this as was seen at the time of the acquisition!), and reached the conclusion that its level was estimated at approximately NIS 34 million (as compared with just NIS 9 million, as claimed by the Company), which the Nawi brothers hoped for and expected and which constituted a fundamental ground from their perspective at the time of the acquisition of the Company.

Regarding the commercial ground in a transaction and its real fundamental nature, the Company claimed and the Court agreed to this and went further that its activity in the field of discounting checks through a stock exchange company afforded that activity, which generally suffers from a negative image (the grey market), appropriate ''public visibility'', and numerous additional tangible commercial advantages, such as: an influencing customers to use the services of a supervised and audited public company, entrance to the Stock Exchange whilst turning ''a new page'' without exposing past results, the ability to raise credit from the banks with reduced guarantees, the ability to recruit credit from the capital market and increase the sources of financing, the ability to realize holdings readily and at high values and all this whilst retaining effective control in the Company. Furthermore, the entry into the Stock Exchange with an existing stock exchange shell reduces the Company's time-lines, efforts and costs significantly – which achieves the existence of the commercial ground.

Despite the aforesaid, and for the purpose of the examination of the commercial ground and the fundamental nature thereof, and even in the comparison to the fiscal ground, the Court went into the depths of the business decisions made by the Company and its controlling interests, which they saw at the time of the acquisition, and it examined the commercial grounds regarding the management of the check discounting activity in a public company (with accumulated losses) as compared with a private company (without losses for offsetting), what the commercial ground was in the entry to the Stock Exchange by means of a stock exchange shell by comparison with the alternative paths (such as: the acquisition of a listed public company, an initial offering of a private company and etcetera) and finally the Court also asked whether the Nawi Brothers made a commercial investigation of the acquisition of other stock exchange shells that were available at that time (for example, without losses or with smaller losses).

The Court reached the conclusion that in real time (at the time that the transaction was executed) the Nawi Brothers expected that they would achieve larger profits (regarding the offsetting of the losses), they did not expect to recruit equity in the first years (the issuance of the bonds only took place 4 years later) and also that: ''in order to prove the existence of ''a fundamental commercial ground'' in the acquisition of the specific shell, the Nawi Brothers had to prove that they took reasonable efforts to try to find additional shells, that did not have losses or which had lower losses, and that it would have been possible to purchase them in that same unique business structure''. Hence, the result that the Court arrived as was that the acquisition of the Company was made for a fundamental fiscal ground of the utilization of the accumulated losses and therefore it was artificial.

In our opinion, the economic weighing up that the Court conducted in this case is a comparison between chalk and cheese. How is it possible to compare between a kilogram and a kilometre? The fiscal ground can be measured exactly and (relatively) easily in money terms, whereas the commercial ground and the fundamental nature thereof are examined and measured by a test involving common sense in accordance with economic, commercial, business and moral criteria, market regulations and etcetera- how can we make a real examination of which of the foundations overrules the other? How many further rulings will be written in order to find the magical formula for this unknown? Therefore, maybe this is the place and this is the time to call in the legislator, out of an approach supporting tax stability and to set clear and absolute tax directives for situations in which a company cannot offset accumulated losses.

We would like to start the 2022 series of our articles from short review of main tax features that should be taken into consideration by every foreign consultant or foreign businessman who works with Russia.

Tax reporting period is started

End of winter and spring is period when Russian companies and individuals are liable to submit their financial statements and tax returns

All Russian tax residents are liable to submit the following forms not later than April 30:

CFC reporting

Russian legal entities and individuals who own or control CFC are liable to submit the following forms:

CFC notification on control in respect of CFC and ownership structure; deadline is 30 of April (failure to file a notification leads penalty – 5800 EUR)
CFC financial statements in respect of 2020 with audit opinion if there is no DTT between Russia and country of CFC; deadline is 30 of April (failure to file a notification leads penalty – 11 600 EUR)
Notification about any changes in the structure of CFC ownership, deadline is 3 months from corresponding change (failure to file a notification leads penalty – 580 EUR)

Please note that the Russian CFC rules treat as CFC not only legal entities but also trusts and foundations

Personal income tax reporting

Individuals who are recognized as tax resident upon the end of 2021 are liable to submit personal income tax return reflecting all foreign and Russian income including CFC income. Deadline is 30 of April (failure to file a tax return leads penalty – 30% of amount due; unpaying tax leads to penalty – 20% / 40% of amount due)

VAT on electronic services

Non-Russian company which provides software, multimedia contents or online services to the Russian clients (individuals or legal entities) should be registered in Russian tax authorities and pay Russian VAT at the rate 20%. This VAT is deductible by the Russian customers – legal entities.

Our team is able to help with tax registration at the Russian tax authorities and with submission of VAT tax returns.

Russian tax benefits for IT companies

Russia provides tax benefits for IT companies:

CIT – 3% instead of 20% (general CIT rate), 1% in some regions

Social contribution tax: 7,6% of gross salary

For small companies: full VAT exemption, CIT 6% from gross income or 15% from net income

Condition to apply tax benefits: average number of employees should be not less than 7 persons

Implementation of 2022 Edition of the WCO Harmonized System (HS) Nomenclature

The Unified Commodity Description and Coding Table of the GCC States has come into force from 16 February 2022 on the basis of the Harmonized System - Edition 2022. The Federal Decree No. (85) of 2007 of the Common Customs (Regulation) Law for the GCC states has been repealed and replaced by the Federal Decree Law No. (15) of 2022.

Dubai issues First Law Regulating Virtual Assets

The Emirate of Dubai has issued Dubai Law No. 4 of 2022 dated 28 February 2022 on the Regulation of Virtual Assets in the Emirate of Dubai (“Dubai Virtual Assets Law” or the “DVAL”).

The DVAL will become effective on its publication in the Official Gazette. Its scope will be limited to authorising the conduct of activities relating to virtual assets in the Emirate of Dubai only (including free zones and special development zones but excluding the Dubai International Financial Centre).

The law establishes a separate authority called the “Dubai Virtual Assets Regulatory Authority” (the “VARA”) to oversee the regulation and authorisation of virtual asset related activities in Dubai. VARA will report into the Dubai World Trade Centre (“DWTC”)

Any person who requires an “authorisation” from VARA to conduct virtual asset services, must operate in the Emirate of Dubai and must obtain a trade licence from the relevant commercial authority in Dubai.

The Ministry of Human Resources & Emiratisation (“MOHRE”) has announced an overhaul to the labour laws in the UAE

The new UAE Labour Law (Federal Decree Law No. 33 of 2021) (“New Law”), which came into effect as of 2 February 2022 (“Effective Date”), seeks to address changes in the work environment, align UAE labour relations with international best practices, and recognise the need for atypical and/or flexible working structures. The New Law has replaced Federal Law No. 8 of 1980, as amended (“Original Law”) in its entirety, and it is the most significant amendment to UAE labour legislation since the Original Law’s enactment.

The key amendments inter-alia include changing the existing unlimited contracts to limited contracts by 1 February 2023.

UAE Cabinet Approves Pending Tax Treaty with the Democratic Republic of the Congo

On 28 February 2022, the United Arab Emirates Cabinet approved the treaty, signed 12 October 2021 with the Democratic Republic of the Congo.

Tax Treaty between Guyana and the UAE Signed

As reported by Newsroom Guyana, the agreement – Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital – was signed on 24 March 2022.

As part of this new agreement too, a specific carve-out was made for oil and gas.

Tax Treaty between Antigua and Barbuda and the UAE has Entered into Force

According to an update from the UAE Ministry of Finance(list of Tax Treaties) , the income tax treaty signed on 15 January 2017 with Antigua and Barbuda entered into force on 24 February 2022.

The UAE Ratifies Pending Protocol to Tax Treaty with Ukraine

According to an update from the UAE Ministry of Finance (list of Tax Treaties), the United Arab Emirates Cabinet approved the pending protocol to the 2003 income and capital tax treaty with the Ukraine on 31 January 2022.

Chile Lower House Ratifies Tax Treaties with the United Arab Emirates

The Chile Lower House of Parliament on 3 March 2022 adopted the ratification law bills regarding the tax treaty signed between Chile and the United Arab Emirates on 31 December 2019 (Bill No.

Notice on Temporary Suspension of Export and Re-export of wheat and wheat flour

The export or re-export of wheat and wheat flour originating from the Republic of India, which was imported after May 13, 2022 has been temporarily banned vide Customs Notice No. (06/2022) issued on 30/06/2022.

Companies wishing to export / re-export wheat and wheat flour must submit a request to the Ministry of Economy to obtain permission to export outside the UAE along with supporting documents to verify the origin of the shipment.

The permit is valid for only 30 days from issuance and must be submitted to Dubai Customs via electronic clearance systems.

Amendment of Decision No. 3 of 2021

The Federal Tax Authority has amended Decision No. 3 of 2021 and released updated Decision No. 3 of 2022 on Implementing the marking of tobacco and tobacco products scheme.

This update specifies prevention of supply, transfer, storage or possession of cigarettes, electrically heated cigarettes and water pipe tobacco in the State (Local Market, Arrival and Departure Terminals) using marks with the old design from 31 December 2023.

Democratic Republic of the Congo Approves Pending Tax Treaty with the UAE

On 8 July 2022, the Cabinet of the Democratic Republic of the Congo approved the ratification of the pending income tax treaty with the United Arab Emirates.

UAE to introduce new gold import rules

The UAE will introduce a new set of regulations on gold imports in line with international rules that seek to thwart money laundering and the financing of terrorism and illegal organisations.

The Regulations, drafted in accordance with OECD guidance on gold imports will come into effect from January 2023. They have been drafted in accordance with guidance from the Organisation for Economic Co-operation and Development (OECD) and its corresponding protocol for gold.

Dubai issues decree to regulate the grant of ‘Musataha’ rights on use of commercial lands

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, has issued Decree No. (23) of 2022 regulating the grant of ‘Musataha’ rights on commercial lands in Dubai.

The Decree regulates the use of commercial lands in Dubai by granting the right of ‘Musataha’ to develop real estate projects.

As per the Decree, the ‘Musataha’ agreement creates a real property right that entitles its holder to construct a building or invest in, mortgage, lease, sell, or purchase a plot of land belonging to a third party for a period of up to 35 years with an extension upto max of 50 years.

The holder of the agreement has to abide by a number of rules and regulations.

The UAE to Introduce Fines for Failure to Comply with the Emiratisation Quota

From January 2023, private sector companies with more than 50 employees that do not reach the Emiratisation quota will be subject to fines.

The penalties and incentives shall be based on the size of the establishment and extent of meeting Emiratisation criteria.

UAE and France sign Comprehensive Strategic Energy Partnership

On July 19, 2022, His Highness Sheikh Mohamed bin Zayed Al Nahyan, President of the United Arab Emirates and Ruler of Abu Dhabi signed two agreements in Paris.

The first, a Comprehensive Strategic Energy Partnership (CSEP), which focuses on enhancing energy security, energy affordability, decarbonisation and climate action, ahead of the COP28. The 28th session of the Conference of the Parties (COP28) is set to take place in the UAE in 2023, and

The second is a strategic partnership agreement between Abu Dhabi National Oil Company (ADNOC) and TotalEnergies to explore new opportunities for growth across the energy value chain.

Goods supplied in a designated zone & connected shipping or delivery services in the UAE

The Federal Tax Authority (‘FTA’) has issued a Public Clarification (VATP027) - Goods Supplied in a Designated Zone and Connected Shipping or Delivery Services on 30 October 2021.

This latest Public Clarification aims to:

Avoid potential double taxation on goods supplied from a designated zone to the UAE mainland; and provide registration relief to non-resident suppliers who also ship or deliver these goods.

VAT Public Clarification on Mobile Phones, Data Packages and Airtime Made Available to Employees for Business Use

A business is entitled to recover input tax in respect of Phones, Airtime, and Packages acquired if these costs are incurred to make taxable supplies and specific requirements as to the name, documented policy, tax invoice etc. are met.

Amendment of Tax Procedures law.

The UAE Cabinet has issued Federal Decree-Law No. 28 of 2021 (16 September 2021), amending Federal Decree-Law on Tax Procedures No. 7 of 2017 (11 June 2017) (The Federal Decree-Law on Tax Procedures). The amendments are effective from 1 November 2021.

Major points are as follows.

Any decisions issued before effective date shall follow old tax procedures law.

The time limits for filing reconsideration applications, objections before the Federal Tax Authorities (FTA), Tax Dispute Resolution Committee (TDRC), and appeals before Competent Courts have been increased from 20 to 40 business days.

An alternate mechanism for filing objections and appeals to be prescribed for federal and local government entities in tax disputes for which the Cabinet shall – according to a suggestion by the Minister – issue a respective decision.

Increase in the time limits for filing tax applications/objections and softening the requirement to pre-deposit only tax amounts for filing objections before TDRC and 50% of penalties at the time of appeal before the Competent Courts

Annual Economic Substance Regulation(‘ESR’) Reporting and Country by Country Reporting

Entities conducting relevant activity & earning income from the relevant activity (provided not an exempted licensee) needs to submit the ESR Report by 31st Dec 2021 for FY ended 31st Dec 2020. For Entities conducting relevant activity for FY ended 30th June 2021 needs to be submit ESR notification by 31st Dec 2021.

Country by Country Reporting is required to be done by Ultimate Parent Entity of the MNE Group whose Tax residence is in the UAE. Reporting needs to be done by 31st Dec 2021 for the Fiscal year ended 31st Dec 2020.

New UAE Labour Law coming into force on 2 February 2022

The Ministry of Human Resources & Emiratisation (“MOHRE”) has announced an overhaul to the labour laws in the UAE. The new UAE Labour Law (Federal Decree Law No. 33 of 2021) (“New Law”), which will come into effect as of 2 February 2022 (“Effective Date”), seeks to address changes in the work environment, align UAE labour relations with international best practices, and recognise the need for atypical and/or flexible working structures.

The New Law will replace Federal Law No. 8 of 1980, as amended (“Current Law”) in its entirety, and it is the most significant amendment to UAE labour legislation since the Current Law’s enactment.

Corporate Tax Introduced in the UAE – Effective from 1 June 2023

The Finance Ministry in the UAE announced introduction of Corporate Income Tax.

The UAE Corporate Tax regime will become effective from financial years starting on or after 1 June 2023 and will be applicable to all UAE businesses / Commercial activities except for extraction of natural resources (which are already subject to Tax).

The new regime implies a standard statutory tax rate of 9% when taxable profits exceeds AED 375,000. There is an indication that there will be a different tax rate for large multinationals that meet the criteria under ‘Pillar Two’ of the OECD Base Erosion and Profit Shifting project (i.e. that have consolidated global revenues above EUR 750m).

Individuals would be subject to Corporate Tax only if they have ongoing and regular business in UAE. Employment income, income from real estate, income from savings, investment returns and other income earned by individuals in their personal capacity that is not attributable to a UAE trade or business shall not be subject to corporate tax.

Foreign Companies and Individuals would be subject to tax only if they are engaged in a business in the UAE on a regular basis.

The detailed law on Corporate Tax is yet awaited.

UAE Issues Rules on Installment and Waiver of Administrative Penalties

UAE Cabinet Decree No. 105 of 2021 was issued on 28 December 2021, providing new rules for the installment and waiver of administrative penalties.

It is provided that requests for both installments and waivers of administrative penalties must be submitted to the FTA, which shall review the request within 40 business days.

Dubai Customs issues notice concerning procedures for Cross Border e-commerce

The Notice No. (15/2021) issued by Dubai Customs on procedures for Cross Border e-commerce with the purpose of simplifying and facilitating customs procedures and regulating the movement of goods through cross-border e-commerce channels, came into effect from 01 January 2022. This notice repeals Customs Notices No. (9/2021), (13/2021) and (14/2021).

UAE to Sign Tax Treaties with Dominica, Guyana, and Jamaica and Protocols to Tax Treaties with Algeria and Finland.

As reported by Bloomberg tax, on 14 January 2022, the United Arab Emirates Cabinet approved the signing of income tax treaties with Dominica, Guyana, and Jamaica, as well as amending protocols to the 2001 tax treaty with Algeria and the 1996 tax treaty with Finland.

The treaties will be the first of their kind between the UAE and the respective countries and the protocols will be the first to amend the respective treaties. The treaties and protocols must be signed and ratified before entering into force.

Tax Treaty between Israel and the UAE has Entered into Force

The income tax treaty between Israel and the United Arab Emirates entered into force on 29 December 2021. The treaty, signed 31 May 2021, is the first of its kind between the two countries.

UAE has launched its first Space Economic Zone in Masdar City

The UAE Space Agency and Masdar have announced they have agreed to establish the country’s first Space Economic Zone in Masdar City.

The Masdar City Free Zone will offer tailor-made business licenses for space-related companies across the launch sector, satellite communication, logistics, data analysis, science, technology, engineering, among other things.

New UAE Cybercrimes Law to come into force in January 2022

The Federal Decree Law No. 34 of 2021, effective from January 2, 2022, covers new areas of the internet, bringing major amendments to the Federal Law 5 of 2012 on Combatting Cybercrimes.

The new law criminalises publishing and sharing fake news, rumours and misleading or inaccurate information that cause panic on online platforms. Violators will face at least one year in prison and a minimum Dh100,000 fine. The penalty increases to two years in prison and a minimum Dh200,000 fine if the crime was committed during pandemics, emergencies and crises.

VAT Public Clarification on Mobile Phones, Data Packages and Airtime Made Available to Employees for Business Use

The UAE Federal Tax Authority (“FTA”) published a new VAT Public Clarification (VATP028) to provide guidance on the input VAT recoverability related to mobile phones, airtime, and data packages that are made available to employees for business use by their employers.

The Public Clarification inter-alia clarifies that a business is entitled to recover input VAT from mobile phone usage if these costs are incurred to make taxable supplies and all the following conditions are met:

The business is registered for VAT and has purchased Phones, Airtime, and Packages in its own name (Not in Employees name)
The business has a detailed documented policy which clearly states that the Phones, Airtime, and Packages may only be used for business purposes, and shall also specify the consequences of any personal use.
The business regularly monitors the use of Airtime and Packages and retains explanation for the variances
The business takes action against employees using Phones, Airtime, and Packages for personal use.
The business shall obtain and maintain the tax invoice received from supplier against their services

United Arab Emirates – Niger Tax Treaty comes into effect:

The 2018 Tax treaty between UAE and Niger entered into force on 18 August 2021 and will apply as from 1 January 2022. When in effect, the treaty provides that dividends and interest will be taxable only in the state of residence of the recipient. A 10% rate will apply to royalties.



UAE issues new Federal Electronic Transactions and Trust Services Law



The UAE has issued Federal Decree by Law No. 46 of 2021 on Electronic Transactions and Trust Services (“Law”). It introduces legal concepts into UAE law that are similar to the European eIDAS Regulation to promote legal certainty in electronic interactions.

The Law provides a new means for regulating Electronic Identification Systems and Trust Services.

Electronic identification allows businesses and consumers to identify and authenticate who they are. Under the Law, The Telecommunications and Digital Government Regulatory Authority (‘TDRA’) is to issue the rules, procedures and standards related to the electronic identification systems, verification procedures and digital ID, after coordination with concerned bodies.

Trust Services are electronic services which aim to improve the confidence of citizens and businesses in the security and certainty of electronic transactions.

The Law repeals the existing Federal Law No. 1 of 2006 concerning e-transactions and e-commerce (“Old Law”) as of 2 January 2022. However, there is a 12-month grace period which allows those subject to the Law to ensure that they are compliant.

Federal Decree No. 32 of 2021 concerning Commercial Companies comes into force from 02 January 2022



The United Arab Emirates government published the Federal Decree No.32 of 2021 concerning Commercial Companies (CCL 2021) which comes into force from 02 January 2022, on which date the Federal Decree Law No. 2 of 2015 and its amendments (CCL 2020) will be repealed.

The CCL 2021 incorporates changes that will affect (in a positive way) the present operations of companies, and investors that wish to establish business presence in the UAE.

Companies incorporated at the date of commencement of the CCL i.e. January 2022, will be permitted a period of 12 months from that date to amend their memorandum and articles of associations, such that they are not inconsistent with the provisions of the CCL 2021. Failure to do so can result in a company’s liquidation and exposure to fines that may be prescribed by Cabinet in this regard.

VAT Public Clarification on Mobile Phones, Data Packages and Airtime Made Available to Employees for Business Use

The UAE Federal Tax Authority (“FTA”) published a new VAT Public Clarification (VATP028) to provide guidance on the input VAT recoverability related to mobile phones, airtime, and data packages that are made available to employees for business use by their employers.

The Public Clarification inter-alia clarifies that a business is entitled to recover input VAT from mobile phone usage if these costs are incurred to make taxable supplies and all the following conditions are met:

The business is registered for VAT and has purchased Phones, Airtime, and Packages in its own name (Not in Employees name)
The business has a detailed documented policy which clearly states that the Phones, Airtime, and Packages may only be used for business purposes, and shall also specify the consequences of any personal use.
The business regularly monitors the use of Airtime and Packages and retains explanation for the variances
The business takes action against employees using Phones, Airtime, and Packages for personal use.
The business shall obtain and maintain the tax invoice received from supplier against their services

United Arab Emirates – Niger Tax Treaty comes into effect:

The 2018 Tax treaty between UAE and Niger entered into force on 18 August 2021 and will apply as from 1 January 2022. When in effect, the treaty provides that dividends and interest will be taxable only in the state of residence of the recipient. A 10% rate will apply to royalties.

UAE issues new Federal Electronic Transactions and Trust Services Law

The UAE has issued Federal Decree by Law No. 46 of 2021 on Electronic Transactions and Trust Services (“Law”). It introduces legal concepts into UAE law that are similar to the European eIDAS Regulation to promote legal certainty in electronic interactions.

The Law provides a new means for regulating Electronic Identification Systems and Trust Services.

Electronic identification allows businesses and consumers to identify and authenticate who they are. Under the Law, The Telecommunications and Digital Government Regulatory Authority (‘TDRA’) is to issue the rules, procedures and standards related to the electronic identification systems, verification procedures and digital ID, after coordination with concerned bodies.

Trust Services are electronic services which aim to improve the confidence of citizens and businesses in the security and certainty of electronic transactions.

The Law repeals the existing Federal Law No. 1 of 2006 concerning e-transactions and e-commerce (“Old Law”) as of 2 January 2022. However, there is a 12-month grace period which allows those subject to the Law to ensure that they are compliant.

Federal Decree No. 32 of 2021 concerning Commercial Companies comes into force from 02 January 2022

The United Arab Emirates government published the Federal Decree No.32 of 2021 concerning Commercial Companies (CCL 2021) which comes into force from 02 January 2022, on which date the Federal Decree Law No. 2 of 2015 and its amendments (CCL 2020) will be repealed.

The CCL 2021 incorporates changes that will affect (in a positive way) the present operations of companies, and investors that wish to establish business presence in the UAE.

Companies incorporated at the date of commencement of the CCL i.e. January 2022, will be permitted a period of 12 months from that date to amend their memorandum and articles of associations, such that they are not inconsistent with the provisions of the CCL 2021. Failure to do so can result in a company’s liquidation and exposure to fines that may be prescribed by Cabinet in this regard.

Dubai Customs Launches Self – Audit Finding Service

The Dubai Customs has launched self – audit findings service where registered customers / individuals are allowed to disclose errors and commissions committed in customs declarations according to specific terms and conditions.

The service can be availed any time after clearance of goods but before notice or commencement of customs audit procedure. The form is available on Dubai Customs and Dubai Trade portals and the submission is required to be complete with all relevant information pertaining to the errors and omissions.

H. H. Sheikh Hamdan bin Mohammed amends Resolution on payment of outstanding public funds by instalments

His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of The Executive Council of Dubai, issued Executive Council Resolution No. (53) of 2022 amending Article No. (25) of Executive Council Resolution No. (5) of 2021, which pertains to Executive Regulation of Law No. (1) of 2016 on the Financial Regulations of the Government of Dubai.

Article No. (25) is related to payment of outstanding public funds. According to the amended Resolution, if an applicant cannot make the minimum payment of 25% of the outstanding amount before applying for the payment by instalments, the head of the government entity or their authorised representative may reduce the minimum payment after reviewing the reasons behind the request.

The Resolution shall be effective from the date of its publication in the Official Gazette.

The State of Kuwait and United Arab Emirates have signed a double Tax Treaty

On 30 August 2022, the Kuwait Ministry of Finance announced that the State of Kuwait and the UAE recently signed a Treaty for the avoidance of double taxation (“the Tax Treaty”).

The objective of the Tax Treaty is to strengthen the co-operation frameworks in tax matters and unite the financial, economic, and investment partnership between the two countries.

This is the first Tax Treaty that Kuwait has signed with any Gulf Cooperation Council (GCC) member state.

According to Private Wealth, Private Trust Companies are state-chartered organizations that provide fiduciary services to members of a family. It can only do business with the family, not outsiders. They are a unique option available to wealthy families to help them address key issues and challenges of intergenerational wealth transfer.

The private trust company is established to serve as a trustee and is limited to one family. It enables the wealthy family to put all the trust assets together in one structure.

According to Vince Annable, CEO and Founder of VFO Advisory Group and author of The Household Endowment Model: Wealth Planning for Affluent Families,

“With A Growing Number Of States Enacting Legislation Supportive Of Private Trust Companies, They Are
Gaining In Popularity Among Wealthy Families.

These entities usually provide these families with wealth planning and family governance at a level otherwise unavailable.”

While single-family offices and private trust companies are distinct entities, the private trust company can fill some of the roles of a family office such as investment management and administrative services including record keeping. The relationship between single-family offices and private trust companies is set by the wealthy family. For example, the two entities can operate independently where the private trust company obtains back-office services from the single-family office through a service contract.

The private trust company’s board of directors is composed of trusted professionals of different ages and tenures who have a very solid understanding of the interests and concerns of the wealthy family. This approach produces a form of “institutional memory” that better ensures the ongoing agenda of the wealthy family is addressed.

“With A Private Trust Company, The Family Usually Has Extensive Flexibility And Control Over Decision Making,”

says Homer Smith, Executive Director of the Integrated Family Office Practice and Founder of Konvergent Wealth Partners. “For example, the wealthy family can choose who is on the board of the private trust company and how voting on important matters works.”

When there are meaningful family-owned assets in trusts such as privately held business interests, there is a strong likelihood of the decisions that are made to be more attuned to the wealthy family’s interests at the time. Additionally, when the board includes different technical specialists (e.g., lawyers, accountants, wealth managers), they are likely to make better decisions because of their familiarity with the wealthy family and the specific assets.

Many times, family members are on the investment committee of the private trust company. This gives them influence over the ways the family monies are allocated. This level of involvement is often significantly greater than the level of possible involvement with traditional trustees. If the single-family office is managing the monies in the trusts, the wealthy family is still very much involved in the process.

Privacy is also enhanced as the wealthy family can often control the flow of information. The people chosen to be on the board, for instance, are all loyal to the wealthy family. According to Aaron Yen, Senior Partner, Ascendent LLP, “For non-US citizens, the privacy issues surrounding private trust companies can be particularly attractive. They can be effective in bringing assets into the United States while maintaining a high level of privacy.”

While there are substantial benefits of private trust companies to wealthy families, they are a long-term commitment. Sometimes family members take on certain responsibilities. Also, many times, trusted professionals are brought in to assist. Like single-family offices, private trust companies are family businesses. Consequently, avoiding potentially dipterous complications requires a succession plan. It is usually wise to address succession within the private trust company when it is established.

On May 30, 2018 we posted The Us Is Now The 2nd Largest Tax Haven And Is Scheduled To Be Blacklisted By The Eu!, where we discussed that the U.S. is the world’s second-largest tax haven, behind Switzerland and just ahead of the Cayman Islands, according to a report released May 15, 2018.

Now according to the Tax Justice Network the U.S. is considered the best country in the world in which to hide income from tax and government authorities, according to this year's index unveiled on Tuesday May 18, 2022 listing the most financially secretive jurisdictions.

The U.S. has risen to the top of the index that identifies jurisdictions „most complicit in helping individuals to hide their finances from the rule of law, according to the Tax Justice Network, a U.K.-based organization that says its goal is to fight injustice in tax systems.

The Financial Accountability and Corporate Transparency, or FACT, Coalition held a panel discussion to discuss the latest annual TJN index with officials from both organizations and Global Financial Integrity, a research group based in Washington, D.C.

A statement from the FACT Coalition suggested that the U.S. position at the top of the index is due to unaddressed loopholes and lax rules in U.S. anti-money laundering and tax laws.

The U.S. was considered the second-best jurisdiction in which to hide money based on the Tax Justice Network's 2020 data, but the FACT Coalition said the U.S. has since taken steps to try to improve its anti-money laundering enforcement. Those include enacting legislation known as the Corporate Transparency Act, which will establish reporting requirements for certain beneficial owners.

That legislation is designed to create a national beneficial ownership registry, and to combat, to the broadest extent possible, the proliferation of anonymous shell companies that facilitate the flow and sheltering of illicit money in the U.S.

Although that legislation has been enacted, the entirety of implementing regulations has yet to be issued by the U.S. Treasury Department, the coalition noted in its release. Treasury issued the first set of rules on the CTA in December.

We previously posted numerous blog posts regarding that US Taxpayers are receiving automated $10,000 Penalty Assessments for late filed Form 5471's, where we discussed that we have been receiving a lot of calls from taxpayers who have recently received penalty notices regarding late filed or non-filed Form 5471. (See also, We Can Help You Eliminate Your $25,000 Late Form 5472 Penalties for $5,000 Per Penalty!)

The Internal Revenue Service imposes an automatic penalty of $10,000 whenever an individual or company is late in filing an information return disclosing their interest in a foreign corporation, regardless of whether there is any associated underreported of income or tax deficiencies.

U.S. persons including businesses with at least a 10 percent interest in a foreign corporation or who are officers of a foreign corporation in which any U.S. person owns or acquires a 10 percent interest are required to file a Form 5471 with their tax return to disclose their ownership.

The IRS has begun to automatically applying the $10,000 penalty for each Form 5471 that was filed after the due date.

There are basically two remaining ways to defend against these automatic assessments and request penalty abatement for filing an international information return after the due date:

1. Follow the Delinquent Information Return Procedure - The taxpayer can file through the Service's procedures for delinquent international information returns. This procedure is appropriate for taxpayers who can establish reasonable cause for their failure to file or whose failure to file has caused no or nominal tax non-compliance. In our opinion the Delinquent Information Return Procedure is no longer available after November 9, 2020, as it curretly provides:

Taxpayers may attach a reasonable cause statement to each delinquent information return filed for which reasonable cause is being asserted. During processing of the delinquent information return, penalties may be assessed without considering the attached reasonable cause statement.

This is nothing like FAQ #18, in our opinion, which originally established the Delinquent Information Return Procedure. So basically this is nothing more than a delinquent filing with the Reasonable Cause Defense for the assessment of the penalty. (See #2 Reasonable Cause Defense).

Also in our opinion you should be prepared to go to the appeals division of the IRS, to get this penalty abated, based upon reasonable cause.

2. Reasonable Cause Defense - Under Section 6038 of the tax code, which lays out the information reporting requirements for individuals and businesses with an interest in foreign corporations and the penalties for delinquent filing, penalties may be abated if a reasonable cause exists for the failure to file. However, neither the statute nor the applicable regulations define a reasonable cause standard for the abatement. Treasury Regulations Section 301.6651-1(c) provide a definition of what constitutes reasonable cause for failure to file corporate income tax returns and says that ''if the taxpayer exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time, then the delay is due to reasonable cause.''

3. Ask for a First-Time Offender Abatement (FTA) - Generally, an FTA can provide penalty relief if the taxpayer has not previously been required to file a return or has no prior penalties (except the estimated tax penalty) for the preceding three years with respect to the same IRS File (IRM §20.1.1.3.6.1). With respect to a Form 5472 late-filing penalty, the IRM provides for an FTA if an FTA was applied to the taxpayer's related Form 1120 late-filing penalty or no penalty was assessed on the related Form 1120 (IRM §21.8.2.20.2).

Statute of Limitations Issue- Though a $10,000 penalty may discourage some from filing in international information return after the deadline, there is a greater exposure to not late filing and information return and that is that the statute of limitations for tax returns which is generally three years does not apply for returns that are missing the information reports and the statute remains open indefinitely. Under the indefinite statute of limitations, not only can the IRS make adjustments to items related to the international information returns, but they also can examine any other area on the tax return.

2020 was a record year for Americans giving up their citizenship:

A record 6,705 Americans gave up their citizenship in 2020
A 260% increase from 2019 when 2,577 Americans gave up their citizenship
Renunciations triple despite U.S. consulates being closed for large parts of the year due to COVID-19
This is the highest year on record; the previous record was 5,411 cases in 2016

There are an estimated 9 million U.S. Americans living overseas. Every three months the U.S. Government publishes the names of all Americans under the IRS rules (section 6039g), who give up their citizenship.

2020 Saw 6,705 Americans Renounce Their Citizenship,
260% More Than 2019 When 2,577 Americans Renounced.

This number possibly would have been higher if U.S. Embassies worldwide had not been closed for large parts of the year due to COVID-19 regulations. If this trend continues 2021 renunciation numbers will be record-breaking.

Surprisingly enough, it's not only politics that drive renunciations but also a law called Foreign Account Tax Compliance Act (FATCA). This law forces banks outside the U.S. to report all American account holders under threat of astronomical fines. Banks now want to rid themselves of U.S. clients as they pose a liability. Many Americans living outside the U.S. are therefore forced to renounce and provide a Certificate of Loss of Nationality (CLN) to keep their banking services.

U.S. citizens that renounce must pay a $2,350 government fee and appear in person at the U.S. Embassy in their country of residence. In addition, a complete tax return must be filed and exit tax might be owed. Despite these obligations, there has been a growing trend of U.S. citizens renouncing.

''The onerous and costly tax reporting obligations also play a big role. People with a U.S. citizenship or Greencard must file their taxes regardless of where they live in the world every year. They also need to report every single bank account (FBAR), even if they are only authorized to sign, which feels intrusive for many.''

Ironically, the U.S. stimulus checks of $1,200 + $600 are also being used towards the cost of renouncing, a difficult, irreversible decision with a profound impact on an individual's life, especially in these difficult, special times.

According to Law360, a Swiss couple owe accuracy penalties totaling $500,000 for 2006 and 2007 because their amended returns were submitted after a summons, the U.S. Tax Court said on August 31, 2022 in the case of Johannes et ux. v. Commissioner, docket number 14410-15, in the U.S. Tax Court.

Johannes and Linda Lamprecht Filed Their Amended Returns For 2006 And 2007 After The Internal Revenue Service Submitted A John Doe Summons To UBS That Applied To Them, The Tax Court Said.



Thus, their amended returns weren't qualified amended returns„ under Treasury Regulation Section 1.6664-2(c)(3)(i)(D) and the couple were liable for the penalties for understating income.



(3) Qualified amended return defined -

(i) General rule. A qualified amended return is an amended return, or a timely request for an administrative adjustment under section 6227, filed after the due date of the return for the taxable year (determined with regard to extensions of time to file) and before the earliest of - ...

(D)(1) The date on which the IRS serves a summons described in section 7609(f) relating to the tax liability of a person, group, or class that includes the taxpayer (or pass-through entity of which the taxpayer is a partner, shareholder, beneficiary, or holder of a residual interest in a REMIC) with respect to an activity for which the taxpayer claimed any tax benefit on the return directly or indirectly.

(D)(2) The rule in paragraph (c)(3)(i)(D)(1) of this section applies to any return on which the taxpayer claimed a direct or indirect tax benefit from the type of activity that is the subject of the summons, regardless of whether the summons seeks the production of information for the taxable period covered by such return; ...

The Tax Court also found that the IRS had complied with a supervisory approval requirement and that assessing the penalties wasn't barred by a statute of limitations.