Exchange Of Information Programs

U.S. Competent Authority

Exchange of Information

And

Overseas Operations


The U.S. Competent Authority was created in 2002

To assist taxpayers regarding matters covered in the Mutual Agreement Procedure provisions of:


1. The Plantation Post

Exchange of Information - Plantation

Assistant Deputy

Commissoner, International

Douglas O’Donnell

LB&I Commissioner

Heather Maloy

Tax Attache Paris

Deputy Commissioner International

US Competent Authority

Michael Dianilack

Program Manager

EOI

Tax Attache Frankfurt

Plantation Post

Tax Attache London

Tax Attache Bejin

Exchange of Information - Plantation

Revenue Service Representative

Raul Pertierre

Senior Analyst (GS-14)

Peter Monatanez

Analyst (GS=13)

Isnael Amy D

Assitant REveue Service

Representative

Frank San Emeterio

Secretary

Diaz, Erohilda

Analyst (GS-13)

Sosa, Dolores M

Analyst (GS-13

Trias, Sandra


2. What Plantation Does

Under

Income Tax Treaties

Tax Information Exchange

Agreements (TIEAs)


Tax Treaties

Over 60 tax treaties that provide for EOI.

Some are recent and some are old.

Most have slightly different language.

Important to refer to the actual treaty whenever EOI question arises.

Tax Information Exchange Agreements

(TIEAs)

U.S. TIEA background

For the United States, a TIEA is an executive agreement

and not considered a treaty (treaties require ratification

by the U.S. Senate). The authority to enter into TIEAs is

IRC §274(h)(6)(C), and this authority is delegated to the

Secretary of the Treasury.


(TIEAs)

TIEAs in Force prior to 2000 The following countries entered into TIEAs with the U.S. prior to 2000 - Barbados, Bermuda, Costa Rica, Dominica, Dominican Republic, Grenada, Guyana, Honduras, Jamaica, Marshall Islands, Mexico (full treaty also in force), St. Lucia (signed 1987, not in force) and Trinidad & Tobago.

TIEAs entered into after 2000 The following countries entered into TIEAs with the U.S. after 2000 - Antigua and Barbuda, Aruba, Bahamas, British Virgin Islands, Cayman Islands, Guernsey, Jersey, Isle of Man, Netherlands Antilles, Peru, Liechtenstein, Gibraltar, Panama, Colombia,

(signed 2001,not in force) and Monaco (signed 2009, not in force). Secretary of the Treasury is pursuing TIEAs with other countries. • Some requests only go one way from the U.S. to countries that have no direct tax • Caribbean Basin Initiative (CBI)- Provides certain trade and tax benefits.

Allow deductions under IRC §162 for expenses allocable to attendance of an individual at a convention, seminar, or similar meeting held in any country within the “North American area” pursuant to IRC §274(h) and Revenue Ruling 2007-28.

• In some cases, the U.S. bears the entire cost of the country’s information gathering


(TIEAs)

Implementing legislation

To bring a TIEA into force, countries may need to do more than just enter into the TIEA. They may need to pass legislation to bring the TIEA into force, and to complete other actions that bring the legislation into force (e.g. officially publishing legislation). Countries may also need to pass other legislation required by the TIEA (i.e. compulsory powers, access to banking information).


(TIEAs)

Implementation meeting Before or shortly after a TIEA enters into force, an implementation meeting should take place between the countries involved, especially if this is partners first TIEA. The issues covered in the meeting may include the following:

• Overview of tax authorities and organizations • Exchange of information programs and processes • Review of the legislation and other actions necessary to bring the TIEA

into force • Request examples and case scenarios Subsequent assistance

Subsequent assistance may be provided in training, if needed. The U.S. works closely with the TIEA partner to ensure requests are legally sufficient so any legal challenges are successfully defended in court.

Relationship between Treaties and Statutes

“Statutory” basis for Exchange of Information is Article VI of the Constitution, placing treaties and statutes on an equal footing.

Diplomatically speaking, a “treaty” is something that deals with War and Peace. Conventions, including Tax Conventions, are subject to “Advice and Consent” of the Senate.

Once instruments of ratification have been exchanged by the Executive Branch, treaties are self-executing in the US; they do not require legislation.

Treaty Provisions for EOI

Language varies but all have the following elements:

Competent Authorities shall exchange information.

For purposes of carrying out the convention or the laws pertaining to the taxes covered – including prosecution of criminal violations of those laws.

Such persons or authorities may only use the information for those purposes.


Limitations on the Exchange Obligation -

Competent authorities under no obligation to carry out measures that are at variance with either our law or the other country’s law, or provide trade secrets.

Provide information that is not obtainable, either under our law or administrative practice or the requesting country’s law or administrative practice.

Provide information when its disclosure would be contrary to public policy (e.g., defense or intelligence secrets, informant identities, DIF Formula, etc.).

Treaty Provisions for EOI –

Disclosure and Use Limitations

Taxpayers generally not entitled to Competent Authority correspondence or certain other types of information.

Most EOI articles allow information to be disclosed in public judicial proceedings.

Treaty information may be used to prosecute tax crimes such as income tax evasion. However, may not be used to prosecute drug offenses, money laundering, etc. (non-Title 26 offenses).


“Covered Taxes” generally means taxes of the foreign country that are covered by the US treaty.

Found generally in a separate article from EOI.

For Canada all taxes imposed by the Federal Government and income taxes imposed by the state and local governments (e.g., Goods and Services Tax – GST) that are “…substantially similar to the taxes covered by the Convention under Article II (Taxes Covered)…” (Article XVII(1))

In the case of Australia and the UK, provide information for use with federal or national level income taxes.


Disclosures and Use Limitations – information may only be disclosed to persons or authorities concerned with determination, assessment, collection, etc. of covered taxes.


Generally state and local income taxes are not covered, although Canada is an exception.

Current Posts of Duty

with their Jurisdictions

London – UK, Northern Europe, Channel Islands, South Africa

Paris – Southern Europe, Northern Africa

Frankfurt – Central/Eastern Europe

Plantation (FL) – Mexico, Central/South America, Caribbean Basin

EOI Teams –Australia, New Zealand, Canada, France

Beijing – Pacific Rim, India …

Competent Authority

A tax treaty requires the designation of a competent authority for each country that is party to the treaty. The respective competent authorities administer the provisions of the treaty.

The Director International acts as the U.S. competent authority in administering the operating provisions of tax treaties and interpreting and applying these treaties. In interpreting and applying treaties, the Director International acts only with the concurrence of the Associate Chief Counsel (International). See Delegation Order No. 144 (Rev. 13)

Competent Authority

Competent Authority C/A has the authority necessary to carry out the provisions of the treaty or TIEA.

C/A for the US is the Treasury Secretary.

The Treasury Secretary re-delegated authority to act as US C/A to the IRS Commissioner.

Commissioner re-delegated authority to Deputy Commissioner (Int’l), LB&I (bypassing the Commissioner, LB&I).

Treaty Administration

(Competent Authority) Delegation of Authority to act as Competent Authority – Treasury Order 150-10 dated 04/22/1982.

The Commissioner redelegated this authority in Delegation Order 4-12 dated 05/15/2002 (formerly DO-114, Rev.13) to the now Deputy Commissioner (International), LB&I; and those officially acting for the Deputy Commissioner.

Delegation Order 4-12 (Rev. 2) Effective Date: July 1, 2010


(Competent Authority)

Delegation of Authority to act as Competent Authority – Treasury Order 150-10 dated 04/22/1982.

The Commissioner redelegated this authority in Delegation Order 4-12 dated 05/15/2002 (formerly DO-114, Rev.13) to the now Deputy Commissioner (International), LB&I; and those officially acting for the Deputy Commissioner.

Delegation Order 4-12 (Rev. 2) Effective Date: July 1, 2010


(Competent Authority)

The Manager, EOI/Overseas Operations, Tax Attachés, RSR and certain other officials in International are designated to receive exchanges and to sign certain exchange related correspondence for the Deputy Commissioner (International).

What is the basis to obtain or

provide information?

The United States is a party to 90 plus Income Tax Treaties and Tax Information Exchange Agreements (TIEAs).

Tax Treaties, among other things, provide for Exchanges of Information between Tax Administrations.

TIEAs provide for Exchanges of Information between Tax Administrations.

Multi-lateral Agreements


3. Who to Contact in Plantation

Who to Contact in Plantation

Raul Pertierra (Revenue Service Rep) Plantation

Office: 954-423-7100

E-Mail: [email protected]

Frank San Emeterio (Asst. Revenue Service Rep)

Office: 954-423-7220

E-Mail: [email protected]


4. Services Provided by Plantation

EXCHANGE OF INFORMATION

PROGRAMS

Automatic Exchanges Specific Requests Spontaneous Exchanges Simultaneous Examinations Joint Audits Industry Wide Exchanges Simultaneous Criminal Investigations Mutual Collection Assistance Program Mutual Legal Assistance Treaties (MLAT)

Exchange of Information Programs

Specific Exchange – Request for information for “specific” taxpayer, group of taxpayers or tax entity under examination or investigation in the requesting country.

Spontaneous Exchange – Exchange of information provided “spontaneously” (i.e. without being requested). Information generally discovered within the framework of a tax investigation or examination and is forwarded to the tax authorities that may be impacted by the information.


Automatic Exchange – Bulk exchanges of information relating to many taxpayers.

Industry-wide Exchange – Exchange of information relating to a specific industry, sector, etc. Exchange allows tax authorities to discuss issues related to parties on both sides of the industry. Examples: Oil and Gas Industry, E-business, Offshore Compliance Initiatives, Tax Shelter Industry.

Simultaneous Examinations – Specific and Spontaneous exchanges of information relating to a specific taxpayer (s) being examined or investigated by two or more tax authorities.


Mutual Collection Assistance Requests (MCAR) – request for assistance in the collection of a country’s taxes by the authorities of another country. Treaty countries with broad collection assistance article – Canada, France, Sweden, The Netherlands, and Denmark.

What Kind of Information Can be

Exchanged? TAX RETURN INFORMATION

FILING STATUS INCOME/EXPENSES/TAX CREDITS DECLARATIONS LAST KNOWN ADDRESS INFORMATION RETURNS

BANK, BROKERAGE (STOCK/SECURITIES) AND OTHER FINANCIAL RECORDS

INTERVIEW OF TAXPAYERS AND OTHER WITNESSES

BUSINESS RECORDS, INVOICES, CONTRACTS, LOAN AGREEMENTS

PUBLIC RECORDS; LAND OR COMPANIES REGISTRY

ACCOUNTANT AND ATTORNEY RECORDS

INSURANCE COMPANY RECORDS

ASSETS OWNED

ASSOCIATIONS WITH OTHER COMPANIES

TRANSFER PRICING

REGISTERED AGENTS (COMPANY CREATION)

FINANCIAL STATEMENTS

TAX SHELTERS

Tax Connection or Nexus There should be a tax connection shown between the taxpayer and the information sought that is in the possession of the third party.

The request for information is generally concerned with a particular item of income or expense and concerned with the determination of the income tax liability of a taxpayer.

The request is generally of a specific nature and must indicate precisely the information desired and the reason such information is required.

When requesting records, identify for what years the records are being requested.

The treaty partner must have reason to believe that the item of income or expense involved in the request was erroneously treated on a specific tax return. Under this "reason to believe" policy, none of our treaty provisions will permit general "fishing expeditions" on either an individual or a group basis. (See current policy)

Treaty partner furnishes evidence that the person is involved in business or financial transactions that would subject him or she to the tax laws of the country and that receipt of the information in the documents is pertinent and material in the determination of the tax liability in the case. For example: Mr. Taxpayer has not reported $100,000.000 US Dollars on his Income Tax Return from XYZ, Inc. (see attached invoice # 56789).

The request must be based on a specific income tax interest, that is, not on a general inquiry as to the individual's tax status.

Make clear a nexus between the information sought and the covered tax.

Policies and Practices – Cont.

US/Foreign Initiated Specific Request for EOI Exhaustion of means of obtaining information - Our providing information in response to a treaty request is an

expensive proposition. The treaty partner must meet the requirement to first utilize the available and effective means under its own law to obtain the information in question, including asking its taxpayer for the information in appropriate cases.

Use of available means on behalf of treaty partners - We will issue summons on behalf of treaty partners even though we

have no tax interest.


5. How Plantation does the Work

Specific Outgoing Request

1. Request .

3. Information .

4. Information

IRS Examiner

Foreign Country

Competent Authority

EOI Program

2. Request

US

Competent Authority

EOI Program

Specific Simple Incoming Request

.

2. Information .

Foreign Country

Competent Authority

EOI Program

1. Request

US

Competent Authority

EOI Program

Worked by EOI

Specific Simple Incoming Request

2. Request .

6. Info .

5. Info

IRS Examiner

Foreign Country

Competent Authority

EOI Program

1. Request

US

Competent Authority

EOI Program

Worked by IRS Examiner

Person with Info

3. Request

4. Info

Specific Incoming Request with Summons

2. Request

. . 3. Get Summons

IRS Examiner

Foreign Country

Competent Authority

EOI Program

1. Request

US

Competent Authority

EOI Program

Worked by IRS Examiner

Person with Info IRS Counsel

Does not

comply

4. Draft Summons

5. Approve

6. Summons

7. Summons

8. Info

9. Info 10. Information


2. Request Does not comply

. .

Foreign Country

Competent Authority

EOI Program

1. Request

US

Competent Authority

EOI Program

Worked by EOI with Person

Person

with Info

IRS Counsel

3. Draft Summons

4. Approve (not necessary if template used)

5. Summons

6. Info 7. Info


. .

Foreign Country

Competent Authority

EOI Program

1. Request

US

Competent Authority

EOI Program

Worked by EOI with Bank

IRS Counsel

2. Draft Summons

3. Approve (not necessary if template used)

4. Summons

5. Info 6. Info

IRC 7602

Person must comply or assert why not

Exceptions recognized by treaty/TIEA: attorney-

client privilege, trade secrets, contrary to public

policy

U.S. District Court can compel – IRC 7604

Contempt of court with fines or imprisonment

Prosecution with penalties and/or up to one year of

imprisonment

Refusal to Comply -- Summons

Beyond bank’s retention requirements -- 0-5

cases out of about 2000

Otherwise, no cases of not overcoming refusal

to comply

Cases of Refusal to Comply

6. Countries that Plantation Service

Countries Plantation Serves

Anguilla, Antigua & Barbuda*, Argentina, Aruba*, Bahamas*, Barbados*, Belize, Bermuda*, Bolivia, Brazil*, British Virgin Islands*, Cayman Islands*, Chile, Colombia*, Costa Rica*, Dominica*, Dominican Republic*, Ecuador, El Salvador, French Guiana, Grenada*, Guadeloupe, Guatemala, Guyana*, Haiti, Honduras*, Jamaica*, Martinique, Mexico*, Montserrat, Netherland Antilles* (Curacao, Bonaire, St. Maarteen & Saba), Nicaragua, Panama*, Paraguay, Peru*, St. Barthelemy (St. Barts),St. Christopher (St. Kitts) and Nevis, St. Lucia*, St. Martin, St. Vincent and Grenadines, Surinam, Trinidad & Tobago*, Turks & Caicos, Uruguay, Venezuela

Documents

Exchange Of Information Programs