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Wednesday, 9 September 2009
Americans in Singapore seek tax advice as US deadline nears
Tax experts say they are getting queries from United States citizens and US green card holders in Singapore, wanting to come clean over income they have not declared - before an imminent deadline.
Americans in Singapore seek tax advice as US deadline nears
By Lee Su Shyan 09 September 2009
Tax experts say they are getting queries from United States citizens and US green card holders in Singapore, wanting to come clean over income they have not declared - before an imminent deadline.
For these Americans who have under-declared their income, the carrot, if they meet the Sept 23 deadline, is avoiding a sizeable stick - criminal prosecution and hefty fines in the US.
Their fears that the US taxman will come after them have been heightened since last month’s deal between the US’ Internal Revenue Service (IRS) and Switzerland’s UBS, under which the bank agreed to cough up details of the assets of about 4,450 Americans.
That deal has forced many to come to terms with the reality that they may face criminal prosecution for failing to disclose their taxable income - and that being overseas is no guarantee of being let off the hook.
US tax laws are among the most complex and wide-ranging in the world - its citizens get taxed on any income they earn anywhere in the world.
Many taxpayers have tried to avoid the taxman’s attention by moving their income overseas and hoping that banking secrecy rules will protect them. But that strategy may not work now.
Mr. Edmund Leow, a partner at law firm Baker & McKenzie.Wong & Leow, said: ‘Taxpayers can’t keep digging their heads in the sand. Some have been assuming that if they are not in the US, they can just put their money in an offshore account and no one will come after them.’
These concerns are why some taxpayers are choosing to participate in an ongoing voluntary disclosure IRS programme.
Under it, taxpayers who voluntarily come forward to declare their omission face a uniform penalty structure. They will lower their risk of criminal prosecution and avoid much higher civil penalties.
The IRS gave notice in March that taxpayers who wanted to come under this penalty framework had up to Sept 23 to do so.
IRS cites a scenario in which a taxpayer does not disclose his US$1 million (S$1.4 million) deposit and the US$300,000 interest earned over the past six years. Under the voluntary disclosure scheme, a penalty of US$386,000 plus interest will be levied.
But if the taxpayer did not come forward and the IRS subsequently finds out about the deposit, the penalty could be US$2.3 million plus criminal prosecution.
Tax experts have said that many taxpayers, particularly in Europe and even in Asia, are looking to beat the Sept 23 deadline.
In Asia, many of the queries are from American expatriates based in the region, and also from those of Asian origin, such as people who studied in the US and later gained citizenship.
Executive director of international executive services at KPMG Singapore, Mr. Dennis McEvoy, said he has received some queries about the voluntary disclosure practice.
He said: ‘As recent enforcement activity has focused on the use of offshore accounts and entities, this has brought them to the forefront of discussion and resulted in an increased number of voluntary disclosures.’
But even with the threat of criminal prosecution, some taxpayers are still holding back from baring all. One reason is that they may have spent all the income from the past years that is subject to the unpaid taxes.
Another factor is the financial crisis, which has wiped out many fortunes and means that any additional tax demand comes at the worst possible time for cash-strapped taxpayers.
And by not declaring their income from previous years, taxpayers are no longer eligible to claim any allowances to reduce that taxable income, and will end up with an even larger tax bill.
The high costs of engaging tax lawyers - to negotiate with the IRS - as well as accountants to prepare past returns are also making people think twice.
Governments all over the world are getting tougher with tax evaders as they face mounting budget deficits from their stimulus packages. But finding it difficult to raise taxes to fund their spending, countries are trying to combat non-compliance.
The tax authorities are recognising the need for international cooperation in the investigation of tax evasion, said Mr. Leow.
In Singapore, it has been announced that the Republic will endorse the Organisation for Economic Cooperation and Development’s standard for transparency and exchange of information.
2 comments:
Americans in Singapore seek tax advice as US deadline nears
By Lee Su Shyan
09 September 2009
Tax experts say they are getting queries from United States citizens and US green card holders in Singapore, wanting to come clean over income they have not declared - before an imminent deadline.
For these Americans who have under-declared their income, the carrot, if they meet the Sept 23 deadline, is avoiding a sizeable stick - criminal prosecution and hefty fines in the US.
Their fears that the US taxman will come after them have been heightened since last month’s deal between the US’ Internal Revenue Service (IRS) and Switzerland’s UBS, under which the bank agreed to cough up details of the assets of about 4,450 Americans.
That deal has forced many to come to terms with the reality that they may face criminal prosecution for failing to disclose their taxable income - and that being overseas is no guarantee of being let off the hook.
US tax laws are among the most complex and wide-ranging in the world - its citizens get taxed on any income they earn anywhere in the world.
Many taxpayers have tried to avoid the taxman’s attention by moving their income overseas and hoping that banking secrecy rules will protect them. But that strategy may not work now.
Mr. Edmund Leow, a partner at law firm Baker & McKenzie.Wong & Leow, said: ‘Taxpayers can’t keep digging their heads in the sand. Some have been assuming that if they are not in the US, they can just put their money in an offshore account and no one will come after them.’
These concerns are why some taxpayers are choosing to participate in an ongoing voluntary disclosure IRS programme.
Under it, taxpayers who voluntarily come forward to declare their omission face a uniform penalty structure. They will lower their risk of criminal prosecution and avoid much higher civil penalties.
The IRS gave notice in March that taxpayers who wanted to come under this penalty framework had up to Sept 23 to do so.
IRS cites a scenario in which a taxpayer does not disclose his US$1 million (S$1.4 million) deposit and the US$300,000 interest earned over the past six years. Under the voluntary disclosure scheme, a penalty of US$386,000 plus interest will be levied.
But if the taxpayer did not come forward and the IRS subsequently finds out about the deposit, the penalty could be US$2.3 million plus criminal prosecution.
Tax experts have said that many taxpayers, particularly in Europe and even in Asia, are looking to beat the Sept 23 deadline.
In Asia, many of the queries are from American expatriates based in the region, and also from those of Asian origin, such as people who studied in the US and later gained citizenship.
Executive director of international executive services at KPMG Singapore, Mr. Dennis McEvoy, said he has received some queries about the voluntary disclosure practice.
He said: ‘As recent enforcement activity has focused on the use of offshore accounts and entities, this has brought them to the forefront of discussion and resulted in an increased number of voluntary disclosures.’
But even with the threat of criminal prosecution, some taxpayers are still holding back from baring all. One reason is that they may have spent all the income from the past years that is subject to the unpaid taxes.
Another factor is the financial crisis, which has wiped out many fortunes and means that any additional tax demand comes at the worst possible time for cash-strapped taxpayers.
And by not declaring their income from previous years, taxpayers are no longer eligible to claim any allowances to reduce that taxable income, and will end up with an even larger tax bill.
The high costs of engaging tax lawyers - to negotiate with the IRS - as well as accountants to prepare past returns are also making people think twice.
Governments all over the world are getting tougher with tax evaders as they face mounting budget deficits from their stimulus packages. But finding it difficult to raise taxes to fund their spending, countries are trying to combat non-compliance.
The tax authorities are recognising the need for international cooperation in the investigation of tax evasion, said Mr. Leow.
In Singapore, it has been announced that the Republic will endorse the Organisation for Economic Cooperation and Development’s standard for transparency and exchange of information.
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