Category: News

Cooperation between trade associations to promote global standards of best practices for investment migration professionals 

On April 21^st, Invest in the USA (IIUSA), the U.S.-based not-for-profit industry trade association for the EB-5 Regional Center Program (the “Program”) and the Investment Migration Council (IMC), the worldwide association for Investor Immigration and Citizenship-by-Investment, announced a strategic partnership arrangement that will enhance collaboration on initiatives for industry best practices, education and development.

“As the leading EB-5 industry trade association, IIUSA is proud to commence a long-term partnership with the IMC to enhance public understanding of issues facing investment migration professionals in the U.S. and around the globe, “ said IIUSA Executive Director Peter D. Joseph. “This partnership will enable IIUSA’s existing members and partners to access a range of exciting new resources and connections to increase awareness worldwide of the EB-5 visa category.”

The Memorandum of Understanding (MOU) signed by the two organizations will lead to streamlined cooperation in the following five areas: membership exchange, conference collaboration, industry & professional development, organizational promotion and industry best practices.

Bruno L’ecuyer, CEO of the Investment Migration Council commented, “The collaboration between the IMC and IIUSA is a natural step forward for both organizations but also benefitting the investor immigration industry globally. After opening our regional office in New York a few months ago, our commitment to serving American practitioners who work in the industry is cemented through this exciting new partnership,’’ L’ecuyer said. ‘’I am personally looking forward to sitting down with many EB-5 professionals and understanding how the IMC can provide support in a global context’’.

The agreement was officially announced at IIUSA’s 9^th Annual EB-5 Advocacy Conference, the EB-5 industry’s premier conference for grassroots advocacy, industry education, networking. The conference boasted over 350 people in attendance and a full schedule of speakers, Capitol Hill visits, networking and meetings. Attendees were treated to seven Guests of Honor from the federal government, 30+ additional speakers on seven industry panels, and two nights of receptions.

The Investment Migration Forum, to be held June 6-8 in Geneva, Switzerland, will serve as another global platform to highlight the cooperation between IIUSA and the IMC.  The Forum is the world’s premier independent forum on the subject of citizenship-by-investment and investor immigration, and will discuss many issues directly relevant to IIUSA members. To learn more about the event, click here.

 

About IIUSA

IIUSA is the national not-for-profit trade association for the EB-5 Regional Center industry with a mission of advocacy, education, industry development, and research. The organization represents more than 290 Regional Centers and 230 associated members, collectively representing big and small projects, urban and rural economic development, and industry sectors ranging from real estate and manufacturing to energy and infrastructure. IIUSA’s members are engines of economic growth and job creation, accounting for over 95 percent of capital flowing through the Program.

 

To access the data sheet on the Portugal (GRP) program results as of 31st March 2016, please click here.

A former senior Canadian civil servant has been named the incoming head of the Citizenship by Investment Unit (CIU) in move that the government of Antigua & Barbuda said will reassure the international community of the programme’s transparency.

According to the government’s Chief of Staff, Lionel “Max” Hurst, Chisanga Chekwe, will assume the post of Chief Executive Officer (CEO) of the CIU on or about May 16.

“He came to Cabinet in large part because Cabinet wants a Canadian to head the unit of the Citizenship by Investment Programme,” Hurst said, explaining the rationale saying. “It has to do with reassuring international partners that your programme is transparent.”

“The unit has had Antiguan head it for interim periods and they are very good at what they do. This doesn’t have anything to do with inabilities on part of Antiguan and Barbudans.”

Chekwe’s credentials were more than impressive to the Cabinet of Antigua & Barbuda according to the Chief of Staff.

He confirmed that Chekwe has served for more than five years as Deputy Minister in the Ontario Ministry of Citizenship, Immigration and International Trade. (The office a Deputy Minister is comparable with that of a Permanent Secretary)

 

Source: antiguaobserver.com
Posted: 22 April 2016

Since the outset of the EU migrant crisis over two years ago, countless proposals have been tabled by EU and national authorities, civil society and independent policy exponents to address some of the most salient causes and impacts of this unprecedented crisis. To date, most of the proposals that have been converted into actual policy and that have benefited from EU budget support have consisted primarily of emergency, piecemeal and intra-EU measures. These have related, in particular, to the strengthening of external border controls, including through an expanded role for Frontex and the development of the Smart Borders Package, as well as to the establishment of the largely unpopular EU Relocation Plan.

EU initiatives to actively involve non-EU source countries in the pursuit of viable solutions to the migrant crisis have only recently started to materialise, most notably with the signing of the EU-Turkey agreement on 18 March 2016, However, while the agreement appears to be impacting the level of irregular arrivals to Greece since its launch a few weeks ago, it is clearly not able to account for the fact that Turkey is only one of the main migratory routes to Europe. Concerns are therefore mounting over Libya’s gradual ascent as the next mass migration time bomb, especially in the absence of any viable government and stable institutions, as well as over the development of new entry points to the EU, particularly in Italy and in Bulgaria, since the adoption of the EU-Turkey agreement.

New initiatives, and comprehensive and operational strategies, are therefore still needed to capture the full range of persisting causes and impacts of the on-going EU migrant crisis.

One such strategy, albeit still in very embryonic form, has just been tabled by the Italian government. In a letter sent to Presidents Donald Tusk and Jean-Claude Juncker on 15 April 2016, attaching a short ‘non-paper’ titled “Migration Compact”, Italian Prime Minister Matteo Renzi outlined a strategy for enhancing cooperation with countries of origin and transit, redirecting already earmarked EU funds and launching new sources of funding through “EU-Africa bonds” and “Common EU Migration Bonds”.

While not majoring exclusively on first-hand proposals, a number of concepts in this four-page document are novel and worthy of consideration. This is especially true in view of the positive initial reactions already expressed by many EU member states, including in the Visegrad region, as well as by the European Commission. At the EU Foreign Affairs Council of 18 April 2016, Federica Mogherini, the EU High Representative for Foreign Affairs and Security Policy, stressed in particular that ‘most of the Italian proposals support the EU’s ongoing work and activities and constitute a positive political contribution’.

The main thrust in Renzi’s proposals is on the development of, and increased support for the EU’s external action strategy on migration, including through a more active involvement of key non-EU partner countries and through a better use of all existing instruments in the field of external action, particularly those directed at key African countries of origin and transit. In this respect, the idea of modulating cooperation according to partner country, through the development of a matrix reflecting each country’s migratory features and other characteristics such as economic and social trends, security and, climate change, is particularly auspicious. While the European Commission and the International Organization for Migration (IOM) have been producing national ‘Migration Profiles’ since the mid-2000s, the integration of such profiles into core EU policy development is certainly a step in the right direction.

But one of the most engaging proposals in the ‘Migration Compact’ paper no doubt relates to the identification of new methods of financing the migrant crisis, which are clearly aimed at supplementing the EU’s over-stretched disbursements in this policy area, as well of course as addressing the increasing reluctance of most member states to inject or divert additional resources in response to the lingering migrant crisis.

In particular, Renzi’s proposals relating to the launch of “EU-Africa bonds” and “Common EU Migration Bonds” are enlightening, even if similar ideas had already been aired by the Italian government in their paper on ‘A Shared European Policy Strategy for Growth, Jobs, and Stability’ in February 2016, calling for the launch of a mutualised funding mechanism to address the migrant crisis. The exact modus operandi of such a scheme of course remains to be invented and the idea of EU migration bonds will also need to face strong opposition in key member states such as Germany, which has always rejected the idea of Eurobonds. This was reiterated by Chancellor Merkel’s spokesperson on 18 April 2016, who stressed that “the German government does not see any basis for a common funding of debt for member states’ spending on migration”.

The notion of Common EU Migration Bonds, however, merits further examination. It could even draw on the lessons learned from the issuance of national solidarity bonds and debt sales to individual investors in the past. Such schemes have been tested, in particular, in Ireland, Italy and Spain, enabling individuals to easily buy government debt, including online. They appear to have facilitated the absorption of a decent size of the debt requirements, especially in Italy where household savings rates are high. Some of Spain’s autonomous regions have themselves issued “bonos patrióticos” to their citizens in the early 2010s, covering, in the case of Catalonia; over 70% of the region’s funding needs. Other examples abound, including in the United States where patriotic bonds were issued during World War II. While solidarity and empathy towards the on-going migrant crisis appear to be declining within the EU population, the launch of EU bonds that would clearly aim to reduce migratory pressures in Europe would no doubt attract interest among many segments of society. The notion of crowdfunding to support specific projects to derive from Renzi’s non-paper could also be examined, particularly in view of the size of established Syrian and Iraqi communities in a number of member states.

The interest generated by Renzi’s document since its publication a few days ago therefore appears to be justified. While some of the Migration Compact proposals, for example those relating to further cooperation on returns/readmissions, resettlement schemes and the fight against trafficking in human beings and smuggling of migrants, have been upheld in a number of EU initiatives and Communications over the past ten years, and while it is unlikely that discussion of this document will result into any concrete measures in the near term, Renzi’s initiative is potentially a momentous one.  By aiming to involve third countries of origin and transit to such an unprecedented extent, and through such win-win modalities, the Migration Compact proposals can certainly be referred to as a “fair grand bargain”.

 

Source: neurope.eu
Posted: 20 April 2016

A ground-breaking report by a high-level commission, headed by former British Prime Minister Gordon Brown, has tabled a series of far-reaching proposals for an urgent reform of the United Nations Human Rights architecture.

Composed of some of the world’s notable public leaders and thinkers, the Global Citizenship Commission (GCC) asks the international community to “recognize that asylum seekers have three rights that should not be forgotten: a right to security in transit; a right to a fair and responsible process at borders; and a right to good reason for a refusal to allow entrance or settlement”.

The Commission, established in 2013, also asks the five permanent members (P5) of the UN Security Council – Britain, France, Canada, Russia and China – to “voluntarily suspend their veto in situations involving mass atrocities”.

Further: “An international children’s court should be established, and the UN Security Council should convene a ‘Children’s Council’ – an annual review on violations of children’s rights.”

The report, titled The Universal Declaration of Human Rights in the 21st Century, contains the findings and recommendations of the GCC, convened under the auspices of New York University to renew the 1948 Universal Declaration of Human Rights (UDHR) for the twenty-first century. It was presented to Secretary-General Ban Ki-moon at the UN’s headquarters in New York on April 18.

The Commission’s Chair Brown said: “Since 1948, the Universal Human Rights Declaration has stood as a beacon and standard for a better world. Yet at a time of enormous global change, a refugee crisis bigger than that which accompanied the ending of the Second World War, the increasing twin threats of terrorism and extremism, and the appalling abuse and suffering of women and children in conflict and other situations, we need to renew and revitalize our efforts to realize the rights articulated in the Declaration.

Jeremy Waldron, who chaired the GCC Philosophers’ Committee, said: “This report refreshes our understanding of the Universal Declaration of Human Rights, which has dominated human rights thinking since 1948.  It reaffirms the fundamental commitments of the UDHR; it proposes ways in which those commitments can be carried forward to meet new challenges. Above all, it identifies the UDHR as a pillar of our global ethics and our global responsibilities.”

The report also recommends that the UN should consider the creation of a World Human Rights Court, consistent with the principle of complementarity. The International Criminal Court should investigate and prosecute crimes against children within its remit to the full extent of the law.

At the national level, says the GCC, all states should create accessible complaint mechanisms for the resolution of violations of the rights of children, and consider establishing a Youth Parliament, Children’s Commissioner, and dedicated budget for Children

The international community should implement Target 10.7 of the recently adopted Sustainable Development Goals, which calls for states to “facilitate orderly, safe, regular and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies.”

The report asks all governments, international organizations, and NGOs to encourage and support human rights education.

According to the report, although human rights are important for a global ethic, they are only a part of it. Other pillars of a global ethic include:

Good governance and the rule of law, at both national and global levels.

Responsibility for planet and climate, and our obligations to future generations.

Basic humanitarian responsibility for one another, even when human rights are not directly involved.

The eradication of extreme poverty.

Outlawing aggressive war and upholding international security through the United Nations system as a basis for the resolution of global conflict.

The elimination of nuclear weapons and other weapons of mass destruction.

A broad commitment to strengthening institutions such as the United Nations and its agencies, which have paramount responsibility for the well-being of the international system.

The maintenance of the cosmopolitan frameworks that enable people to relate to one another scientifically, productively, economically, and culturally all around the world.

These pillars are related to one another and they form an integrated system, says the report. Each of them has pivotal human rights dimensions but each of them also takes us beyond the field of human rights and opens up broader vistas of global obligation and participation.

“One way of thinking about human rights requirements is that they secure the foundation on which people can exercise and construct their citizenship responsibilities, whether in their own countries or in the world at large. Without the protections and liberty that human rights are supposed to secure, it would be difficult for people to lift their gaze beyond their immediate fears and deprivations,” argues the report.

The Commission thinks it is imperative, therefore, to reaffirm that human rights in general and the UDHR in particular contribute immensely to the emergence of a global ethic. A global ethic is not the same as international law. It is something like the shared moral impulse that underlies and sustains international law.

“Many things need to be comprised in a global ethic cannot be laid down in precise legal terms. At the same time, the reality of human rights institutions and the evolution of international human rights law – along with national and regional declarations of rights, and their accompanying courts – demonstrate that it is possible to build real-world institutions and practices upon these ethical foundations,” mains the report. [IDN-InDepthNews – 18 April 2016]

IDN is the flagship of International Press Syndicate.

 

Posted: 19 April 2016
Source: indepthnews.net

 

The United States Government has warned regional countries offering the citizenship by investment programme (CIP), to refrain from issuing   “unless the issuing government is confident beyond a reasonable doubt that the individual is a bona fide applicant”.

In a statement issued Wednesday, the US Embassy here said while it does not approve or disapprove individual aspects of the CIP, the participating countries must ensure that the identity of individuals is fully validated and that the applicant lacks ties to transnational criminal or terrorist organisations.

The US also noted that it understands the potential economic benefits from utilizing the citizenship by investment programme and  it is the sovereign right of all countries to choose whether or not to engage in such a programme.

“The United States strongly believes that all countries have an inherent responsibility to their citizens and the international community to review fully all applicants who seek a nation’s citizenship.”

“While the United States Government is willing to consult with governments on their citizenship investment programmes, the ultimate decisions to offer and how to operate such a programme, including the issuance of citizenship and related identifying documents, such as passports to applicants,  lie with each individual government and not with the United States,” the statement added.

Countries that have implemented CIP are Antigua and Barbuda, St. Kitts Nevis and Dominica.

St. Lucia has indicated that it will be implementing the programme shortly.

Under the CIP, foreign investors are given citizenship once they make a significant investment in the socio-economic development of the country.

Source: https://stluciatimes.com/
Date: 14 April 2016

Italy opens its borders to foreign investors. From 9 February 2016, applications for investor work permits may be submitted in Italian to the local immigration authorities via a dedicated web site.

In effect, on 2 February 2016, Italy enacted the annual decree setting forth the quotas for 2016 that apply for different categories of foreign workers in Italy. The decree known as the Decreto Flussi explains in detail:

-all numerical limits for each category of worker/citizen permitted to enter with a relevant work permit;
-the timing for the submission of the work permit request; and
-the terms and conditions around applying for a work permit.

In order to work in Italy, Italian immigration and labor authorities require non-EU nationals to obtain a specific authorization, the so-called Nulla Osta al lavoro (work permit). Every year the Italian labor authorities establish a limited number of work permits available.

Background
The quota system was introduced under Italy’s immigration regime in 1998. With this system in place, the Italian labor authority advises the government annually on foreigners’ employment in Italy (non-EU individuals working in Italy) with a view to determining the numerical limit, or quota, for the following year.
Relying on academic and other research, the Italian authorities issue a study on the labor market every three years. The Decreto Flussi is updated annually in order to match supply and demand in the labor market.

Categories of Workers Covered by Decreto Flussi
The government established a quota for investors and self-employed individuals (a “unit” is a “person”).

HIGHLIGHT

• Entrepreneurs need to invest at least €500,000 and hire at least three employees.
Investors and self-employed individuals
In particular, the Decree provides for 2,400 “units” allocated for foreign citizens who belong to the following categories:
a) Entrepreneurs who carry out activities in connection with the Italian economy, invest at least €500,000 and hire at least three employees;
b) Self-employed individuals belonging to a professional association or enrolled with an official/public register;
c) An individual who has a corporate role, as defined, in an Italian company;
d) Highly qualified artists or those who are considered international celebrities;
e) Foreign citizens who want to start up an innovative company, as defined, in Italy.

Furthermore, work permits are issued under the quota system and a pre-determined number of permits are set out in the decree.
Formal international assignments (up to a maximum 5 years in duration) are not part of the quota system and they are permitted according to Italian immigration rules following specific procedures.

 

Maria Barba
Submitted on: 5 April 2016

 

A long term extension of the regional center EB-5 program failed to pass Congress in 2015 mostly because of intractable differences between rural and urban interests. Various proposals were floated seeking to incentivize rural investments and discourage urban investments by providing a reduced investment amount based on various artificial configurations of census tracts. In the end, no agreement could be reached between the divergent interests.

What if there were a way to bridge this divide by incentivizing investments in rural areas and possibly also urban high poverty areas while at the same time providing some benefit to investors in urban areas? And what if it could be done in a way that eliminates any need for gerrymandering, any need for creating a new USCIS bureaucracy with TEA adjudication delays and any need for legislating an artificial number of census tracts to qualify for TEA status? And what if there were a way to do this that removes all doubt about the investment amount required for all investors in the project, even investors in future years? And what if such a solution could ease some of the pressure on the lengthy EB-5 quota backlog that threatens to make the benefits of the EB-5 program unrealistic for most investors?

I suggest that there is such a solution. I regret that I did not originally think of this solution – credit for the idea goes to Tammy Fox-Isicoff, a respected EB-5 attorney, colleague and friend.

Let me set out the premises and then let’s see if the proposed solution achieves the stated goals, is politically palatable and furthers the national interest that Congress had in mind when it created the EB-5 program.

Here are the premises:

• Investments in rural areas and high poverty urban areas are in the national interest and should be incentivized.
• Investments in projects that create employment for US. workers in urban areas should not be discouraged.
• Given the extensive waiting list for most EB-5 investors, reducing or eliminating the waiting times creates a far greater incentive for investors than reducing the minimum investment amount.
• It is logical to have no limit on investments that the federal government believes are in the national interest. Rather, the federal government should encourage national interest investments.
• Carving out of the existing 10,000 numbers (3,000 to 3,500 investors annually) a substantial number for rural area investors, urban impoverished area investors and other investors in the national interest would result in the remaining investors, including a large majority of investors with pending petitions, having a waiting line that could well be in excess of 10 to 15 years. Such a waiting list is totally unrealistic, far too great a disincentive for investors to invest in urban areas and would likely create legal and foreign policy issues for investors who had no reason to believe that legislation would retroactively result in doubling or tripling anticipated waiting times. Such a result would, at best, cripple the EB-5 program.
• Even if Congress can achieve compromise on a new definition of TEA, adjudication delays within USCIS to determine which projects qualify under a new TEA definition will create impediments and backlogs that will make the EB-5 program less amenable to the realities of raising capital for development projects in the U.S.

If we agree with these premises, Tammy and I suggest that the following is a solution that addresses all of them:

Create an EB-5 quota exemption for projects deemed by the U.S. government to be in the U.S. national interest.

Here is how it would work:

Given the political realities, and the fact that bipartisan leadership in both the House and Senate Judiciary Committees believe that investments in rural areas and urban impoverished areas are in the national interest, the legislation could include a provision deeming that rural and urban impoverished area investments are in the national interest. This would create a significant incentive for investors to invest in such national interest projects, and there would be no need to reduce the investment amount. At the same time, since the national interest investors would be exempted from the quota, it would remove some of the pressure on the numbers available for urban area investors. The result would be that urban area investors would not be harmed (and would actually receive a benefit) while investors investing in areas deemed to be in the national interest would be incentivized.

USCIS would also have the authority to determine that any particular project is in the national interest. For example, given the pressing need for improving U.S. infrastructure, it could determine that an infrastructure development project is in the national interest. This is nothing new – USCIS has been adjudicating national interest waivers in the EB-2 category since 1990.

Since the purpose of the targeted employment area was to incentivize certain investments, there would no longer be a need for targeted employment areas. The investment amounts for all investments would be the same. This would eliminate the divisive and artificial debate on where lines should be drawn for purposes of TEA qualification. The new governmental TEA bureaucracy would be eliminated; gerrymandering would be eliminated; the state versus federal jurisdiction issues would be eliminated; changes in investment amount for investors in a project based on TEA analysis in different years would be eliminated. Projects would be able to go to market immediately without waiting for a TEA determination.

Significantly, creating a legislative quota exemption to accomplish a goal considered important by Congress is nothing new. Congress has already exempted immediate relatives (spouses, parents and children of U.S. citizens) from the immigrant quota. In addition, Congress has exempted universities and certain nonprofit institutions from the H-1B visa quota.

Unless I am missing something, this solution could bridge the divide between rural and urban interests, and between rural and urban Senators and Congressmen. It would also be at least a small step toward addressing the quota backlog that threatens to render the EB-5 program – and its job creating benefits – unattractive and unrealistic. And it would break the logjam preventing the passage of legislation providing for a long term extension of the regional center EB-5 program. Most importantly, it would encourage investment in projects and in areas that clearly serve the national interest of the U.S. in furtherance of Congressional intent.

I welcome feedback from all EB-5 advocates on this proposal.

 

Ronald H. Klasko IMCM, Managing Partner, Klasko Immigration Law Partners, LLP, New York, Philadelphia, Chicago
Date Submitted: 21 March 2016

In recent years, many countries signed an agreement with the United States, known as the Foreign Account Tax Compliance Act. This enables automatic reporting to the US tax authorities of financial data of any Americans with bank accounts in their territory, such as income from savings.

These agreements inspired the OECD and the G20 to extend the approach of the United States by establishing a system of automatic exchange of information between Member States.

Big Brother exists! The world is financially transparent!

After 20 years of tinkering, the breakthrough followed on the 28th and 29th of October, 2014.

The Member States of the OECD, the G20, and almost all major financial centres signed an agreement that will enable the automatic exchange of tax information. This automatic exchange of tax information can be considered the new standard which will ensure full global transparency.

The first automatic exchange of tax information is planned for September 2017. At least, that is the intention … Although it looks serious, we should not be naive …

However, as appears from the information below, the basis of the new standard (automatic exchange of tax information) is not new. The scale and scope of the new standard, on the other hand, is innovative and this has far-reaching consequences in terms of tax planning.

Forerunners of the new standard

1. European Union Savings Tax Directive

The European Union Savings Tax Directive, introduced in 2005, provided for the automatic exchange of information between EU Member States (and certain dependent or associated territories of EU Member States) concerning income from interest.

In other words, the goal of the European Union Savings Tax Directive is to tax savings income, acquired in a Member State of the European Union by a natural person resident in another Member State of the European Union (or in one of the dependent or associated territories of the Member States of the European Union), in accordance with the tax laws of that individual’s country of residence.

After the launch, it turned out that the initial European Union Savings Tax Directive contained a number of weaknesses. This enabled tax residents of the EU Member States to slip through the net:

• The concept ‘interest’ was too narrowly defined. As a consequence, one could use financial products which do not generate pure interest in order to avoid reporting,
• The concept ‘paying agent’ was too narrowly defined. This enabled financial institutions to redirect the payments to outside the territory of the European Union Savings Tax Directive in order to avoid reporting,
• The concept ’beneficial owner’ was defined as an individual who directly collects interest from a paying agent. This means that the European Union Savings Tax Directive could be legally avoided if that same individual was working with an interposed entity to collect interest. For example, international business companies, foundations, trusts, and partnerships could be used to avoid reporting.

Not without a struggle and after severe opposition from Luxembourg and Austria, a comprehensive and amended EU Savings Tax Directive was signed on the 24th of March 2014. The loopholes mentioned above were largely closed by this amended European Union Savings Tax Directive.

The scope of the concept ‘interest’ was broadened, the scope of the concept ‘paying agent’ was enlarged and the scope of the concept ‘ultimate beneficial owner’ was enlarged, covering beneficiaries of traditional offshore entities such as international business companies, foundations, trusts, and partnerships.

The EU Member States were forced to implement this amended EU Savings Tax Directive into national law before the 1st of January 2016.

Austria and Luxembourg start with the automatic exchange of information regarding interest received in year 2016 on the 1st of January 2017, a year later.

Nevertheless, this amended EU Savings Tax Directive could still be bypassed, simply because the European Union doesn’t have enough power on the international stage. The bottom line is that one can simply avoid all the countries and jurisdictions which fall within the scope of the EU Savings Tax Directive for: (1) the interposed entity’s country of incorporation (such as an International Business Company), (2) the country of the bank account and other financial products, and (3) the country where the actual management of the entity will take place.

2. Foreign Account Tax Compliance Act (FATCA)

Recently, the automatic exchange of information also became the standard reporting mechanism under the Foreign Account Tax Compliance Act (FATCA).

The Foreign Account Tax Compliance Act (FATCA) is a United States federal law. FATCA is intended to detect and deter the evasion of US tax by United States persons (including those living outside the US) who hide money outside the US.

FATCA enforces the requirement for United States persons to file yearly reports on their non-U.S. financial accounts. FATCA also requires all non-U.S. (foreign) financial institutions (banks for example) to search their records for individuals with a U.S. person-status and to report the assets and identities of such persons to the U.S. Department of Treasury.

In case of non-compliance with the reporting obligations, the financial institutions concerned are subject to a withholding tax of 30% in the United States on all outgoing cross-border payments originating in the United States. In other words, U.S. payors making payments to non-compliant foreign financial institutions are required to deduct and withhold from such payments a tax equal to 30 percent of the amount of such payment.

As mentioned earlier, this FATCA legislation made other countries realise that they, too, would benefit from a transparent and automatic exchange of information mechanism with regard to their taxpayers.

A first reaction/imitation came from the United Kingdom. The United Kingdom concluded agreements with its overseas territories (Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat and the Turks and Caicos Islands) and its Crown dependencies (Guernsey , Jersey and the Isle of Man). Financial institutions in these British overseas territories and Crown dependencies are required to automatically provide financial information of taxpayers in the UK to the tax authorities of the United Kingdom. One refers to these agreements by using the term UK FATCA because they are based on the concept of the FATCA legislation in the United States.

The FATCA legislation was also a great source of inspiration for the OECD and the G20 and actually forms the basis for the new standard on the automatic exchange of tax information.

 

The new standard: automatic exchange of tax information

Automatic exchange of tax information means global tax transparency. Financial institutions will provide information about different kinds of income and assets to the authorities, without these authorities having to request it.

Countries will thus register all different types of income that are earned within their country (dividends, interests, royalties, salaries, pensions, etc.). Then, every government can exchange this information automatically in bulk to the other governments concerned. There will be an annual bulk exchange of this information by making use of secure IT networks.

Advantages:

1. The tax authorities of the country in which an individual is resident is able to check whether the individual in question has indicated his or her revenues correctly.
2. The tax administrations of the countries are able to determine and map the worldwide assets of each of their residents.

Disadvantages:

1. The exchange of data is done electronically, so there will always be a risk of data theft (both during the data transfer or from local government databases).
2. Financial privacy disappears. A government will have a complete view on the wealth of its residents. This opens the door to capital taxes and all kinds of ‘see-through fees’. There is a real  danger that the effective tax rate is pushed up even further in certain countries. The potential access to large amounts of capital will tantalise many politicians – it is much easier to simply increase tax revenue than to cut government spending. The dictatorship is being installed …

The new standard versus TIEAs

In an international context, this automatic exchange of tax information can be considered as the new standard in comparison to the current Tax Information Exchange Agreements (TIEAs).

TIEAs are bilateral agreements between jurisdictions in which they agree to cooperate if they ask one another for tax information in order to aid any tax investigations. Under the current system of TIEAs, which will soon be replaced by the new standard, these governments ensure that this exchange of financial information will take place, but only upon request.

TIEAs thus allow a government to apply its national tax legislation through the exchange of tax information. However, this exchange of information is always done upon request. In addition, this request must be relevant to a particular case and must relate to an item that is covered by this bilateral agreement.

The volume of information which is exchanged according to the ‘old-fashioned’ TIEAs is limited though. Namely, the exchange under a TIEA requires, in many cases, a complete identification of the taxpayer concerned or it may even be required that there is an ongoing official tax investigation for this particular taxpayer.

The new standard eliminates the limitations of TIEAs and ensures that governments can benefit from automatic information exchange without having to ask for it anymore. The new standard will thus ensure greater financial transparency and is an important step at global level in terms of using the exchange of information in the fight against tax fraud.

 

Pandora’s box

The new standard for automatic exchange of tax information is offered as the ultimate solution against tax fraud. However, it is important to put this new standard in perspective.

We can do this by looking at the evolution of the individual member states, apart from the new standard. This calls for an example so let’s take Belgium as a case study (the same process is underway in many other Western countries).

In Belgium, once a country with banking secrecy and financial privacy, taxpayers have had to process a whole list of measures against tax fraud in recent decades:

• Since 1996: requirement to declare foreign bank accounts.
• Since 2011: abolishment of the internal Belgian fiscal banking secrecy.
• Establishment of a central point of contact with the National Bank of Belgium where financial institutions have to report their clients’ identity, account numbers, and contract numbers.
• Since 2013: requirement to declare foreign life insurance policies.
• Requirement for Belgian companies to declare payments to suppliers based in certain tax havens, once they reach more than EUR 100 000 annually.
• Since 2014: requirement to declare and identify the founders and beneficiaries of international business companies, trusts, foundations, and other private wealth structures. In other words, Belgian taxpayers, who have placed a portion of their assets in a foreign legal construction, and the beneficiaries hereof, must report this on their tax return.
• Since 2015: introduction of the so-called Cayman Tax, a ‘see-through’ tax. Belgium has opted, like several other (European) countries, for fiscal transparency and CFC legislation (Controlled Foreign Corporation). The aim is to avoid the creation of tax-exempt wealth vehicles abroad and to avoid the decreasing tax base that comes with it. The creation of a foreign construction is not made legally impossible, but the favorable tax effect has been completely neutralised. The income of foreign structures, including companies which are not taxed at a rate of at least 15%, are now charged directly in respect of the founder, his heirs, ‘third party beneficiaries’, or shareholders. This is done according to the original classification of the income. For example, 27% on investment income such as interests and dividends versus progressive rates up to 50% on business income.
• Since end of 2015: establishment of online reporting system for social fraud and undeclared employment. This online ‘snitch’ hotline gives civilians the opportunity to report their neighbour for engaging in undeclared employment or other offenses.

The trend in several (European) countries is obvious and can only frighten the attentive taxpayer… Public authorities are quietly mapping all private wealth in order to strike even harder in the pockets of the taxpayers who have already been taxed completely numb. The new standard for automatic exchange of tax information will actually be a godsend for many governments that are running at a loss, including the Belgian one. Or perhaps not quite?

Anyone who is paying attention will recognise that the new standard could well be a poisoned chalice for various countries with high government spending. The new standard is ultimately forcing taxpayers to make a difficult decision: accept legal confiscation and help filling bottomless government pits OR vote with their feet.

Governments which do not work towards creating acceptable tax rates (such as the Belgian one) will be confronted with the undesirable effects of the new standard of transparency. Value-adding taxpayers not only can, but will choose to become resident and taxpayer elsewhere.

Not only a resident! but some, people just are going for more for another citizenship! And they are smart!!

 

Iven De Hoon, Tax Lawyer
Date submitted: 23 March 2016

The biggest issue presently in the U.S. EB-5 investment green card program is the long quota waiting list for Chinese national investors, who comprise over 85% of all investors in the EB-5 program.  Because the waiting list may exceed 4 to 5 years before the investor can immigrate to the U.S., investors and their representatives are seeking options to be able to enter the U.S. during the waiting period, possibly work in the U.S. and have their children be able to study in the U.S.  The B-1/B-2 visitor visa generally only allows the visa holder to spend up to 6 months per year in the U.S.  This is sufficient for some investors, but not for others.

One option being considered more frequently is the E-2 treaty investor visa.  This visa can generally be issued for 5 years and can be extended after 5 years if the investment business is still viable.  It allows the investor to oversee his business, the spouse of the investor to work anywhere he or she wishes and the child of the investor to attend any level of schooling, after which he can change to a student visa.

There is only one major problem with this visa option for Chinese investors.  The U.S. does not have a bilateral investment treaty with China that enables its nationals to obtain the E-2 treaty investor visa.  For this reason, some Chinese investors are seeking to buy U.S. citizenship in a country that has a bilateral investment treaty with the U.S.  One such example is Grenada, which has a citizenship by investment program that enables Chinese investors to obtain Grenadian citizenship, often within 3 months or less.  There is no residence requirement in Grenada.

Assuming the Chinese investor becomes a Grenadian citizen, he then needs to invest in a new or existing business in the U.S.  The business must be owned at least 50% by the investor or by another individual or corporate national of the treaty country.  Surprisingly, there is no exact amount of investment.  Rather, the amount of investment varies depending upon the type of business.  For example, a consulting company requires a far less substantial investment to be viable than would a manufacturing company.  The key is that the investor must show that the amount of investment is substantial enough to create a viable business of the type contemplated.  Employment of U.S. workers, while not required, is very helpful.

The E-2 visa application can be presented at the U.S. Consulate with jurisdiction over the treaty country, or at a U.S. Consulate in the foreign national’s country of citizenship or residence.  Technically, it can be presented at any U.S. Consulate around the world where the investor appears, although application at a consulate with no relationship to the investor is often an undesirable option.

While the E-2 visa option is an answer for some investors, the long term viability of the EB-5 program is dependent upon passage of legislation by the U.S. Congress that would address the shortage of visa numbers provided for EB-5 immigrants.  Various proposals are presently being considered and will hopefully be enacted as part of comprehensive EB-5 legislation in 2016 or 2017.

 

Ronald Klasko, Klasko Immigration Law Partners, LLP
Date Submitted: 24 March 2016