Governments around the world know more than ever before about the activities of Foreign Financial Account holders that maintain undisclosed accounts and the financial institutions where those accounts are maintained.
[box type=”alert” size=”large” style=”rounded” border=”full”]Governments now have unprecedented access and insight into the hidden world relating to the maintenance of offshore accounts.[/box]
Much like Foreign Account Tax Compliance Act (FATCA), the information to be exchanged between governments includes the names of account holders, aggregated balances, and residency information; however, Automatic Exchange of Financial Information (AEOI) is not U.S.-centric.
European, Latin American, Asian and other jurisdictions’ governments will exchange information with one another on taxpayers with accounts in non-resident jurisdictions around the world and investigating activities by asset management companies, corporate service providers, financial advisers, insurance companies and other financial entities to acknowledge their role in facilitating tax evasion, disclose the individuals engaged in this conduct, and cooperate in an effort to address and resolve criminal exposure.
Offshore Action 1:
The entire cash flow needs to be visible.
The USA and 101 additional countries have agreed to enforce an Automatic
Exchange of Financial Information on all cash flows for the purpose to ensure that taxpayers pay the right amount of tax to the right jurisdiction.
Which means cash flows must be visible to the USA and 101 other countries tax authorities. Participating jurisdictions send and receive pre-agreed information each year, without having to send a specific request.
The reason why:
Cash flow to and from financial accounts of institutions, individuals and entities used in the past were not transparent to tax authorities.
The result required:
Information to be automatically exchanged each year includes interest, dividends, account balance, income from certain insurance products, sales proceeds from financial assets and other income generated with respect to assets held in the account or payments made with respect to the account.
Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and compliance includes a requirement that financial institutions “look through” passive entities to report on the relevant command and control persons.
The financial institutions covered by the enforcement include custodial institutions, depository institutions, investment entities, insurance companies, unless the institution is specifically excluded from reporting.
Offshore Action 2
The USA and 101 Country Automatic Exchange of Financial Information world means that the project funding is automatically income to the person in command and control of the cash flow of the project.
It is your project, the income would be treated as yours; what else could it possibly be?
That means that cash flow is your income unless it is specifically recognized category by tax authorities in the USA and 101 countries as not being your income.
Therefore, we look at cash flow that is recognized as not your income.
The reason why:
In the Automatic Exchange of Financial Information world there is a retirement plan category that is agreed and recognized as not subject to tax and regulatory reporting because it is not your income.
This is an excluded from reporting financial account with respect to assets held and other income generated. This is exempt from reporting the financial assets with respect to any beneficiary of assets held in that account.
The result required:
The Automatic Exchange of Financial Information world recognizes this cash flow and other income generated is not income.
The fact it is recognized as exempt from reporting means that what you are doing is understood, agreed and registered as legal non-disclosure because it is not your income it is not reported.
The only way to receive funding gross rather than suffering a current tax is to place a specific type of retirement plan between you and the cash flow. That cash flow is recognized as an excluded from reporting financial account and an exempt beneficiary that is not subject to income:
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