Individuals, trusts and corporations sheltering funds in offshore accounts could feel the tax noose tighten in the coming months. Tax authorities from the United States, the United Kingdom and Australia have announced plans to share tax information on entities set up in such places as the Cayman Islands, Singapore, the British Virgin Islands and Cook Islands.
Officials at the Internal Revenue Service (IRS), the Australian Tax Office and Her Majesty’s Revenue & Customs will work together to examine and analyze data and information on the individual owners of the entities in question, as well as the identities of the advisors who assisted in establishing the entities. Their stated goal is to leave “no safe haven for people trying to illegally evade taxes.”
While offshore entities are not, in themselves, illegal, using them to avoid or evade tax liabilities is against the law and can result in penalties and fines. Advisors who promote such a scheme are also subject to civil penalties and possible criminal prosecution.
If you currently hold assets through an offshore entity that has so far escaped scrutiny by the IRS, you may soon be at risk of discovery by a foreign tax administration who will share what they know with their American colleagues. It is very important that you review your offshore holdings with your tax advisor to make sure all reporting requirements are being met and appropriate taxes paid. Otherwise you may be subject to fines, payment of past taxes, and possible criminal prosecution. The IRS Offshore Voluntary Disclosure Program remains in effect at this point, offering a “safe harbor” for those who have failed to report in the past. Click here to learn more.