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On 3 April 2023, the United States Tax Court ruled in Farhy v Commissioner, preventing the IRS from assessing and collecting penalties for failure to file Form 5471, the Information Return of US Persons With Respect to Certain Foreign Corporations.
This form is used to report an individual’s control over a foreign corporation.
Under US Internal Revenue Code (IRC) section 6038(b), failing to provide this information incurs a penalty ranging from $10,000 to $50,000.
In June 2021, Alon Farhy challenged the penalties imposed on him for not filing Form 5471.
The Tax Court ruled in his favor, stating that the IRS did not have the authority to assess these penalties under section 6038(b).
However, it noted that the IRS could pursue civil action to collect the penalties.
The IRS appealed this decision to the United States Court of Appeals for the District of Columbia Circuit (DC Circuit), which on 3 May 2024, reversed the Tax Court’s decision, affirming the IRS’s authority to assess and collect these penalties.
From 2003 to 2010, Farhy owned two corporations in Belize—Katumba Capital Inc. and Morningstar Ventures, Inc.
Despite knowing his obligation to file Form 5471, he willfully chose not to. After notifying Farhy of his failure, the IRS assessed penalties and issued a final notice of intent to levy when he did not respond.
Farhy requested a collection due process hearing, but the IRS upheld the penalties, leading him to petition the Tax Court, which initially ruled in his favor.
Both parties referenced IRC section 6201(a). The IRS argued that this section granted them broad authority to assess penalties as taxes.
Conversely, Farhy contended that penalties must be explicitly labeled as “tax” or “assessable” in the Code to fall under the IRS’s authority. Farhy outlined four classes of assessable penalties, arguing that section 6038(b) did not fit any of these categories.
The DC Circuit did not fully align with either party’s arguments but concluded that Congress intended section 6038(b) penalties to be assessable, citing:
Congress amended section 6038 to simplify the penalty collection process, countering Farhy’s argument that penalties should be nonassessable to limit IRS’s collection powers.
Sections 6038(b) and 6038(c) penalties work together, and making 6038(b) penalties nonassessable would complicate the process intended by Congress.
The reasonable cause exception for late filing, determined by the Secretary of Treasury, indicates that section 6038(b) penalties fall under the IRS’s assessment authority.
Farhy’s interpretation would necessitate separate proceedings for sections 6038(b) and 6038(c) penalties, potentially leading to conflicting judgments, which the DC Circuit found impractical.
The DC Circuit’s decision reversed the Tax Court’s ruling, affirming the IRS’s authority to assess penalties under section 6038(b).
Following this decision, Farhy petitioned for a rehearing, which was denied on 13 June 2024.
As of now, Farhy has not appealed to the United States Supreme Court, but given the ongoing litigation surrounding these penalties, further appeals are likely.
This case underscores the complexities of tax compliance and the importance of adhering to filing requirements for foreign assets. It also highlights the evolving legal interpretations of the IRS’s authority, which may have significant implications for taxpayers with international interests.
If you have any queries about this case Farhy v Commissioner Case, or US tax matters in general, then please get in touch.
A landmark ruling by the US Supreme Court has significantly curtailed the authority of federal agencies, including the Internal Revenue Service (IRS), to interpret the laws they enforce.
The decision in the case of Loper Bright v Raimondo overturns the Chevron doctrine, a 40-year-old principle that required courts to defer to federal agencies on the interpretation of ambiguous laws passed by Congress.
For decades, the IRS relied on the Chevron doctrine to defend its tax regulations in litigation.
This doctrine compelled federal courts to defer to a federal agency’s reasonable interpretation of an ambiguous statute.
This effectively limited the opportunities for taxpayers and tax practitioners to contest some of the muddier aspects of Internal Revenue Code.
The Supreme Court declared that Chevron is incompatible with the Administrative Procedure Act’s mandate for courts to resolve legal questions using their judgment.
Going forward, the Courts will rely on their discretion in cases involving ambiguous statutes rather than deferring to agency interpretations. That said, they may still consider an agency’s interpretation if it is long-standing or well-reasoned.
The implications of the Loper ruling are still unfolding, but experts anticipate an increase in litigation.
Additionally, the IRS will likely face constraints in issuing tax guidance and rules, as the process to establish these as settled law becomes more protracted.
The ruling may also invigorate pending legal challenges to potentially overreaching federal agency actions.
However, the Supreme Court’s decision in Loper does not retroactively invalidate cases decided under the Chevron deference doctrine over the past 40 years. Statutory precedent will still apply to those cases. “We do not call into question prior cases that relied on the Chevron framework,” the Court stated. “The holdings of those cases that specific agency actions are lawful remain subject to statutory stare decisis despite our change in interpretive methodology.”
This ruling marks a significant shift in the balance of power between federal agencies and the courts, with potentially far-reaching consequences for regulatory practices and the enforcement of federal laws.
If you have any queries about this article on Loper Bright v Raimondo, or any other US tax matters, then please get in touch.
They must have thick skin, those HMRC people.
I sometimes wonder whether it’s provided when they join or if it accumulates over their time in post.
After all, it takes either fortitude or tone deafness to keep going in the face of seemingly endless criticism.
This year alone, among other things, HMRC has been accused of allowing customer service to plummet to an all-time low and performed a rapid about-face over proposals to hang up its helpline during the summer months.
Yet there are times when persistence appears to pay off.
Take the Diverted Profits Tax (DPT), for instance, which (whisper it!) looks as though it may be changing the kind of corporate shenanigans on the part of big multi-national businesses which in the past has enabled them to minimise the amounts which they make to the Revenue.
The tax came into effect in 2015. Whilst not applying to small and medium-sized enterprises (SMEs), it is a means of countering the exploitation of overseas offices (or ‘permanent establishments’, as they’re otherwise known) to artificially reduce their UK profits and tax liabilities.
For organisations with the kind of turnover and structures which make it possible, such paper shuffling can be incredibly lucrative.
There is a sting in the tail, though.
Get caught and the sanctions – including a six per cent surcharge on top of the normal Corporation Tax rate – can be enormous. An even higher rate of 55 per cent exists in respect of specific profits in the oil industry.
Figures released last month by HMRC show that DPT generated more than £8.5 between its introduction and March last year
The Revenue’s notable scalps include the likes of the drinks giant Diageo which agreed to hand over £190 million in 2018, a settlement which I discussed with The Times at the time .
Realising that it was onto a winner, HMRC subsequently turned those thumbscrews even tighter, launching something called the Profit Diversion Compliance Facility (PDCF) the following year.
It aimed to “encourage” companies identified by some of the near 400 Revenue staff working on international tax issues as having operations which might trigger a DPT liability to “review both the design and implementation” of their policies and pay any tax due.
In short, it offers a chance to ‘fess up to any mischief and avoid being hauled over the coals and, given that it’s eked more than £732 million extra income for the Revenue, could be said to have demonstrated its worth.
Cynics might suggest that the DPT performance record, in particular, indicates that its novelty is wearing off.
The £108 million recovered in the last financial year was less than half the sum reclaimed only 12 months before.
However, I take the opposite view.
I think it is evidence that instead of using offices in far-flung corners of the globe to manipulate their balance sheets and mitigate their UK tax bills, multi-nationals accept that they now have nowhere to hide.
Of course, that is not solely down to HMRC’s efforts.
The Organisation for Economic Co-operation and Development (OECD) has, since DPT was introduced, also unveiled the Global Minimum Tax (GMT) as part of its campaign to eradicate the use of profit shifting which led to the Diverted Profits Tax.
This new measure means that multi-nationals turning over more than €750 million (£633.38 million) will be subject to a minimum 15 per cent tax rate wherever they operate in the world.
It amounts to a combination, one-two punch for the UK tax authorities, in particular. The DPT can still address individual methods not covered by the GMT’s more broad brush approach.
However, the extent to which the UK will retain DPT is perhaps up for debate as well.
To all that, we can add the Revenue’s intention, announced in January, to actually reform DPT, making it part of the wider Corporation Tax for the sake of simplicity – something which in itself is a novel and noble development in UK tax procedures.
There are, I should point out, still some companies which appear reluctant to accept that the diverted profits game is up.
The latest detailed HMRC missive describes how it “is currently carrying out about 90 reviews into multinationals with arrangements to divert profits”, inquiries which involve some £2.6 billion in potentially unpaid tax.
Furthermore, the Revenue is involved in “various international tax risk disputes where the business was not prepared to change their arrangements”. Embroiled in those proceedings led by HMRC’s Fraud Investigation Service “are a number of large businesses” who face possible civil or criminal investigation.
It may well be that corporate titans once inclined to accounting mischief have just been worn down by the Revenue’s dogged investigators.
A change in personnel on the boards of these companies coupled with the prospect of a process lasting five years and a large penalty can also persuade even the hardiest souls to call a halt to such behaviour.
Even those who remain resistant to the newly knighted Jim Harra and his colleagues can’t escape the potential reputational damage arising from the leak of sensitive documentation as has happened successively with the Pandora, Paradise and Panama Papers.
Now that HMRC is finally and effectively calling the tune, there is – with no little apologies to Axl Rose and his bandmates – less of an appetite for diversion.
That is a situation for which and for once the Revenue deserves credit.
Thanks for your patience.
If you have any queries about this article on the UK’s diverted profit tax, or other UK tax matters, then please get in touch.
Look what you’ve reduced me to….
Last month, the Australian Tax Office (ATO) issued a notice outlining its new data collection and surveillance requirements for cryptocurrency service providers in Australia.
This initiative is part of a broader effort to enhance tax compliance within the cryptocurrency sector.
For the financial years 2023-24 to 2025-26, the ATO will acquire extensive data from cryptocurrency designated service providers. The targeted data includes:
Names, addresses, dates of birth, phone numbers, social media accounts, and email addresses.
Bank account information, wallet addresses, transaction dates and times, transaction types, deposits, withdrawals, transaction quantities, and coin types.
The ATO anticipates collecting records related to approximately 700,000 to 1,200,000 individuals and entities each financial year.
This initiative builds on the ATO’s existing data-matching program, which started in 2019.
The program involves the collection of bulk records of purchase and sale information from cryptocurrency service providers, aimed at identifying potential tax liabilities.
The ATO’s heightened focus on data collection stems from concerns about capital gains tax (CGT) evasion.
In Australia, cryptocurrency assets are treated as CGT assets.
The ATO acknowledges that the complex and innovative nature of cryptocurrency can lead to genuine misunderstandings regarding tax obligations.
The new requirements are designed to address these issues by increasing transparency and ensuring that taxpayers accurately report their cryptocurrency transactions.
By acquiring detailed transaction and identification data, the ATO aims to better track and enforce CGT liabilities.
Businesses providing Digital Currency Exchange (DCE) services in Australia are already subject to reporting requirements under the anti-money laundering and counter-terrorism financing (AML/CTF) regime, overseen by the Australian Transaction Reports and Analysis Centre (AUSTRAC). These businesses must comply with stringent data reporting and record-keeping standards to prevent illicit financial activities.
The ATO’s new data collection measures add another layer of responsibility for cryptocurrency exchanges, further integrating tax compliance with existing AML/CTF obligations. This dual compliance requirement underscores the importance of robust internal data management systems and thorough understanding of both tax and AML/CTF regulations for DCE providers.
The ATO’s enhanced data collection is likely to result in increased scrutiny of cryptocurrency transactions, making it essential for individuals and entities engaged in cryptocurrency activities to maintain accurate records and fully understand their tax obligations.
Given the potential for genuine misunderstandings about tax obligations in the crypto sector, there may be an increased need for educational initiatives to help taxpayers navigate the complexities of cryptocurrency taxation.
Cryptocurrency service providers will need to adopt robust compliance strategies to manage the additional data reporting requirements. This includes ensuring that all client and transaction data is accurately captured and reported to the ATO.
If you have any queries about this article on Australia and Crypto Exchanges, or Australian tax matters in general, then please get in touch.
Businesses that engage self-employed contractors, consultants, and freelancers should now reassess their commercial arrangements to ensure they meet the requirements for tax and employment purposes.
In May 2024, the Irish Revenue Commissioners released a guidance note detailing the factors to be considered in determining employment status for tax purposes. This guidance, while focused on tax law, also impacts employment and social welfare considerations.
The European Parliament adopted the Platform Work Directive on April 24, 2024, introducing a presumption of employment for certain workers in platform work activities.
This legislative change underscores the ongoing importance of accurately determining employment status in both the gig economy and broader business contexts.
The new guidance follows a landmark decision by the Irish Supreme Court in October 2023, in The Revenue Commissioners v. Karshan (Midlands) Limited t/a Domino’s Pizza [2023] IESC 24.
We have covered this case previously on Tax Natives.
This case involved delivery drivers and fundamentally altered the analysis of employment contracts to determine whether an individual is an employee or self-employed.
The ruling has significant implications for businesses engaging individuals for personal services, whether as independent contractors, consultants, or freelancers.
The Supreme Court established five key tests to determine employment status, which the Revenue Commissioners’ guidance now elaborates on with practical examples from various sectors, including construction, IT, and professional services.
This test examines if there is an agreed rate for services provided, whether hourly, daily, or linked to specific deliverables. The nature and arrangement of any payment are crucial factors.
This test differentiates between individuals providing services personally and those who can delegate the work to others.
The level of control the contractor has over how the work is performed is a fundamental factor. The presence of control is also critical under the Platform Directive for determining employment status.
After passing the first three tests, all facts and circumstances of the relationship must be considered, including:
The specific wording of relevant statutory regimes or legislation must be considered, as different laws may confer different rights.
For example, being taxed under the PAYE system does not automatically grant employment rights.
The Supreme Court’s decision and the Revenue guidance note clarify that transferring between taxing regimes for a tax benefit does not constitute abusive tax avoidance. Structuring one’s affairs to fall within a particular regime is considered legitimate.
Businesses must now proactively review their commercial arrangements with self-employed workers. The guidance note provides detailed examples to help businesses apply these tests in various scenarios.
The Supreme Court ruling specifically addresses the Taxes Consolidation Act 1997 and does not automatically apply to other areas of law. The Revenue Commissioners emphasize ongoing engagement with government departments responsible for employment and social welfare status to ensure consistent application across different legal contexts.
The Supreme Court case and the Revenue Commissioners’ new guidance significantly impact how businesses should classify their self-employed contractors.
Businesses are advised to review and possibly restructure their current arrangements to ensure compliance with the updated requirements for tax and employment purposes.
If you have any queries about this article the Guidance Issued on Employment Status, or Irish tax matters in general, then please get in touch.
The IRS annually publishes the “Dirty Dozen” list to alert taxpayers about common tax scams.
The 2024 edition underscores both enduring and novel threats, emphasizing the sophistication of tactics used by scammers to mislead taxpayers and steal sensitive information.
The 2024 list shows a significant shift in scam tactics, with an increased focus on online and digital methods, reflecting broader societal shifts towards digital financial interactions.
Phishing remains a primary concern, with new twists on scams emerging each year.
Taxpayers are advised to remain vigilant, especially during tax season.
Unsolicited emails, texts, or calls should be treated with suspicion.
Official IRS communications will not demand immediate payments or threaten legal action without prior notification.
If you have any queries about this article on the IRS Dirty Dozen, or other US tax matters, then please get in touch.
The Common Reporting Standard (CRS), initiated in 2017, has significantly enhanced HMRC’s ability to track overseas financial assets and income.
This article explores the implications of HMRC’s “nudge” letters, which prompt UK taxpayers to verify their offshore tax affairs.
Under the CRS, most countries, including traditional tax havens, now exchange information with the UK.
This global initiative aims to combat tax evasion and reduce non-compliance.
HMRC receives detailed annual reports from participating countries about UK taxpayers’ offshore assets and income.
Since 2017, HMRC has been sending “nudge letters” to taxpayers. These letters inform recipients that HMRC has data suggesting they may have undeclared overseas income or gains taxable in the UK.
The letters ask taxpayers to either declare additional tax liabilities via HMRC’s Worldwide Disclosure Facility (WDF) or confirm that there are no undisclosed liabilities by signing a declaration certificate.
A response is typically requested within 30 days.
While there is no legal obligation to respond within 30 days or sign the declaration, ignoring these letters can lead to a formal investigation.
It is crucial for taxpayers to seek professional advice before responding to minimize the risk of an invasive investigation and potential penalties.
Determining tax liabilities can be complex, especially for individuals who may not have been UK residents or domiciled for tax purposes.
Non-UK residents are not required to report overseas income in the UK.
However, UK residents are taxed on their worldwide income, which can lead to misunderstandings and non-compliance.
Penalties for undeclared taxes are calculated as a percentage of the “potential lost revenue” (PLR) and can range from nil to 200% or more.
Factors influencing the penalty include the behavior causing the non-compliance, cooperation during the investigation, and whether there was a “reasonable excuse” for the failure.
HMRC’s “nudge” letters serve as a reminder for taxpayers to review their offshore tax affairs. Professional guidance is recommended to navigate the complexities of tax compliance and avoid potential pitfalls.
If you have any queries about HMRC nudge letters, or UK tax matters in general, then please get in touch.
If you’ve received an HMRC ‘nudge’ letter or wish to regularize any undisclosed offshore income, you may need to make a disclosure using HMRC’s Worldwide Disclosure Facility (WDF).
Here’s what you need to know about the WDF and how we can help bring your tax affairs up to date.
The Worldwide Disclosure Facility (WDF) is an HMRC digital service that allows taxpayers to disclose offshore non-compliance related to their overseas interests.
This service is available to individuals, companies, and trustees, including non-UK residents.
Under the Common Reporting Standard (CRS), HMRC receives financial information from over 100 countries to check against the declarations made by UK taxpayers, identifying potential offshore non-compliance.
Examples include inaccuracies in filed tax returns or failure to notify chargeability to tax, leading to undeclared offshore income, profits, and gains.
By making a disclosure through the WDF, you maintain control over the process and are likely to reach a settlement quicker than if HMRC were to open an investigation. You determine the potential lost revenue, the behavior leading to non-compliance, and the level of tax-geared penalties.
An HMRC ‘nudge’ letter prompts taxpayers to review their UK tax affairs in relation to their overseas interests and correct any irregularities by submitting a WDF disclosure.
Do not ignore the letter. HMRC likely has information about your offshore interests and suspects irregularities in your UK tax affairs.
Consulting an expert is crucial in determining offshore non-compliance.
We assist our clients by reviewing their onshore/offshore tax affairs, advising on the best response to the HMRC ‘nudge’ letter, and determining if a disclosure is required.
No. However, HMRC typically contacts individuals or businesses when it has information suggesting issues with their tax affairs. Our tax investigation specialists can help identify any irregularities and disclose them via the Worldwide Disclosure Facility.
It’s not necessary to report income or gains that:
Reviewing past tax years may uncover potential tax reliefs previously overlooked. A full disclosure to HMRC via the WDF could potentially result in a net repayment if you’re still in time to claim such reliefs.
Inform HMRC of your intention to make a WDF disclosure as soon as you become aware of tax owed on any offshore income or gains.
Individuals can make a disclosure about their own taxes, their company’s taxes, a trust or estate, or on behalf of someone else. We can help you make a disclosure statement for yourself, your business, or other income-generating entities.
Disclosures detailing offshore liabilities must include:
Notify HMRC of your intention to make a WDF disclosure. HMRC will confirm receipt and issue a disclosure reference number (DRN) within 15 days. Registering unprompted by HMRC intervention protects your ‘unprompted’ status, meaning potentially lower penalties.
Submit the WDF disclosure within 90 days of HMRC confirmation and receipt of the DRN. Include:
Payment must be made at submission, unless a time-to-pay arrangement is agreed with HMRC.
To encourage disclosures, HMRC introduced the Requirement to Correct (RTC), giving taxpayers until 30 September 2018 to disclose.
Disclosures after this deadline for tax years up to 2015/16 are subject to Failure to Correct (FTC) penalties, which are significantly higher than standard offshore penalties but can be reduced through unprompted disclosure.
RTC harsher penalties apply unless you show a reasonable excuse for not disclosing by the 30 September 2018 deadline.
HMRC has stated circumstances that do not constitute a reasonable excuse, such as insufficiency of funds unless due to events outside your control, and reliance on another person unless reasonable care was taken to avoid the failure.
Voluntary disclosure of offshore income or gains via the WDF offers numerous benefits:
Specialists can argue for lower penalties based on full disclosure and cooperation with HMRC.
Experts navigate behavior categories and associated time limits, minimizing unnecessary tax, interest, and penalties.
WDF doesn’t offer immunity from prosecution. Disclosures involving tax evasion and fraud should be handled via the Contractual Disclosure Facility or Code of Practice 9.
If you have any queries about HMRC Worldwide Disclosure Facility (WDF), or UK tax matters in general, then please get in touch.
In a concerning development, on April 12, 2024, the Internal Revenue Service (IRS) began notifying numerous taxpayers about a significant data breach.
This breach, which spanned from 2018 to 2020, involved the unauthorized disclosure of sensitive tax return information by Charles Littlejohn, an independent contractor working for the IRS.
This information pertained primarily to high-net-worth individuals and their associated entities.
Charles Littlejohn disclosed these confidential details to ProPublica, which subsequently published them in a series of exposés.
These publications laid bare the financial intricacies of several high-profile taxpayers, sparking widespread concern about privacy and data security.
In January 2024, Littlejohn was sentenced to five years in prison after pleading guilty to unauthorized disclosure of tax return information.
Four years post-breach, the IRS has commenced the process of notifying affected taxpayers about the potential repercussions and their rights, including possible steps they might consider to protect their financial identity.
Under I.R.C. § 6103, it is illegal for any officer, employee, or affiliate of the U.S. or any local law enforcement agency to disclose tax returns or tax return information without authorization.
This law covers a broad array of information, including a taxpayer’s earnings, deductions, liabilities, and even their involvement in any investigations or audits.
Violations of these provisions can lead to severe civil and criminal penalties, ensuring the confidentiality of taxpayer information is maintained strictly within legal bounds.
The IRS’s notification to the impacted taxpayers, referred to as Letters 6613-A, elaborates on the unauthorized disclosures linking them to the independent contractor’s illicit activities.
These letters also guide affected individuals on how to inquire further about the ongoing criminal prosecution and how they might engage with the provisions of the Crime Victims’ Rights Act.
Taxpayers receiving these notifications are advised to consider various protective measures to secure their personal and financial identity.
This includes obtaining an Identity Protection PIN from the IRS and monitoring their financial transactions and credit activity closely.
Additionally, the IRS suggests that these taxpayers could explore the option of initiating a civil lawsuit if they find substantial grounds for claims of unauthorized disclosure.
Despite the clear legal frameworks and the ongoing prosecution of Littlejohn, several questions remain.
These include the determination of whether Littlejohn could be considered as an IRS employee and whether the IRS itself could be held accountable for his actions.
Moreover, establishing the scope of damages and linking them directly to the breach poses a considerable challenge.
Affected taxpayers and related entities also need to consider their responsibilities towards investors or partners who might not have been directly notified by the IRS.
As the legal proceedings continue and taxpayers begin to assess their positions, the IRS’s data breach serves as a critical reminder of the importance of stringent data protection measures and robust legal strategies to safeguard taxpayer information.
Those impacted should take immediate action to protect their identities and consult with legal advisors to understand their rights and potential responses fully.
If you have any queries about this article on IRS data breach, or any other US tax matters, then please do get in touch.
The United Arab Emirates (UAE) Federal Tax Authority (FTA) has recently issued a comprehensive guide detailing the taxation policies for partnerships under the newly implemented Corporate Income Tax (CIT) regime.
This guidance is crucial as it clarifies how both incorporated and unincorporated partnerships will be treated for tax purposes, which has implications for numerous entities operating within the UAE.
From the perspective of the UAE’s CIT, legal entities that are incorporated, established, or recognized in the UAE are generally considered taxable persons.
However, the treatment of partnerships depends on whether they are incorporated or unincorporated:
The guide stipulates that individual partners of a fiscally transparent partnership may need to register for CIT depending on their specific circumstances.
For legal persons within the UAE who are partners in these partnerships, CIT registration is mandatory.
On the other hand, if an unincorporated partnership is considered fiscally opaque, it must register for CIT as it is recognized as a taxable person.
For tax purposes, deductible expenses for partners in fiscally transparent partnerships and for fiscally opaque partnerships are treated similarly.
Partners must account for their share of the partnership’s expenses in their taxable income.
Additionally, the guide highlights that transactions between related parties, including those involving partners of unincorporated partnerships, must adhere to the arm’s length principle to maintain compliance with transfer pricing regulations.
While incorporated partnerships based in a Qualifying Free Zone can benefit from the Free Zone Tax Regime if certain conditions are met, this benefit does not extend to unincorporated partnerships treated as taxable persons.
An unincorporated partnership, even if it operates a branch in a Qualifying Free Zone, cannot enjoy the Free Zone Tax benefits due to its non-legal person status.
The guide also addresses the treatment of foreign partnerships, stipulating that they will be considered fiscally transparent if they meet specific criteria such as not being taxed in their home jurisdiction, having partners who are individually taxed on their share of the partnership’s income, submitting an annual declaration to the FTA, and maintaining adequate tax information exchange arrangements with the UAE.
The FTA’s new guide on the taxation of partnerships under the UAE’s CIT regime provides vital clarification for entities navigating this complex area.
This detailed guidance is aimed at ensuring that partnerships and their partners are well-informed of their tax obligations and can plan their tax strategies effectively.
Entities involved in partnership structures in the UAE should carefully review this guide to ensure compliance and optimal tax handling under the new corporate tax environment.
If you have any queries about this article on UAE Clarifies Taxation of Partnerships, or UAE tax matters more generally, then please get in touch.