Recording Artist and Performer DMX Charged With Tax Fraud

July 17, 2017  |   Posted by :   |   Tax Evasion   |   0 Comments

Rapper DMX (aka Earl Simmons) was arrested in NY on 7/13/17 and charged with 14 separate counts of tax fraud and tax evasion for a multi-year scheme to hide millions in income from the IRS and pay $1.7m due in taxes. He faces 40 years in jail for not paying $1.7m in taxes incurred between 2002-2005 and did not file or pay tax for personal income tax returns (2010-2015) despite earning more than $2.3m.

DMX whose hits have included: “Its Dark and Hell is Hot,” “Gon’ Give it to Ya,” is alleged to intentionally avoid taxes by not having a personal bank account, creating bank accounts in names of others, and pay expenses in cash.

In the words of IRS Criminal Investigation Special Agent James Robnett, “While most individuals file truthful tax returns and pay their debts the indictment against Simmons alleges tax crimes including that he failed to file personal tax returns for several years and did not pay his fair share of taxes”

Please click link for complete article from DOJ, Recording Artist and Performer DMX Charged With Tax Fraud.

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Global High Net Worth Investors: Money Laundering & Luxury Real Estate

July 13, 2017  |   Posted by :   |   International Investors,International Tax Planning   |   0 Comments

In July 2016 the US Treasury Dept. expanded its pursuit of international criminals who launder money (hide the illicit funds) through all cash US luxury real estate purchases.

According to the NY Times, nearly 1/2 of luxury real estate nationwide is purchased using shell companies. Effective August 2016 the US Treasury Department has ordered title companies (escrow companies) to report the identities of all cash buyers who purchase expensive US residential real estate (homes and condos). According to the US Treasury Dept. foreign and other purchasers use offshore and onshore “shell companies” (that conceal the real owner identities) to purchase US real estate in all cash transactions which becomes a “US safe haven for their money”.

Effective August 2016, the Treasury Program requires the reporting for all cash purchases at the following sales prices (in the following jurisdictions):

1. New York City (Manhattan: $3m, Other NYC boroughs $1.5m)
2. Florida: Miami-Dade County, Broward and Palm Beach Counties ($1m)
3. California: Los Angeles, San Francisco Bay Area and San Diego ($2m)
4. Texas: San Antonio ($500k)

Additionally, other major US cities may soon be included once the US Treasury Dept., according to FINCEN (Financial Crimes Enforcement Network) Acting Director, Jamal El-Hindi: “learns more about the money-laundering risks in the national real estate market”.

In the United Kingdom recent legislation, The Criminal Finances Bill, is designed to crackdown on billions of dollars laundered by international criminals in the UK real estate market. In the UK it is estimated that up to $173B per year is laundered through UK real estate. Transparency International claims that up to 2000 properties in Central London alone require explanation while UK Home Secretary Amber Rudd estimates an average of 10 “unexplained wealth” transfers per month.

The Bill contains two critical pieces:

1. Authorities may impose “Unexplained Wealth Orders” on owners who buy multi-million pound properties, forcing them to prove the source of the funds or have the assets seized;

2. The UK government may claim property and assets (by seizure) of those guilty of human rights abuses anywhere in the world and revoke their UK Visa.

London in particular is being highlighted as being the “money laundering capital of the world”. Journalist Luke Harding who has investigated global money laundering in a recent expose, The Laundromat is the center of “mega fraud” in which a whole tier of lawyers, agents, real estate brokers have gotten rich by “basically servicing kleptocratic cash”. Harding has analogized the English as being “posh English butlers for kleptocrats” which he termed “depressing and shameful”.

Of particular concern is the role played by British territories in money laundering. Nearly one in ten properties owned in the City of Westminster is owned by an offshore company based in UK territories like British Virgin Islands, Jersey or Guernsey. The Criminal Finances Bill did not include a third provision which would have created a public register of ownership.

Labour MP Dame Margaret Hodge stated: “We are winning the argument but it’s an incredible struggle every time…in the UK post Brexit there is a reluctance to offend anybody. Even the BVI
In case we can get some trade out of them…its nonsense. We should not be defending corruption, money laundering, tax evasion and avoidance and criminal activity in the name of trade.”

In the Panama Papers, of which I have written two books: 1. The IRS/Panama Papers: US Taxpayers with Offshore Entities and 2. The IRS/Panama Paper: Tax Evasion and Money Laundering, it was revealed that certain US states are now replacing offshore tax havens to create shell companies for anonymous owners to use to purchase US assets including: Nevada, Delaware, South Dakota and Wyoming.

It remains to be seen if the US Treasury Dept will expand their recent disclosure requirements to other than NY, FLA, CA and Texas but if the problem is considered a nationwide risk for America and American states are being used by criminals to launder money thru shell companies to buy US luxury real estate it is only a question of time before US legislators and related governmental bodies follow in the footsteps of the United Kingdom and enact a US version of the UK Criminal Finance Bill which would allow the US or State governments to seize US real estate purchased with illicit funds.

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Chinese Investors and US OECD Tax Issues

July 10, 2017  |   Posted by :   |   International Investors   |   0 Comments

For Chinese investors who become EB5 Visa holders or other US green card they will be subject to annual US world wide tax reporting for income and disclosure of all offshore Financial Accounts over $10,000 that they own or control (FBAR filing: FinCen Form 114) and foreign financial assets over $50,000 (FATCA/Form 8938 attached to Form 1040/US Income Tax Return) or risk serious civil and criminal penalties.

The penalties may include a civil penalty for up to 50% of the account balance yearly for FBAR violations (which is computed annually; in the case of Florida Taxpayer Carl Zwerner he had a 150% penalty imposed after he lost it at trial so his $1.6m account cost him nearly $2.4m under the FBAR civil penalty). In addition a criminal penalty of up to 10 years in jail for each year the FBAR is not filed.

Under FATCA, which was enacted as law in March 2010, as of 2017 over 100,000 foreign financial institutions in over 80 countries are reciprocally exchanging tax information with the US government (Treasury Dept/IRS). If the offshore account has a US owner unless they supply their taxpayer ID information to the offshore bank, the US will withhold 30% of any US source dividends or interest at the source and 30% of gross sales of securities (i.e. 30% of the sales proceeds are withheld with no calculation for any taxpayer basis or other capital gain issues).

A Chinese investor who immigrates to the US is subject to world wide US income, estate and gift taxes and related tax filings which are subject to IRS audit with both tax, interest and civil and criminal penalties due for tax non-compliance. Unlike China, the IRS is a very powerful tax agency with nearly 100,000 employees, an over $10B annual budget while they collect over $3 trillion per year in US taxes due.

As of 2018, China will be one of 101 signatories to the Organization of Economic Development digital exchange of tax information between countries known as the Common Reporting Standards (CRS) which has even more expansive tax compliance required including bank balances and income related to insurance products.

To be forewarned is forearmed. For your Chinese investors who wish to immigrate to the US, Canada or Europe they are entering a new realm of detailed tax compliance requirements. Failure is punishable by jail and steep fines. So proceed with caution and hire the best experts before immigration.

As the quote goes: “It is not the seaworthiness of the vessel but the skillful navigation that assures the prosperous voyage”.

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Offshore Tax Evasion & Worldwide Soccer

July 05, 2017  |   Posted by :   |   Tax Evasion   |   0 Comments

With the publication of the Panama Papers in 2016, some of the world’s wealthiest individuals were revealed as tax cheats who hide their assets offshore through anonymous companies. Worldwide soccer has now been thrust under a similar spotlight as some of its brightest stars are being prosecuted for tax evasion, fraud and related crimes. In the “eye of the storm” are the following:

1. Lionel Messi – The Barcelona star was sentenced to a suspended 21-month jail term (non-violent prison sentences under 2 years in Spain suspend incarceration for the crime) and paid a 2m+ Euro fine to Spain. Messi and his father (Jorge Messi) were found guilty of using offshore companies to avoid paying taxes on 4.16m Euros of income earned by Messi from his “Celebrity Image Rights” for 2007-2009.

2. Neymar – The Brazilian star forward and his parents stand trial in Spain (2017) for alleged corruption for his transfer from Santos (Brazil) to Spain in 2013.

3. Javier Maschereno – The former Barcelona Defender agreed to a one year suspended sentence for tax fraud in 2016 in Spain.

4. Fabio Coentrao – The Portugese fullback, soon joining Sporting Lisbon (on loan from Real Madrid) alleged to have failed to “correctly declare” 5.6m Euros of income earned from “Celebrity Image Rights” (2012-2013) while he was playing for Atletico Madrid.

5. Radamel Falcoa – Formerly with Atletico Madrid, now with Monaco, is suspected of failing to declare 1.3m Euros of income.

6. Angel Di Maria – On 6/21/17, Supersport reported that former Real Madrid player Angel Di Maria has reached an agreement with Spanish prosecutors over tax evasion charges related to his “Celebrity Image Rights.” The Argentinian midfielder is accused of failing to pay 1.3m Euros to Spanish tax authorities in 2012-2013 by “giving up his celebrity image rights” to offshore companies in tax havens (which include Panama). Di Maria will plead guilty to 2 charges of tax fraud, pay a 2m Euro settlement and receive an 8 month prison sentence (which under Spain’s rules of no jail for non-violent crimes under 2 years may not be incarcerated).

Other major tax cases currently pending include:

Cristiano Renaldo, 4 time world player of the year, has been summoned to appear before a judge in Spain on 7/31/17 (in Pozuelo de Alaron, a Madrid suburb) to respond to Spanish prosecutors allegations that he evaded 14.7m Euros in tax due by use of offshore companies between 2011-2014 and faces 4 charges of tax fraud.

Spanish prosecutors allege that Ronaldo evaded tax via shell companies in BVI and Ireland. He allegedly declared 11.5m Euros of Spanish related income from 2011-2014 while actually earning 43m Euros. He is alleged to have “voluntarily refused” to include 28.4m Euros in income from sale of his “image rights” for 2015-2020 to a Spanish Company.

Jose Mourinho, star coach who won multiple championships with Real Madrid (La Liga 2012, Spanish Cup 2011), Porto (2004), Inter Milan (2010) and in 2016 with Manchester United won Europa League and League WP, is accused by Spanish Tax authorities of failure to pay millions of Euros in taxes from 2010-2013 while coaching Real Madrid.

Spanish Authorities accuse Mourinho of 2 tax evasion offenses, failure to declare 3.3m in earned income between 2011-2012 (2011 1.6m Euros; 2012: 1.7m Euros)

In a related case, super agent Jorge Mendes, who represents Mourinho and Ronaldo (and other soccer stars) has been summoned to appear in Spanish court on 6/27/17 (at Pozuelo de Alarcon). The whistleblowing website, Football Leaks, exposed Mendes practices to “optimize enormous earnings from celebrity image rights for clients.”

The European media consortium, European Investigative Collaborations (EIC) claims that 185m Euros worth of income has been “concealed from tax authorities by using offshore shell companies and offshore accounts” much of which appears to be from the sale, license or assignment of Celebrity Image Rights.

As I explained in my numerous articles on the Estate of Michael Jackson (published among others by Lorman Education Services, one of America’s leading on line cpe providers, pre-eminent international magazine Offshore Investment and in my interviews: Hollywood Reporter and reprinted in Billboard), Celebrity Image Rights is an exploding area of huge worldwide revenues. For many years it appears much of this income received was either unreported, under-reported and concealed by a maze of offshore anonymous companies in the tax havens with BVI and Panama being two of the “major players”.

Now that Central Governments worldwide are seeking records, tax revenues and pursuing criminal prosecution, for those major stars who have been cheating on their taxes, or intend to continue cheating on their taxes they may best heed the advice of my favorite Nobel Laureate, Bob Dylan: “Its all over now, Baby blue.”

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Offshore Tax Evasion and Celebrities: Soccer Star, Christiano Renaldo

June 29, 2017  |   Posted by :   |   Tax Evasion   |   0 Comments

On June 13, 2017 Bloomberg News reported that Christiano Renaldo, the world’s best paid athlete ($93m last 12 months), who lead Real Madrid to Championship and Spanish Titles (and was 4 time world soccer player of the year) was accused by Spanish prosecutors of $16.5m tax evasion.

According to prosecutors, for the 3-year period (2011-2013), Renaldo under reported worldwide income stating 11.5m Euro while earning 43m Euros. He apparently has assets outside of Spain of 203m Euros (as disclosed in 2014 tax declaration).

The income apparently came from income from payments for his celebrity “Image Rights” (as the world’s leading soccer player). He is accused of “knowingly” hiding this income offshore and not paying income taxes due on these payments received.

He joins other worldwide soccer stars (Lionel Messi, who had his appeal rejected 6/17 over the same issue in Spain for which he was convicted of tax evasion and given a 2 year jail sentence which he never served. Neymar, his teammate is also under investigation for tax evasion related to his transfer from Brazil team Santos).

For the first time, international celebrities are now facing criminal tax evasion prosecution for unreported offshore income received from payments for their Image Rights. Athletes, Movie Stars and Musicians all face the same danger. With the disclosure of hidden assets and income held thru anonymous offshore entities, in Switzerland and the BVI (Panama Papers) the days of tax cheating for world wide celebrities appears to be coming to their bitter end. Or as the Bob Dylan song goes, “Its all over now, Baby Blue”.

The Cristiano Ronaldo tax evasion case in Spain centers on the soccer star’s Celebrity Image Rights. The primary allegation against Ronaldo is that he assigned his Image Rights (Name and Likeness) to offshore shell companies; he hid the ownership from the Spanish Taxing Authorities and is being criminally prosecuted for failure to declare the related income and pay tax due.

The Spanish Prosecution alleges that Ronaldo failed to provide Spanish Tax Authorities with a “Complete Accounting of Earnings” from his Celebrity Image Rights. The Prosecution alleges:

1) Ronaldo used his offshore company (Tollin) to hide income from his Celebrity Image Rights from the Tax Authorities and filed tax returns that understated his income and tax due;

2) The Tax Authorities allege that Ronaldo defrauded the Spanish Government out of 14.7m Euros ($16.5m US) between 2011-2014. Apparently in 2014, Ronaldo received a large payment for his Celebrity Image Rights (for the period 2015-2020) days before a Spanish Tax Law (the David Beckham Law was repealed). The timing of the payment in light of the repeal of the law indicate the transaction was “tax motivated”.

3) Ronaldo’s Agency (Gestifute) issued a public statement stating “using off-shore structures is common among soccer players”.

Ronaldo’s case in which he is being prosecuted by Spain for tax evasion is the second major tax evasion case involving a major worldwide soccer star. Soccer star, Lionel Messi, was previously convicted of tax evasion in Spain for using shell companies (established in the UK, Switzerland, Uruguay and Belize) to avoid taxes on 4.16m Euros of Messi income derived from his Celebrity Image Rights.

In Messi’s case, Spanish prosecutors focused on Messi’s clandestine, secretive, opaque structure in which the names of the beneficial owners of his off-shore shell companies was hidden, not revealed to tax authorities or the income received declared for tax purposes. The Court found Messi guilty of setting up a “chain of shell companies” to conceal criminal tax evasion and sentenced him to 21 months in jail (and his father to 15 months in jail) but they never served the jail time (in Spain sentences under 2 years do not require incarceration).

At trial, Messi claimed that he “did not understand the structure”, that he signed documents without reading them and he was just an innocent taxpayer who made mistakes. His defense failed. The Court held that he was being “willfully blind” to avoid his tax obligations.

In the United States, US athletes, entertainers and celebrities with worldwide income, which is not reported face heightened scrutiny. As of 2010, the Foreign Account Tax Compliance Act (“FATCA”) requires US taxpayers to include in their tax returns “world wide reporting and disclosure”. FATCA requires foreign banks to disclose American’s accounts held outside of the US, which are over $50,000. As of 2017, over 100,000 foreign financial institutions in over 80 countries are co-operating with the IRS to reveal massive amounts of financial information regarding US taxpayer offshore accounts.

In the US, willful “blindness” to tax obligations is not a defense to criminal tax evasion charges. Willfulness is defined under US tax laws as an intentional, voluntary violation of a known legal duty. Willfulness is confirmed by the Taxpayer knowledge of the tax reporting requirements and the Taxpayer conscious choice to fail to report the income and comply with the tax law.

A conscious effort to avoid learning about their tax reporting duties for offshore income is considered willfulness.

If the world’s biggest soccer stars use anonymously owned offshore companies to hold their Celebrity Image Rights in order not to report the related income and pay taxes due, after being advised by top lawyers, bankers and accountants (as revealed in the Panama Papers which included Messi) what are the risks for US athletes, entertainers and celebrities who also fail to report their worldwide income?

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