We have thought it proper to also inform about existing Laws of re-opening of Disclosure scheme of overseas assets and existing Laws of Report of Global income of US citizens and resident aliens being taxed in USA and Passive Foreign Investment Company (PFIC).
I. U.S. OFFSHORE VOLUNTARY DISCLOSURE PROGRAMME (OVDP) :-
1. The Internal Revenue Service (IRS) having offered Offshore Voluntary Disclosure Initiatives (OVDIs) in 2009 and 2011 has once again given an opportunity for voluntary disclosure of overseas assets and income thereon under the Offshore Voluntary Disclosure Programme(OVDP).
2. The OVDP is quite similar to the OVDI.
.02 Under the OVDP, tax-payers are required to pay tax on hitherto undisclosed income of earlier 8 full tax years together with interest thereon.
.03 Tax-payers are also required to pay penalty of 27.5% of the highest balance of hitherto undisclosed foreign bank accounts and / or value of foreign assets.
3. The link to IRS website is :- http://www.irs.gov/uac/2012-Offshore-Voluntary-Disclosure-Program
4. Recent information states that IRS has collected an amount of US$5bn in back taxes, interest and penalties from 33000 tax-payers who have opted for OVDP which amounts to average disclosure of app. US$ half a million each.
II. GLOBAL INCOME OF US CITIZENS AND RESIDENT ALIENS BEING TAXED IN USA:-
1. A U.S. citizen or resident of USA [ resident alien ] is required to pay tax in USA on his / her worldwide income.
2. However the taxability of such global income is not covered by US tax laws alone. Tax payers can opt applicability of USA India Tax Treaty or other country's Tax Treaty if income arises from such other country if the provisions of Tax Treaty are beneficial.
III. PASSIVE FOREIGN INVESTMENT COMPANY (PFIC):-
1. A US citizen and / or US resident is required to pay tax on passive investments as income at normal rates.
2. Income from passive investments will include capital gains; dividend; interest etc.
3. PFIC rules have an option of computation and payment of tax on notional income i.e. Net Asset Value (NAV) as at the end of the year.
We will be happy to provide assistance in case of doubts but it would be appropriate that a professional CPA or the IRS is contacted for clarifications.
We hope the contents are found useful.