Tuesday, July 15, 2008

IRS to tighten rules on foreign banks and U.S. investors

The Internal Revenue Service soon will require foreign banks in its "Qualified Intermediary" program to determine whether their clients are U.S. investors hiding behind foreign shell companies to improperly reduce tax rates or to avoid paying taxes, The New York Times reported today.

If they are, the newspaper said, the new rules will require banks to notify the IRS and withhold taxes on dividends in that account.

"These new rules, which are aimed at United States, not foreign, clients of the banks, would help to peel back some of the layers of banking secrecy that permeate tax havens from Switzerland to the Caribbean, where vast sums of money are hidden from the I.R.S.," according to the Times.