From: Black Unicorn <unicorn@schloss.li>
Date: Wed, 10 Apr 1996 08:44:05 +0800
To: Duncan Frissell <frissell@panix.com>
Subject: Re: the cost of untracability?
In-Reply-To: <2.2.32.19960408231626.00c90cc8@panix.com>
Message-ID: <Pine.SUN.3.91.960409132018.17470A-100000@polaris.mindport.net>
MIME-Version: 1.0
Content-Type: text/plain


On Mon, 8 Apr 1996, Duncan Frissell wrote:

> At 03:36 PM 4/8/96 -0400, Black Unicorn wrote:
> 
> >In addition, to prevent funds from being removed to non-resident aliens 
> >or foreign entities where tax enforcement and collection is difficult, 
> >there is a 30% withholding requirement in the event the payee is not a 
> >U.S. citizen or resident (for tax purposes).
> 
> The withholding tax applies only if the payee is not a resident of a
> jurisdiction with a tax treaty with the US.

Agreed, but with qualification.

Most, but not all, tax treaties include provisions limiting or 
eliminating the foreign soruce withholding tax.  Note, however, that these 
are typically only treaties that also provide for information sharing and 
enforcement of foreign tax judgments.  Offshore jurisdictions which do 
not permit information sharing, jurisdictions without mutual legal 
assistance agreements, and offshore jurisdictions which do not 
have treaties at all with the United States (i.e. jurisdictions where one 
would want to actually hold assets and feel them secure) are going to 
expose the payee to this liability.

It's a trade off unless one finds a jurisdiction without such a treaty 
which is  at the same time unwilling to cooperate and withhold the 
taxes.  Even in the event this jurisdiction is used, if the payor has 
assets in the United States they will be attachable to satisfy the 
payee's 30% withholding tax.

In my view it is best to opt for banking secrecy jurisdictions and 
financial entities that hold no significant assets in the United States.

  Net banking will further muddy
> the waters on this because of the difficulty of telling the residency of
> customers particularly in the case of accounts transferred to third parties
> for profit -- a worthwhile future business activity.

Agreed.

> DCF

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