What is an ESOP?

An Employee Share Ownership Plan (ESOP) allows employees, who qualify, to purchase shares in their employer’s company, with or without the monetary assistance from the company.

Employees can acquire shares, and ownership through an ESOP that can range from 1% to 100%. An excellent method for small business owners wishing to retire and sell their business.

The key aspect is that employees have an ownership stake in the company they work for, and share in the risks and rewards that accrue to it.

Currently, there are four types of ESOPs in Canada:
1) ESOPs started by employers to reward employees for their effort in making the company successful.
2) ESOPs started by public companies to reward key employees for their efforts, then expanded to all employers through matching share purchase programs.
3) ESOPs started due to financial crisis, utilizing provincial ESOP legislation. A relatively recent development, these are used mainly to save jobs.
4) ESOPs started by employers and/or employees utilizing current tax laws and provincial legislation – some are for companies in crisis as well as healthy companies.

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Withholding rates for debt instrument – Canada / US

As a follow up to a question I was aksed a few weeks ago about Corporation X’s proposed issuance of about $100 million of debt to be packaged and marketed by a foreign institution, I am providing the general withholding tax rules and one of the exceptions that would be applicable to Corporation X’s proposed debt issuance.

Generally, interest paid from US sources to foreign corporations is subject to US withholding at a rate of 30% or the lower rate under an applicable tax treaty.

Interest would be considered US-source if paid by a US citizen or resident or by a domestic corporation. However, no withholding tax is applied to US-source interest payments in the case of
interest on “portfolio debt obligations” of US issuers, defined as corporate and partnership debt issued in registered form and held by persons who own less than 10% of the equity of the issuing corporation (or less than 10% of the capital or profits if the issuing entity is a partnership).

Bearer instruments may also qualify if applicable guidelines are met.
The portfolio exemption does not apply to contingent interest, i.e. interest calculated by reference to the receipts, sales, income, profits, assets, or dividends of the debtor or a related party.

How to contact the IRS internationally – Updated 2012.

Below, you will find the only way for a Canadian person / organization to contact the IRS for personal, business or FATCA information.  If you live in the US, you can call from anywhere, toll-free, and discuss tax issues and I think it’s about time they extend the same courtesy to Canada, eh?

See the IRS contact information below from the IRS website; http://www.irs.gov/localcontacts/article/0,,id=101292,00.html

International Services:

If you are a taxpayer who lives outside the United States, the IRS has full-time permanent staff in 4 U.S. embassies and consulates. These offices have tax forms and publications, can help you with account problems, and answer your questions about notices and bills. You can reach these offices at the following telephone numbers, which include country or city codes if you are outside the local dialing area.

If you are calling about an e-file issue and it is not account related, please contact the
e-help Austin at 512-416-7750. Assistance is available from 7:00 a.m. to 6:00 p.m. Central time, Monday through Friday.

Frankfurt IRS

U. S. Consulate Frankfurt
Giessener Str. 30
60435 Frankfurt am Main, Germany
Tel: [49] (69) 7535-3834
FAX: [49] (69) 7535-3803
M-F 8 a.m. – 4 p.m. (Closed U.S. and German Holidays)

London

Internal Revenue Service, United States Embassy
24/31 Grosvenor Square
London W1A 1AE
United Kingdom Walk-In assistance available
Tuesday through Thursday
9:00 a.m.- 1:00 p.m. and 2:00 p.m. – 4:00 p.m.

Phone Service
Tel: [44] (207) 894-0476
9 a.m. to Noon. Monday through Friday
FAX: [44] (207) 495-4224

Paris United States Embassy/IRS
2 Avenue Gabriel
75382 Paris Cedex 08, France
Walk-In assistance 9:00 a.m.- noon
Phone service: M-F 1:30 p.m. – 3:30 p.m.
Tel. [33] (01) 4312-2555
Fax: [33] (01) 4312-2303

The IRS offices listed can answer your federal income tax questions, help with account and refund problems, and assist with the preparation of current and prior year tax returns.

IRS trained volunteers are also available at some embassy/consulate locations. If you are interested in becoming a volunteer, please contact one of our IRS offices.

Taxpayers located outside the US (read: CANADA) may also contact the IRS by mail at:

Internal Revenue Service
P.O. Box 920
Bensalem, PA 19020

Or you may telephone or FAX the Philadelphia Service Center office at:

Tel: 267-941-1000 (not toll-free)
Fax: 267-941-1055

Phone service available from 6:00 am to 11:00 pm (EST) M-F

Residents of Puerto Rico and the U.S. Virgin Islands may contact the IRS toll-free at 1-800-829-1040. (Hours of Operation 7:00 a.m. to 10:00 p.m. Monday – Friday).

Other items of potential interest:

International Taxpayer Advocate:
To request Taxpayer Advocate help, call:

Worldwide: Puerto Rico office:
Tel: (Spanish) 787-622-8930, (English) 787-622-8940
FAX: 787-622-8933

Good news for Canadians (and other non-US companies) regarding the IRS

The following IRS news release came across my desk late last week and it is good news for Canadians and other non-US organizations who have to interact with the IRS.

The IRS is finally recognizing that with their new expectations on foreign organizations (they call it international compliance), that they must provide resources to assist these organizations carry out the IRS’ requirements. To achieve this, the IRS will be adding 875 new staff! So we know they are serious…

These changes come into effect on October 1st, 2010.

Read on:

Release number:IR-2010-88
DAte of release: August 4, 2010

WASHINGTON — As part of a continuing effort to improve global tax administration efforts, Internal Revenue Service officials announced today the realignment of the Large and Mid-Size Business (LMSB) division to create a more centralized organization dedicated to improving international tax compliance.

As part of the organizational shift, the name of the IRS’s large corporate unit — LMSB — will change on Oct. 1 to the Large Business and International division (LB&I).

“Executing our international strategy is a top priority, and our work continues to intensify in this area,” said IRS Commissioner Doug Shulman. “Every day, we are moving forward in our international compliance efforts. Bringing together our top international personnel in this new group will help us advance our global tax administration efforts and ensure focus and fairness in a critical area for our nation.”

The new LB&I organization will enhance the current International program, adding about 875 employees to the existing staff of nearly 600. Most of the additional examiners, economists and technical staff are current employees who specialize on international issues within other parts of LMSB.

The realignment will strengthen international tax compliance for individuals and corporations in several ways, including:

Identifying emerging international compliance issues more quickly.
Removing geographic barriers, allowing for the dedication of IRS experts to the most pressing international issues.
Increasing international specialization among IRS staff by creating economies of scale and improving IRS international coordination.
Ensuring the right compliance resources are allocated to the right cases.
Consolidating oversight of international information reporting and implementing new programs, such as the Foreign Account Tax Compliance Act (FATCA).
Coordinating the Competent Authority more closely with field staff that originate cases, especially those dealing with transfer pricing.
Otherwise centralizing and enhancing the IRS’s focus on transfer pricing.
Heather C. Maloy will continue serving as Commissioner of LB&I. Michael Danilack, Deputy Commissioner, International, will head the realigned global unit. Paul D. DeNard will continue serving as Deputy Commissioner (Operations).

The new international unit will include a transfer pricing director, who will continue piloting the new transfer pricing practice, and a chief economist, who will oversee the IRS’s economic positions pertaining to transfer pricing.

“The realigned organization will let us focus on high-risk international compliance issues and handle these cases with greater consistency and efficiency as we continue to increase our work in this area,” Shulman said.

In addition, the realigned LB&I will continue to serve the same population of taxpayers — corporations, subchapter S corporations and partnerships with assets greater than $10 million as well as certain high wealth individuals.

Today’s announcement marks the latest in a number of efforts the IRS has made to increase international tax compliance. The IRS has taken major steps to address offshore tax evasion, including the investigation of the misuse of undisclosed offshore accounts by U.S. taxpayers. Last fall, the IRS created a Global High Wealth Industry unit to better monitor tax compliance by high income individuals and their related enterprises.

LB&I is also charged with overseeing the implementation of the recently enacted Foreign Account Tax Compliance Act (FATCA). Signed into law in March, FATCA will substantially improve international information reporting, increasing international transparency and compliance.

The IRS and the Department of Treasury have also worked to revise tax treaties and tax information exchange agreements (TIEAs) to increase transparency and to make it more difficult for taxpayers to evade taxes just by crossing international borders.

The link to the original article is here;
http://www.irs.gov/newsroom/article/0,,id=226284,00.html