Zaher
Fallahi Certified Public Accountant (CPA) and Attorney At Law, is a CPA and Law
firm with emphasis on U.S. Tax Law and Office of Foreign Assets Control (OFAC) Regulations. We
are licensed in California and Washington D. C., and represent tax and OFAC
clients throughout the U.S. Please call:
(310) 719-1040 (Los Angeles)
(714) 546-4272 (Orange County)
Toll Free 1-877-687-7558, click here for OFAC Attorney
E-mail taxattorney@zfcpa.com
Harvard Law
School
Zaher Fallahi
has completed “Negotiation and Leadership” and “Leveraging the Power of
Emotions as You Negotiate” Certificate Programs at Harvard Law School.
Iranian OFAC New Developments
June 27, 2018. Iranian OFAC, US Revokes JCPOA (BARJAM) related General Licenses H and I. For details see US Revokes Iranian OFAC General Licenses H and I
May 8, 2018. Iranian OFAC, United States withdraws from the Joint Comprehensive Plan of Action (JCPOA) also known as the “Iran Nuclear Deal”. For details see US Withdraws from JCPOA (BARJAM)
What is OFAC?
Office
of Foreign Assets Control (OFAC) is a division of the US Treasury that
administers the US economic sanctions programs against many countries,
including Iran. OFAC issues specific licenses for conducting transactions
in Iran, and enforces the US economic sanctions laws against persons who may
violate OFAC Regulations. Depending on the egregiousness of violations,
OFAC may refer perpetrators to the Department of Justice for criminal
prosecution.
What is an
Iranian OFAC license?
An
Iranian OFAC license is an authorization or permit from OFAC to engage in a
transaction in Iran that otherwise would be prohibited by law. There are two
types of licenses; OFAC general licenses and OFAC specific licenses.
Who are US
persons?
US
Persons are defined as US Citizens, Green Card Holders, individuals live in the
US, or US legal entities such as corporations, partnerships and LLCs.
Who needs an
OFAC specific license?
Transactions
not covered under the OFAC General License, may require an OFAC specific
license to sell property in Iran and transfer the related funds to the US. The
following are some transactions subject to OFAC Specific License:
(1) Selling a property in Iran acquired after becoming a US person;
(2) Selling a property acquired by gift (arguably);
(3) Selling a property built or developed after becoming a US person;
(4) Selling an income producing asset or commercial property;
(5) Closing a bank account in Iran;
(6) Purchasing a property in Iran; and,
(7) Engaging in employment or self-employment, subject to exceptions.
(8) Note,(3), (4), and (5) above, may also require an OFAC Voluntary Self
Disclosure ("VSD");
Important: Transfer of non-commercial family
remittances such as “cash inheritance” or “cash gift” do not require OFAC
licenses. However, consultation with an OFAC compliance attorney is recommended
to prevent potential OFAC problems. Although, most Iranian transactions appear
to be covered by OFAC General License provisions, it is advisable to consult
advice from an OFAC lawyer and a lawyer knowledgeable with the Bank Secrecy Act
(BSA), to prevent potential un-intended consequences.
Toll Free 877-687-7558
OFAC Voluntary
Self-Disclosure ("VSD")
OFAC
Voluntary Self-Disclosure (VSD) refers to self-initiated notification to
OFAC of an apparent violation by a person that has committed, or otherwise
participated in, an apparent violation of a statute, Executive Order, or
regulation administered or enforced by OFAC, prior to or at the same time that
OFAC, or any other federal, state, or local government agency or official,
discovers the apparent violation or another substantially similar apparent
violation.
For
these purposes, ‘‘substantially similar apparent violation’’ means an apparent
violation that is part of a series of similar apparent violations or is related
to the same pattern or practice of conduct. Notification of an apparent
violation to another government agency, but not to OFAC, by a Person, which is
considered a VSD by that agency, may be considered a VSD by OFAC, based on a
case-by-case assessment.
Zaher
Fallahi, an Iranian OFAC Sanctions Lawyer, CPA, advises Iranian -American OFAC
clients in responding to OFAC Administrative Subpoena, filing an OFAC Voluntary
Self-Disclosure (VSD) petition and responding to inquiries by IRS, Criminal
Investigation Division of IRS, Financial Crimes Enforcement Network (FinCen).
We help clients
with OFAC problems
Zaher
Fallahi, Iranian OFAC Lawyer, CPA, advises clients with respect to sale of
property in Iran and transfer of net proceeds to the US according to
Iranian OFAC Regulations and the US tax laws. We practice as
Orange County and Los Angeles Iranian OFAC Attorney in California. Zaher
Fallahi has a radio program in a Los Angles radio station on OFAC Regulations regarding Iran and takes
questions from the public on Iranian OFAC Sanctions Regulations. As a Los
Angeles and Orange County Tax Attorney, CPA, we advise clients with tax
implication of OFAC related transactions.
It
is important to know how OFAC Sanctions Regulations apply to the transactions
occur in Iran before filing for an OFAC license or causing transactions in Iran
that may be covered under OFAC general license. OFAC general license
refers to transactions which are exempt from OFAC specific licensing
requirements. General license doesn’t mean that such transactions are tax free.
OFAC Sanctions Regulations do not discuss tax consequences. Most Iranian
transactions covered by general license have tax implications.
Compliance
with OFAC Regulations can prevent potential violations which may have
un-intended monetary cost and criminal prosecution.
Many OFAC
cases entail one or more of the following tax issues:
(1) Income Tax;
(2) Capital Gains Tax;
(3) Gift Tax;
(4) Inheritance Tax;
(5) Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain
Foreign Gifts;
(6) Offshore Voluntary Disclosure Program (OVDP);
(7) Report of Foreign Bank & Financial Accounts (FBAR); and,
(8) Foreign Account Tax Compliance Act (FATCA) and other Tax law.
Toll Free 877-687-7558
OFAC History
The
US Treasury Department has a long history of dealing with sanctions, dating to
the War of 1812; Secretary of the Treasury Gallatin administered sanctions imposed
against Great Britain for the harassment of American sailors.
During
the Civil War (1861-1865), the US Congress enacted a law which prohibited
transactions with the Confederacy; a secessionist government established in
1861 by seven Southern States who were called slave states. OFAC
is the successor to the Office of Foreign Funds Control (the “FFC”), which was
established at the advent of World War II following the German invasion of
Norway in 1940. The FFC program was administered by the Secretary of the
Treasury throughout the war.
The
FFC’s initial purpose was to prevent Nazi use of the occupied countries’
holdings of foreign exchange and securities and to prevent forced repatriation
of funds belonging to nationals of those countries. These controls were later
extended to protect assets of other invaded countries.
After
the United States formally entered World War II, the FFC played a leading role
in economic warfare against the Axis powers (German, Japan and Italy) by
blocking enemy assets and prohibiting foreign trade and financial transactions.
OFAC
was formally created in December 1950, following the entry of China into the
Korean War, when President Truman declared a national emergency and blocked all
Chinese and North Korean assets subject to U.S. jurisdiction.
Iranian OFAC
Regulations Overview
OFAC
is sister agency of the IRS and administers and enforces economic sanctions
against countries and groups of individuals. The Iranian Transactions
& Sanctions Regulations, Title 31 C.F.R. Part 560 (the “ITSR”), of Office
of Foreign Office Assets Control (OFAC) Regulations, generally
prohibit the exportation, re-exportation, sale, or supply of any goods,
technology, or services directly or indirectly, from US or by a US person,
to Iran or the Government of Iran.
These
Iranian OFAC Sanctions Regulations prohibit US persons (citizens, green
card holders or US businesses), from engaging in any transaction or
dealing in or related to goods or services of Iranian origin, or owned or
controlled by the Government of Iran, or goods or technology or services
for exportation, re-exportation, sale or supply, directly or indirectly,
to Iran or the Government of Iran.
Employment
in Iran or conducting a business in Iran such as practice of medicine, law,
engineering, dentistry, consulting, software development, real estate
development, construction, etc. by a US person requires an OFAC
license, unless exempted by law. And, there is a high likelihood that
such request will be denied, because they may violate the Iranian OFAC
Regulations.
Despite
these OFAC prohibitions, a US person may still conduct some prohibited acts
either by obtaining an OFAC specific license or based on an OFAC exception.
See General licenses H Iran
Nuclear Deal, BARJAM
Joint
Comprehensive Plan of Action ("JCPOA"), Iran Nuclear Deal (BARJAM in
Farsi)
Following
the 2013 nuclear negotiations between Iran and the 5+1 superpower nations,
resulted in lifting of certain non-US or secondary sanctions on January 16,
2016, See Iran
Nuclear Deal, BARJAM
Contrary
to what was expected, most of the US sanctions against Iran remained in effect.
I receive many calls from the Persian-American community as to whether
OFAC has been abolished forever. My answer is “no”. I further explain
that OFAC was not created for Iranian purposes and will not cease to exist when
the Iranian sanctions are completely lifted in the future.
Importations
from Iranian to U.S.
Goods
or services from Iran may not be imported into the United States, either
directly or through third countries, with the following exceptions:
1-
Gifts valued at $100 or less;
2-
Information and informational materials;
3-
Household and personal effects, of persons arriving in the United States, that
were actually used abroad by the importer or by other family members arriving
from the same foreign household, that are not intended for any other person or
for sale, and that are not otherwise prohibited from importation;
4-
Accompanied luggages for personal use normally incident to travel;
5-
Foodstuffs; including caviar and pistachio, effective January 16, 2016; and,
6-
Persian Carpet, effective January 16, 2016. See Iran
Nuclear Deal, BARJAM
OFAC General
License
An
OFAC general license authorizes a particular type of transaction for
a class of persons without the need to apply for an OFAC license. Transfer of
cash inheritance or cash gift are examples of general license.
OFAC Specific
License
An
OFAC specific license is a writing issued by OFAC to a particular
person or entity, authorizing a particular transaction in response to a written
license application, for a specific period time, generally two years. Sale
of a property acquired in Iran subsequent to becoming a US person and transfer
of the related funds to the US is an example of specific license.
Persons
engaging in transactions pursuant to OFAC general licenses or OFAC specific
licenses must make sure to comply with all OFAC specific license requirements.
OFAC Sanctions Regulations may contain statements of OFAC’s specific licensing
policy with respect to particular types of transactions.
Do I need an
OFAC license?
Effective
October 22, 2012, sale of inherited property in Iran, or property owned before
becoming a US person, and transfer of the related proceeds to the US, do
not require OFAC Specific Licenses.
Additionally,
transfer of non-commercial family remittances such as
“cash inheritance” or “cash gift” do not require OFAC licenses.
Notwithstanding, consultation with OFAC attorney is recommended to avoid
potential OFAC problems. Although, most transactions may seem to be authorized
under OFAC General License provisions, it is advisable to seek legal
advice from an OFAC attorney to prevent missteps.
It
is also important to obtain tax advice from a tax attorney with knowledge
of international tax laws and a counsel familiar with the laws of Bank
Secrecy Act ("BSA"), as well.
The
BSA, also known as the Currency and Foreign Transactions Reporting Act, is
a legislation passed by the United States Congress in 1970 that requires
US financial institutions to collaborate with the US government in cases
of suspected money laundering and fraud.
Therefore,
the US banks and financial institutions are cautious about their own
security, and strive to prevent any potentially illegal funds being transferred
through them.
This section
of the bank issue a “Suspicious Activity Report (SAR)” when they discern a
suspicion. From time to time, these financial institutions reject the
incoming funds and return them to the country where they came from.
It
is recommended to seek legal advice from an Iranian OFAC lawyer regarding
documentation of the source of funds as to “gift” and “inheritance”,
among other things.
E-2 and EB-5
visa applicants
Since
October 22, 2012, the OFAC General License provisions apply to the seekers of
E-2 visa and EB-5 visas. In other words, you do not need to obtain OFAC
Specific License for these transfers.
Tax implication
of E-2 and EB-5 visa holders
Holders
are visas E-2 and EB-5 visas become US persons and subject the US taxation on
their world wide income.
Goods covered by
OFAC General License
Exportation
of most medical devices, medicine, and food stuffs from US to Iran
are also authorized by OFAC General License. Merchants exporting the above
items to Iran are advised to consult Iranian OFAC attorneys and be compliant
with the requirements of the Commerce Department.
Which one?
Inheritance or Gift?
Inheritance is
a property received from estate of another who has died. If your
folks live in the US, property you receive from them in Iran is not
inheritance, because they are still alive and the property they give you is a
“gift “and may have additional tax reporting issues.
Gift is
a property given to another person without consideration. Although, there are
exceptions to the rule, generally gifts or inheritance are received from a
relative or family member, not from strangers or neighbors.
To
be prudent, obtain documents with evidentiary value to potentially
substantiate the character of property that may be required by OFAC, Financial
Crimes Enforcement Network (FinCen), IRS Criminal
Investigation Division (CID), and other government authorities interested
in the true character of your incoming money, in case circumstances arise.
Characterization
of a property or naming it something which is not to evade compliance, is
illegal and may subject perpetrators to criminal prosecution regardless of
whose idea it was; a non-lawyer friend, lawyer friend, paid lawyer, accountant,
CPA, neighbor or your car mechanic.
Carrying
money in excess of $10,000 through the US Customs
Strict
rules apply to transfer of funds via a financial institution or carried in a
briefcase through the boarders or airports. Click below for
additional information. See Carrying
more than $10,000 through US Customs
Zaher
Fallahi, Iranian OFAC Lawyer, Certified Public Accountant (CPA), advises
Iranian-American clients in obtaining necessary evidentiary documents for
properly responding to potential OFAC Administrative Subpoenas
and inquiries by BSA, IRS Criminal Investigation Division (CID), FinCen,
and the US Customs and Border Protection.
Taxation of
Money Transfer from Iran
Who is subject
to U.S. taxation?
If
you are a U.S. citizen or resident alien (green card holder), the applicable
tax laws for filing income tax, estate tax, and gift tax returns are
generally apply the same way whether you live in the United States or
overseas. And your worldwide income from interests, dividends, wages, or
other compensation for services, income from rental property or royalties,
and other types of income, must be reported on your U.S. tax
return whether they are earned within or outside the United States.
In
addition, you are subject to requirements of the FBAR, FATCA and other
International Tax Laws. See below for details.
Zaher
Fallahi, International Tax Attorney, Certified Public Accountant (CPA),
advises clients on US taxation throughout the world. Telephone
appointments are available for clients who may not be able to meet in person.
Tax
implication of transactions conducted in Iran are as follows:
Inheritance Tax
If
the decedent was a US person, the estate of the decedent may be required to
file an Inheritance Tax Return. For the year 2017 estates up to
$5,490,000 are not taxable. However, a return may still be filed for the
portability election (an election to use the deceased spouse’s unused
exclusion) purposes. If the decedent was not a US person, or the estate did not
file an estate tax return, the recipient may be required to report amounts in
excess of $100,000 per year.
Gift Tax
If
the donor is a US person, she or he may be required to file a Gift Tax Return,
IRS Form 709 for gifts in excess of $15,000 per person per year.
For
the year 2018 gifts up to $11,180,000 (2017 was $5,490,000) are not taxable. If the donor was not a US person, the recipient may be required to report
amounts in excess of $100,000 per year. Non-compliance with the foreign
gift and inheritance reporting may subject the recipient to substantial
penalty. In case of failure to report foreign gifts timely, seek tax advice
from a tax attorney for remedial ion.
Capital Gains
Transactions
where the underlying assets are gift or inheritance, may be subject to Capital
Gains taxes.
An
example that I hear often is; this is my inheritance property from my deceased
dad and I am told it is tax free. When I express my condolences and ask “when
did your dad pass away”?, I learn that the dad had passed away twenty
years ago or before the 1979 revolution or something like that. Although,
sale of such assets may be considered personal family remittances for OFAC
purposes and exempt under the sanctions laws, however, they most of them result
in substantial capital gains taxes.
Report of Foreign
Bank and Financial Accounts (FBAR)
US
persons defined as citizen, resident (green card holder or meeting substantial
presence test) with an interest in, signature authority or other authority over
financial accounts with an aggregate value in excess of $10,000, are required
to e-file their “Report of Foreign Bank and Financial Accounts (FBAR)”,
Form FinCEN 114 with the Financial Crimes Enforcement Network (FinCEN),
See FBAR.
Foreign Account
Tax Compliance Account (FATCA), 2010 Law
US
persons with an interest in certain Foreign Financial Assets with an aggregate
value of more than $50,000 (singles living in the US) are required to include
“Statement of Specified Foreign Financial Assets” in their regular tax
returns. See FATCA
The
Persian-Americans living abroad are subject to the US tax laws and are required
to file their annual income tax returns. They are also required to comply with
the laws of US sanctions against Iran. Application of the US tax laws is
independent of the laws of sanctions. See VSD above.
Offshore
Voluntary Disclosure Program (OVDP), Amnesty
Any
non-compliance with FBAR may turn into a criminal tax case and requires advice
of tax lawyer with special skill must be sought. Your tax attorney may advise
you on a proper course of action such as the Offshore Voluntary Disclosure
Program (OVDP). See OVDP
Zaher
Fallahi, OVDP Attorney, CPA, practices in California; Orange County and
Los Angeles and advises clients on the legal and tax implication of Iranian
OFAC transactions worldwide.
US Taxation of Iranian-Americans living
in Iran
If
you are a U.S. green card holder or citizen of the United States (a US person
the Internal Revenue Code 7701(b)) and live in Iran, you are taxed on your
worldwide income regardless where you earned it.
Additionally,
you are subject to all the US international tax laws, including Report of
Foreign Bank & Financial Accounts (FBAR),
Foreign Account Tax Compliance Act (FATCA),
and one potential remedy (OVDP).
The
good news is that you may be able exclude up to an amount of your earned
(compensation) income in Iran which is adjusted annually for inflation ($97,600
for 2013, $99,200 for 2014, $100,800 for 2015, $101,300 for 2016, $102,100 for
2017, and $104,00 for 2018), if you otherwise qualify. For example not stay in
the US more than 35 days in a calendar year, under the Foreign Earned Exclusion
provided under the Section 911 of the Internal Revenue Code.
You
may deduct certain foreign housing amounts. This exclusion can only be taken by
timely filing the tax return. It is important to note that this exclusion does
not apply to passive or un-earned income (see below). Neither does it waive the
requirements of filing the FBAR and FATCA (see
above).
Generally, there
are three categories of foreign income;
I)
Earned Income;
II)
Un-earned Income; and,
III)
Variable Income.
I- Earned income
includes:
1)
Salaries & wages
2)
Commissions,
3)
Bonuses
4)
Professional fees and tips.
II- Unearned
income includes:
1)
Dividends;
2)
Interest;
3)
Capital gains;
4)
Gambling winnings;
5)
Alimony, social security benefits; and,
6)
Annuities.
III- Variable
income; may fall in one of these categories:
1)
Business income;
2)
Royalties; and,
3)
Rents.
The
bad news is that unfortunately your employment in Iran may violate the US
laws of sanctions against Iran also known as the Iranian Transactions and
Sanctions Regulations (ITSR) administered and enforced by the Office of Foreign
Assets Control (OFAC).
Of
course, there are certain exceptions to the ITSR. For instance, employment at
the World Bank, International Monetary Fund (IMF) or other United Nations
related organizations that may be authorized. It is prudent to ask your
potential employer to ensure that your employment in Iran is otherwise
authorized by OFAC.
Also,
your self-employment income in Iran even if were authorized by OFAC is excluded
only for income tax purposes and not for Social Security or Medicare purposes.
Furthermore,
you may not take a foreign income tax credit for taxes paid in Iran, due to the
economic sanctions against Iran, but may deducted as an expense. Under the
ITSR, a US person is not allowed to open a bank account in Iran.
It
is important to note that the lifting of the Secondary-US sanctions (Europeans
and South East Asian countries, etc.) effective January 16, 2016, have not
altered the above referenced laws. Click here for more information; Iran
Nuclear Deal, BARJAM
Non-willful
Iranian OFAC Violations
If
you have worked in Iran without the knowledge of the ITSR, and reading this
article raises your curiosity as to whether you may have violated any US laws,
you may seek legal advice from an OFAC attorney, including our firm.
Zaher
Fallahi, Tax attorney, CPA, assists Americans living abroad with US taxes and
offshore accounts; OVDP, FBAR and FATCA. As an OFAC Attorney, he guides clients
on OFAC Licenses, sale of property in Iran and transfer of money from Iran to
the US under OFAC Regulations. Telephones: (310) 719-1040 (Los Angeles), and (714) 546-4272 (Orange County), or
e-mail to: taxattorney@zfcpa.com
We assist
clients regarding Iranian OFAC Licenses
Zaher
Fallahi, attorney at law, has been rated 10 by Avvo: Rated
10 of 10 .
Zaher
Fallahi, tax attorney, has been named a top tax attorney: TOP
Tax Attorney
About
1.8% of the U.S. lawyers are also CPAs, and we are proudly one of them;
We
have successfully assisted many clients with legal and tax implication of
Iranian OFAC transactions
Outside General Counsel Services ( through our law firm)
Need OFAC
License, Contact:
Zaher
Fallahi, Attorney At Law, Certified Public Accountant (CPA) both in California and
Washington D.C.
(310)
719-1040 (Los Angeles)
(714)
546-4272 (Orange County)
Toll Free 877-687-7558
E-mail taxattorney@zfcpa.com
