ATO Practice Statement Law Administration

PS LA 2006/4

SUBJECT:

Ability of the Internal Revenue Service of the United States of America to gather taxpayer specific information from the United States Virgin Islands and several other Territories (formerly known as Possessions) of the United States of America.

PURPOSE:

To alert ATO personnel to the ability of the Internal Revenue Service of the United States of America to obtain taxpayer specific information from the United States Virgin Islands and several other Territories of the United States of America under United States domestic tax law and provide such information to Australia under the existing Exchange of Information Article of the Australia-United States of America Double Tax Convention.

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FOI status: may be released

STATEMENT

1. The Internal Revenue Service (IRS) of the United States of America (United States) is able to obtain taxpayer specific information from the United States Virgin Islands (USVI) and several other United States Territories under United States domestic tax law and provide such information to Australia under the existing Exchange of Information Article of the Australia-United States Double Tax Convention.

EXPLANATION

Tax Implementation Agreement between the United States and the USVI

2. The United States and the USVI have a Tax Implementation Agreement that provides for the exchange of tax information between the two governments. Under that agreement, the USVI is required routinely to provide the United States with information which may be relevant to third countries, such as 'information about the ownership interests of all corporations subject to USVI tax with non-USVI source income that receive a rebate, subsidy or reduction of USVI taxes'. This information may be redisclosed by the United States in accordance with the provisions 'of an applicable treaty' with a third country. Thus, if a third country treaty partner were to make a request to the United States for USVI information that has been provided to the United States under the implementation agreement, the United States could provide the information to the third country.

Use of Compulsory Process

3. The USVI is within the jurisdiction of the United States' federal courts. Thus the United States can use its compulsory powers to secure the information in the USVI without regard to the local laws in the USVI. The implementation agreement between the United States and the USVI explicitly acknowledges that the administrative summons authority of the IRS extends to the USVI. If a third country treaty partner were to make an authorised request to the United States for USVI information that was not in the possession of the United States, the United States would secure that information.

Tax Determination TD 93/221

4. According to Tax Determination TD 93/221 the definition of 'United States' in the Australia-United States Double Tax Convention, when used in a geographical sense, does not include the USVI (or other United States' possessions - now known as territories). However in relation to exchange of information, most of Australia's tax treaties have specific provisions authorising the exchange of information relating to residents of third jurisdictions. While Article 25 of the Australia-United States Double Tax Convention does not contain such a specific authorisation, advice received from the Attorney-General's Department has confirmed that it is permissible for such exchanges to occur between the competent authorities of Australia and the United States, provided such exchanges are in relation to the taxes covered by the Convention. Therefore the operation of United States domestic law and the Tax Implementation Agreement between the United States and the USVI allows for an effective Australian request for information regarding the USVI from the United States.

Other United States Territories

5. The IRS recently advised that in addition to the USVI, the United States also has similar formal working agreements with American Samoa, Guam, Northern Mariana Islands and Puerto Rico. Thus the IRS is able to obtain tax information from these United States Territories and provide such information to Australia under the tax treaty.

Process of exchange of information requests

6. For more information on how to frame an exchange of information request to the United States or another tax treaty partner, please contact the Exchange of Information Unit via email australiancompetentauthority@ato.gov.au.

Amendment history

Date of Issue: 29 March 2006

Date of Effect: 29 March 2006

File 05/16778; 2002/3939

Related Rulings/Determinations:
TD 93/221

Subject References:
American Samoa
competent authority
double tax convention
exchange of information requests
Guam
Northern Mariana Islands
Puerto Rico
taxpayer specific information
United States of America
United States Virgin Islands (USVI)

Legislative References:
International Tax Agreements Act 1953 Schedule 2

Authorised by:
Graham Whyte
Assistant Commissioner
International Relations

Business Line:  PGI