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News & Articles

This page contains various news and background articles related to our business fields. Newest articles are on the top of the page.


JAPAN'S EXIT TAX FORCES RESIDENTS TO THINK ABOUT THEIR FUTURE IN THE LAND OF THE RISING SUN

October 04, 2015 00:00:00
By Winstone Group Inc. | Attorney Salazar, Alberto

The recent "Exit Tax" has significant implications for permanent residents, long-term foreign residents and expatriating Japanese nationals.

The intention of this exit tax is to plug the gushing flow of individuals holding stocks and equities with unrealized gain from escaping Japanese individual income tax by relocating to such countries as Singapore, Hong Kong, Switzerland or anywhere outside Japan.

This article will provide a brief overview of the EXIT RULE, who's impacted by it, AND A FEW CASES TO CONSIDER.

GENERAL RULE. A resident of Japan is subject to a 15.315% exit tax if she expatriates from Japan on or after July 1, 2015, with a combined value of assets of at least JPY 100 million (approximately USD$833,333; CAD $1,097,333 using 3 Oct 2015 exchange rates). The tax is on unrealized gain from certain securities. An unrealized gain is a profitable position that has yet to be cashed in, such as a winning stock position that remains open.

SCOPE. The rule traps any person who: is a Japan resident, an individual whose principal place of residence (Jusho), or temporary place of residence (Kyosho) has been Japan for a period of time exceeding five out of the last 10 years prior to expatriation; AND has assets with a combined value of at least JPY 100 million.

The five-year residency period applies on a prospective basis to non-Japanese individuals on the following visa statuses: Permanent Resident, Long-Term, Spouse or Child of Japanese National, Spouse or Child of Permanent Resident. Therefore, you will NOT be potentially trapped if you were to leave Japan before July 1, 2020. From July 1, 2020, you're trapped with the exit tax and the inheritance tax, if you die in Japan. For Japanese nationals, the five-year residency test is applied retroactively, i.e., if one departs today, he's hit with the exit tax.

ASSETS. Assets exposed include, but not all inclusive, the following: government bonds, corporate stocks and bonds, investment trust beneficiary certificates, shares in a Japanese LLC, foreign stocks, bonds and stock option certificates.

ASSET VALUATION. The value of assets is determined by using the fair market value on the date of expatriation from Japan, if you have appointed a tax representative. Otherwise, use the fair market value on the date three months prior to expatriation from Japan.

EXIT TAX ON INHERITANCE. If you, as a Japan resident, lived in Japan for more than 5 years in a 10 year period prior to your demise; AND you had assets valued at least JPY 100 million; AND your heir is a non-resident; THEN the EXIT TAX would be imposed on unrealized gain at the time of inheritance. Therefore, there's a double taxation of exit tax on the deceased and inheritance tax on the heir. No double tax relief is available in this case.

STRATEGIES. If you are running your company in Japan on a spousal visa, then consider a change to an investor visa.

If you are an employee of a foreign company with a permanent resident or spousal visa, then change it to an intra-company transferee.

If you are holding significant assets in financial centers such as in Hong Kong, Singapore, Switzerland while living in Japan, it's important to consider the Exit Tax before expatriating from Japan.

The Odds of Getting an IRS Tax Audit this Year is ZERO

March 23, 2015 23:00:00
By Winstone Group Inc. | Attorney Salazar, Alberto

If you are delinquent with the US Tax Returns and FBARs, now is the best time to get back into the system.

IRS Commissioner John A Koskinen is "deeply concerned that significant reductions in the IRS budget will degrade the agency's ability to continue to deliver on its mission during filing season and beyond." Our Congress has continued with substantial cuts to the IRS despite the significant amount of extra work to get ready for the tax changes relating to the Affordable Care Act (ACA) and the Foreign Account Tax Compliance Act (FATCA).

It couldn't be a better time to get back into compliance with the IRS system. The IRS is now at its lowest level of funding since 1998.

It is not possible to shift service jobs to cover enforcement personnel without providing them with substantial training, which of course is resource-intensive. The IRS doesn't have the budget. The IRS has cut more than 1,800 enforcement personnel. This results in significantly lower audits and resources focused on collection.

Now is the time to get back into the system.

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Boris Johnson will pay the IRS

November 23, 2014 22:23:00
By Winstone Group Inc. | Attorney Salazar, Alberto

Alberto Salazar, International Tax Specialist, claims Boris Johnson, the mayor of London, who was born in New York and holds a US passport as well as a UK passport, will pay the IRS the US capital gains tax on the sale of his residence in the UK.

Rule: All US citizens and residents, including those with dual citizenship, are legally obliged to file a tax return and liable to pay US taxes on world wide income, regardless of where they live and regardless if the income is earned abroad.

Mr. Johnson has not lived in the US since he was a child and lives and works in the UK. Mr. Johnson can and will pay the capital gains tax, despite his current position that he pays the lion's share of his taxes in the UK.

Having the IRS on his back as he bids to return to parliament at the next general election will be cumbersome and a distraction.

While he is at it, he will have to report and pay taxes on his earned income to the IRS. He earns well above the foreign-earned income exclusion threshold of $97,600.

The clincher, the IRS will confiscate more than half his wealth for his failure to file the FBARs, FinCEN Report 114, Report of Foreign Bank and Financial Accounts. The IRS will take the greater of $100,000 or 50 percent of the balance in the account at the time of the violation, for each violation, plus accrued interest and interest on penalties. There are civil and criminal penalties for negligence, pattern of negligence, and willful violations. FBAR civil penalties have varying upper limits, but no floor and the IRS has discretion in determining the amount of the penalty.

The London mayor will either pay and renounce US citizenship or negotiate a deal with the US government. As you may know, the US government is delinquent of 7mil pounds to London's City Hall for vehicle congestion charge.

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Abenomics and the Japanese Yen

November 5, 2014 14:13:00
By Winstone Group Inc. | Attorney Salazar, Alberto

Based on discussions with Tokyo, Singapore and Hong Kong clients in the investment banking industry, the goal is to demolish the yen. Here is the analysis on the Japanese U.S. Dollar exchange rates as of last Friday. It is subject to change as soon as the Fed and the BOJ makes changes to its monetary policies.

Last Friday afternoon, Mr. Kuroda promised that the BOJ would:
(1) Increase the monetary base by JPY 80 trillion annually (over 16% of GDP), up from the previous commitment of JPY 60-70 trillion.
(2) Increase its JGB (Japan Government Bonds) holdings by JPY 80 trillion annually, up 60% from the prior allocation.
(3) Lengthen the average remaining maturity of its JCB holdings to 7-10 years, up from the current goal of 6-8 years. Before Mr. Kuroda arrived at the BOJ, the average maturity was under 3 years.
(4) Triple the annual purchases of EFTs and J-REITs.
(5) The aforementioned actions will continue until further notice.

On the same day, the Government Pension Investment Fund of Japan (GPIF) announced it would reduce its holdings of Japanese Government Bonds (JGB) from the current 53% allocation to 35% of its JPY 127 trillion in assets.

The GPIF will sell its JGBs holdings at a pace slightly below the additional purchases by the BOJ. The GPIF will invest the liberated funds into the Nikkei stock market until June 2015.

Immediately after these impeccably coordinated announcements, the Nikkei stock index instantly jumped 5%, the Yen collapsed by over 3.5%, and the JGB yields dropped further.

According to the Financial Times and confirmed by several of our clients in the investment banking industry in Tokyo, Singapore and Hong Kong, the goal is to demolish the yen. It seems to be working. As long as the aforementioned policy is in place, the JPY 115 to 119 range would be expected until the end of December 2014.

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Singapore Air Show
   Shopping For A War!

February 20, 2014 17:49:00
By P. Carroll

WINSTONE aerospace

Unlike previous Singapore air shows there was a stronger military presence from exhibitors. On the surface it looked like 50% more participation on the military side with less civil participation. Delegations from the Japan Air and Maritime Self Defense Force were present to see what was on offer. Japanese aerospace primes were also exhibiting in their own right with smaller Japanese component manufactures grouped under the JETRO umbrella. For Japanese industry the emphasis was on civil aerospace and regional jets. Notwithstanding this the underlying impression at the air show was foreign manufacturers and the organizers were expecting arms sales to increase due to the increased tensions in the Asian region.

In Business Aviation Gulfstream, Cessna, Embraer and many others were present, but even here there was a shift towards military with the Beechcraft King Air shown in gray with the title "special missions" and the Viking Twin Otter was being offered also for "special missions"

Boeing and Airbus were competing for orders, signing significant orders, and both showed their new widebody jets (A350/B787).

WINSTONE aerospace WINSTONE aerospace

Flight Global stated that they could see in the short term Airbus planning the A380 upgrade and both Airbus and Boeing planning to replace the A320/B737 as early as 2020. International industrial participation would be expected as normal shared out in each country in return for orders. Today Airbus is perceived as a cheaper product than Boeing and this is reflected in the net asset values. Despite airlines and operators still having older aircraft, which was considered negative in the past, they are finding ways to still generate reasonable profit levels and extending further the life time of these aircraft. The future customer base is expected to increase to 50% through leasing customers and the leasing customer split to be about 50% sale and lease back and 50% direct.

From China AVIC and COMAC were both present with a grouping of Chinese civil aerospace component and service companies.

AVIC who purchased Cirrus Aerospace and TCM Continental were exhibiting both a Continental piston engine plus a Cirrus aircraft.

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Estate Planning Principles Memorandum

January 11, 2014 21:24:00
By Winstone Group Inc. | Attorney Salazar, Alberto

Asset protection is a major part in both business and estate planning. It is an important part of arranging your assets in a way that will preserve the value of your assets from attacks by creditors and governments.

The purpose of this memorandum is to provide a brief overview of principles that you should know about in preparation of protecting your assets for your family and grandchildren. The relevant parts include: the durable power of attorney, payable on death (POD), transfer on death (TOD), etc.

A US Trust could shield your assets from compliance reports and protect your funds from non-US governments. The POD / TOD will protect your funds. The Durable Power of Attorney is required no matter the situation.

In a nutshell, the Will is easy and cheap to set up. However, the lawyers and court will capture 20 to 30 % of the total value of your estate during the probate court proceedings. Your estate value is the fair market value of all of your worldwide assets. The lawyers charge a minimal fee to draft your Will with the anticipation of getting their excessive fees at the back-end, once you are deceased. Your estate must go through probate if you have assets, including real property such as residential rental property, in the US.

In order to avoid losing a huge part of your estate to the lawyers and administration costs, the revocable trust is to be used in protecting your estate for the benefit of your spouse and your children (next generation skipping provisions). Once you establish the trust, the assets fund the trust. In other words, the Trust will be funded with your US assets and US real property. The title of the property will be changed from your name to the Trust name at the time the Trust is established. Upon your demise, there is NO PROBATE in any court. The real property and other assets are transferred pursuant to your instructions as noted in the Trust, namely to the successor beneficiaries without any court proceedings and without any interference by third parties.

In conjunction with the Trust, you must have a durable power of attorney and a Pour-Over Will. The Pour-Over Will ensures that any assets you have obtained after the establishment of the Trust but before your death, will pour over to the Trust.

Here are the important items you should consider:

ESTABLISH THE POUR-OVER WILL. This testamentary device is used in conjunction with the Trust. The client decrees in the Pour-Over Will that the property in his estate at the time of his death shall be distributed to the Trustee (Successor Trustees = the surviving spouse and or the children) of the Trust. The U.S. courts recognize the Pour-Over Will in the event the client had not put all of his assets into the Trust for reasons of liquidity, convenience, or simply because he did not get around to do so before his death. A Pour-Over clause gives probate property to the Successor Trustee by "pouring" such assets into the Trust. The Pour-Over clause protects the client's property not previously placed in Trust by pouring it into the previously established Trust.

DURABLE POWER OF ATTORNEY. The Durable Power of Attorney (also known as an Enduring Power of Attorney) is a legal document that ensures the client's attorney-in-fact (spouse/child) continues to hold power to manage assets on behalf of the client even if the client were to become incapacitated, unconscious or lost.

HEALTH CARE POWER OF ATTORNEY. A health care power attorney, an advance directive also referred to as a health care proxy, is a medical power of attorney that allows the client to grant another person, the client's spouse as proxy, the right and authority to handle matters related to client's medical care. An advance directive is a legal document giving direction to health care providers about treatment choices. This document empowers the proxy to make all medical and health care decisions in the event the client becomes incapacitated.

Such powers include the power to consent, refuse consent or withdraw consent to any type of medical care, treatment, service or procedure. It is important to understand a Living Will does not appoint another person to make health care decisions. It only applies to decisions regarding "life-sustaining treatment".

The Health Care document allows the proxy to make decisions regarding personal care, medical treatment, hospitalization, health care and medical procedures during a period of incapacity. A durable document continues in effect and or takes effect when client is incapacitated.

PAYABLE ON DEATH (POD) ACCOUNTS. For an individual with funds held in US banks and credit unions, the POD arrangement ensures swift distribution of assets to your heirs because there is no probate. POD accounts are created by completing the proper forms with your banker. The POD allows for the transfer of all checking and savings accounts, security deposits, savings bonds and other deposit certificates. It's important to understand that the POD should be used in conjunction with a Durable Power of Attorney (DPA). The DPA is triggered at the time you become incapacitated. The POD is only activated at the time of your death.

TRANSFER ON DEATH (TOD) ACCOUNTS. For an individual with funds held in US financial institutions, the TOD arrangement ensures swift distribution of assets to your heirs because there is no probate. TOD accounts are created by completing the proper forms with your broker or investment adviser. The TOD allows for the transfer of all stocks, bonds, mutual funds or other assets to the designated beneficiaries upon your death. You maintain complete control of your assets during your lifetime. Your named beneficiaries have no access to or control over your assets as long as you are alive. It's important to understand that the TOD should be used in conjunction with a Durable Power of Attorney (DPA). The DPA is triggered at the time you become incapacitated. The TOD is only activated at the time of your death.

Nothing contained in this memorandum is to be considered as the rendering of legal advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. This memorandum is intended for educational and informational purposes only.

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Security in Asia
   The UK Japan Dimensions

October 6, 2013 22:47:00
By P. Carroll

WINSTONE aerospace

"Rejuvenating UK-Japan Relations for the 21st Century" - this was the title of the Japan - UK security conference held over two days at the end of September. Key note speakers at the conference included HRH The Duke of York, KG and Mr. Shinzo Abe, Prime Minister of Japan. Notable other participants included the former US Director of National Intelligence. From Japan former Minister of Defence of Japan, former Chief of the Japanese Self Defence Fleet, Spokesman for the Keidanren on Policy Planning, Defence Production Committee, Administrative Vice Minister of Defence, Ambassador International Security Policy, Ministry of Foreign Affairs, Director General Japan Ministry of Defence. While on the UK side participants included the former Minister of State for Security and Counterterrorism, Former First Sea Lord, Royal Navy, former Chief of MI6, representatives from Defence and Security Organization, UK Trade and Investment, Rolls-Royce and BAE Systems. Organization was provided by the Sasakawa Peace Foundation and the Royal United Services Institute.

This event was significant in many ways. It was the first time Japan had openly held structured talks on cooperation with another country on security matters, other than that of the United States of America. Here specifically the intent is to cooperate in the area of defence equipment development and exploitation. The conference was a follow on to a number of agreements signed between the governments of Japan and the UK over the last year but specifically the Defence Cooperation Framework Agreement signed on the 4th July this year. The agreement covers joint development and manufacture of defence equipment. Historically the relationship between the countries goes back 400 years with defence cooperation since the late 1800's. In the first Gulf War Japanese and British minesweepers operated together leading to the introduction of the British mine hunting technology to Japan shortly after. Today in the Gulf of Aden British, Japanese, US and other navies operate together in anti-piracy operations.

Both nations felt as Japan and the UK host unique relations with the US on defence it was right they should exploit this relationship further. In the seas around Japan it was felt to balance the forces in the region the knowledge and technology of the parties could be leveraged to the benefit of all. It was recognized in programs like the F35 Joint Strike Fighter no one nation can now continue in isolation to develop large military projects and in fact despite the F35 prime being a US manufacture both Japan and the UK are involved in difference equipments/technologies on the aircraft and as such both must be in a position to export their products in the future. For Japan exporting defence technology is limited under the current constitution but it was felt this century would bring changes to reflect the current global situation and the fact nations cannot continue to fund defence R&D alone.

It is with this back drop all parties, Japan, UK and the US welcomed the move to joint R&D programs between the nations. Some programs have been identified and preliminary work has been started. It is expected in the near future mechanisms will be established to fast track this work for the benefit of all.

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Automobile News - Latin NCAP

August 2013
By Winstone Group Inc. | Attorney Salazar, Alberto

The Importance of Corporate Responsibility and Economic Sense

The Latin American New Car Assessment Program (Latin NCAP)'s new crash test results indicate that popular cars sold by vehicle manufacturers in Latin America pose an unacceptably high risk of death or injury in the event of a crash.

Certain auto parts manufacturers and auto manufacturers doing business in Latin America need to ensure consumers buy safe entry-level model vehicles. The crash test results demonstrate that the Nissan Tsuru, Renault Clio Mio, Suzuki Alto K10 and Chevrolet Agile all provide inadequate protection for occupants. These popular entry-level models are sold with no airbags and body structures that collapse onto the occupants inside the automobile. The top global companies continue to provide sub-standard safety protection across the Latin American market with 0 star ratings, according to NCAP. The new SEAT Leon, the Spanish manufacturer, received the first 5 star rating from the Latin NCAP.

Corporate Responsibility & Economic Sense

The manufacturers should expect the Latin Americans to be furious with the results. Its unethical and economic nonsense for global manufacturers building and selling unsafe cars in Latin America while building and selling good, safe, 5 star cars at affordable prices in the US and Europe. Unless serious and immediate positive changes occur in the very near future, these manufacturers will lose orders and lay off employees. The Latin Americans will buy the SEAT Leon that provides the level of protection expected by the people.

The global manufacturers must build in accordance with global standards. Building to meet the minimal local requirements is counterproductive for the future of the manufacturer and imposes an unacceptable risk of death or serious bodily harm for the consumer. Its disingenuous for the manufacturers to state that they build autos in compliance with local regulations known to be unsafe for the occupants.

Latin America is the fastest growing market in the world. The US economy is on life-support and the European economy is in a coma. As weak sales continue to diminish profits in the US and in Europe, it appears that auto manufacturers cut costs by providing inadequate protection for the Latin American consumers. In order to ensure the Japanese auto manufacturers and part manufacturers succeed in Latin America, the manufacturers should be selling highly safe autos that meet or exceed the UN global standards.

Continuing with the current course of selling unsafe autos, loss of market share by infuriating the Latin Americans is a given outcome. SEAT with the new Leon (Barcelona Spain) gets the economics of selling autos with high levels of safety in Latin America.

WINSTONE represents auto manufacturers and auto parts companies entering the Mexican and Brazilian markets. Winstone is lobbying to get the manufacturers to voluntarily comply with the U.N.'s minimum crash safety standards despite the much lower existing safety standards in Latin America.

Source:

Latin NCAP (www.globalncap.org) published the crash test results on July 24, 2013.
www.latinncap.com | www.ancap.com.au

Letters by Global NCAP to the Executives of the Auto Manufacturers (PDF files):
SEAT | NISSAN | Suzuki | Renault | GM

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ALERT JAPAN - IMPORTANT PLANNING NOTICE

2013.03.05 - New Reporting Requirement for Overseas Assets

Tax Compliance Burden Increasing for Individual Residents of Japan

The Japanese 2012 Tax Reform Act requires a new filing known as the Statement of Overseas Asset to be submitted on or before March 17, 2014 for reporting overseas assets held by permanent residents.

Permanent residents who own overseas assets valued at over JPY 50,000,000 must submit a statement of assets with its fair market value as of the 31st of December on an annual basis. The NTA will provide detailed regulations for determining the value of the assets in a forthcoming guidance report within a few weeks. Assets include deposits in financial institutions, bonds, stocks and movable and immovable assets such as real estate. The understatement of the fair market value of assets or the failure to report overseas assets will be subject to severe penalties. Refer to the NTA website for future guidance and details on this new reporting requirement.

The objective of this new measure is to ensure full compliance of the reporting regulations. This measure will further enable the NTA to ensure its residents are reporting worldwide sources of income. Already, the NTA directly receives financial data from offshore investment companies for residents in Japan. Non-Permanent Residents and Permanent Residents must report income from worldwide sources.

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Americans Evading Taxes  Put On Notice:

US Government's Disclosure of Forthcoming Wave of Offshore Bank Investigations

Saturday 24 September 2011  Hong Kong
By Winstone Group Inc. | Attorney Salazar, Alberto

Earlier this week, the US Department of Justice website noted the intention to commence world wide criminal investigations of offshore institutions assisting Americans to evade taxes. Such written intention was taken off the website within 24 hours. No listing of the financial institutions had been noted on the website as it would have been a Federal crime.

SCOPE - Taxpayers should not be fooled into believing that the U.S. Justice Department solely investigates financial institutions that have U.S. branches and U.S. operating licenses. Investigations have expanded to include entities with representative offices or no formal US presence.

Based on history, the institutions may avoid prosecution by paying fines and revealing detailed data on the accounts held by US citizens. According to the Justice Department website ( www.justic.gov/tax/offshore_compliance_intiative.htm ), "the Tax Division's top litigation priority is the concerted civil and criminal effort to combat the serious problem of non-compliance with our tax laws by U.S. taxpayers using secret offshore bank accounts"- a problem that a 2008 Senate report concluded costs the U.S. Treasury at least $100 billion annually. The result will be thousands of accounts handed over to the IRS by the financial institutions.

The US government's amnesty program has successfully resulted in nearly 18,000 taxpayers in an 18-month period concluding in February 201 to "come in from the cold" and voluntarily disclose to the IRS their previously hidden foreign accounts and also to agree to pay hundreds of millions of dollars to the U.S. Treasury.

IMMEDIATE ACTION TO BE TAKEN: File Form TD F 90-22.1 Report of Foreign Bank and Financial Accounts pursuant to the instructions on the form. The forms may be downloaded at www.irs.gov/pub/irs-pdf/f90221.pdf for no charge. Please understand that "I didn't know I had to file form TD F 90-22.1" is not a valid legal excuse.

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Spanish Tax Authorities' investigations of HSBC Swiss Bank Accounts

Mr. Emilio Botin, billionaire Spanish banker, has been inconvenienced this week by the Spanish Tax Authorities' investigations. Knowing Mr. Botin's character, all transactions are well documented and exceptionally well organized. Most critical, is the apparent source of the information that led to the commencement of the investigation: former IT employee (French national) of HSBC's Swiss Private Bank.

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The effect of "Operation Twist" - Brazil's currency war

THIS WEEK THE FEDERAL RESERVE announced the decision to reduce long-term interest rates by further loosening of monetary policy through "Operation Twist". This "Quantitative Easing", also known as surreptitious deficit financing, scheme should further weaken the US Dollar.

For our clients engaged in Brazil, the government had to intervene to hold up the Real. Brazil will continue to implement anti-dumping duties on select imports and increase taxes on foreign-built automobiles. This apparent "protectionism" policy is directly related to other countries' holding down their currencies. Last year, Brazil had imposed such schemes to reign in the rapid rise of the Real; this week, the scheme is to hold the Real.

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JAPAN'S EXIT TAX FORCES RESIDENTS TO THINK ABOUT THEIR FUTURE IN THE LAND OF THE RISING SUN

The Odds of Getting an IRS Tax Audit this Year is ZERO

Boris Johnson will pay the IRS

Abenomics and the Japanese Yen

Singapore Air Show: Shopping For A War!

Estate Planning Principles Memorandum

Security in Asia
The UK Japan Dimensions

Latin NCAP

Alert Japan - planning notice

Americans evading taxes

Spanish Tax Investigations

Brazil's Currency War