Focus on Brazil: Agreements to Exchange Information and the Use of the United States and its Territories for Tax Planning, Privacy, and Asset Protection

By José Dumont Neto, Esq.1

1.  SCOPE:

This article demonstrates that Brazilians with legitimate intentions to legally avoid reporting under both the U.S. Foreign Account Tax Compliance Act (“FATCA”), and the Common Reporting Standards (“CRS”) promulgated by the Organization for Economic Cooperation and Development (“OECD”), should consider the United States of America and its offshore territories (“United States” or “U.S.”) as an appropriate jurisdiction for tax planning, privacy, and asset protection.


Be advised that tax evasion is a crime in Brazil pursuant to Law no. 8,137/1990.


This article applies to Brazilians2 considered, under U.S. tax concepts, to be “non-U.S. persons.” The U.S. Internal Revenue Code defines a non-U.S. person in the negative as a person not considered to be a “U.S. person”. The term “U.S. person” includes, but it is not limited to, the following: (i) a citizen of the U.S., including an individual born in the U.S. but who is a resident in another country (and who has not given up U.S. citizenship); (ii) a person residing in the U.S., including U.S. permanent residents (“green card holders”); (iii) persons who spend a significant number of days in the U.S. each year (usually, on average, more than 121 days per year under the “substantial presence test”); and (iv) corporations formed in the U.S., U.S. domestic partnerships and limited liability companies, U.S. estates and U.S. trusts.


Agreements to automatically exchange information are mainly designed to prevent tax evasion by ensuring that taxpayers pay the right amount of tax to the competent jurisdiction. Due to their relevance, scope, and actual worldwide implementation, this article focuses on two regulatory schemes that directly impact the disclosure of bank information and personal data protection: FATCA and CRS.

4.1.  FATCA

According to the U.S. Internal Revenue Service (“IRS”),3 FATCA is an important development in U.S. efforts to combat tax evasion by U.S. persons holding assets offshore.

Under FATCA, reporting institutions are required to provide information to the IRS regarding financial assets and/or substantial ownership interests held outside the United States by a U.S. person. The reporting institutions include, but are not limited to, banks, investment entities, brokers, and insurance companies. Entities deemed “non-U.S. reporting institutions” that do not obey the reporting requirements of FATCA are subject to a 30% withholding tax on many types of income payable to them by U.S. persons including, but not limited to interest, dividends, investment advisory fees, custodial fees, bank or brokerage fees, insurance or annuity premiums, and various types of financial contracts.

Because secrecy laws and personal data protections would restrict or prohibit non-US reporting institutions to comply with FATCA, it was necessary to convince foreign jurisdictions to change their domestic laws. Under the rationale that the fight against tax evasion brings benefits to all involved jurisdictions, the IRS released a form of Intergovernmental Agreement (“IGA”) providing both the United States and the respective foreign FATCA partner (“FATCA Partner”) the obligation to reciprocally4 exchange relevant information on foreign-owned accounts and investments.

However, such obligation to reciprocally exchange information is not fully “reciprocal.” As demonstrated below, the United States collects more detailed information than it actually provides to FATCA Partners.


The United States appears to have acknowledged that some FATCA Partners need an incentive to change their domestic laws regarding bank secrecy and personal data protection in order to be in a position to actually provide to the United States the information required under FATCA IGAs. One such incentive is for the United States to provide information to its FATCA Partners similar to what it requires to be provided by its FATCA Partners.

The United States expressly sometimes does acknowledge the need to achieve equivalent levels of reciprocal automatic information exchange between countries. For example, Article 6 of the IGA between Brazil and the United States (“IGA Brazil-USA”)5 provides:

The Government of the United States acknowledges the need to achieve equivalent levels of reciprocal automatic information exchange with Brazil. The Government of the United States is committed to further improve transparency and enhance the exchange relationship with Brazil by pursuing the adoption of regulations and advocating and supporting relevant legislation to achieve such equivalent levels of reciprocal automatic information exchange.

While, the United States thus expressly recognizes that it provides non-equivalent levels of information to Brazil, what exactly is it that is not reciprocally exchanged between the countries? Here is an example that relates to reportable bank account information:

Information reported by Brazil

Article 2 –The information to be obtained and exchanged is:

In the case of Brazil, with respect to each U.S. Reportable Account of each Reporting Brazilian Financial Institution:

(1) the name, address, and U.S. TIN of each Specified U.S. Person that is an Account Holder of such account and, in the case of a Non-U.S. Entity that, after application of the due diligence procedures set forth in Annex I, is identified as having one or more Controlling Persons that is a Specified U.S. Person, the name, address, and U.S. TIN (if any) of such entity and each such Specified U.S. Person;

Information reported by the United States

Article 2 –The information to be obtained and exchanged is:

In the case of the United States, with respect to each Brazilian Reportable Account of each Reporting U.S. Financial Institution:

(1) the name, address, and Brazilian CPF/CNPJ of any person that is a resident of Brazil and is an Account Holder of the account;

A simple comparison of the above language reveals that the United States is significantly less burdened than Brazil regarding the information to be exchanged between the countries in respect of bank accounts and their ultimate beneficiaries.

The Brazilian reporting institutions must report all relevant information concerning the U.S. account holder and, if necessary, proceed with due diligence to identify the ultimate U.S. person controlling the reported asset. On the other hand, the U.S. reporting institutions only are required to report the account holder’s name, address and taxpayer number (CPF/CNPJ), regardless of the ultimate beneficiary of the account. There is no need for the U.S. reporting institutions to undertake due diligence to identify ultimate beneficiaries and/or controlling persons of potential reportable accounts.

Similarly, the difference in requirements for each country may also be shown by simply comparing the meaning of “reportable accounts” under the definitions section of IGA Brazil-USA:

Information reported by Brazil

Article 1 – For purposes of this agreement and any annexes thereto (“Agreement”), the following terms shall have the meanings set forth below:

The term “U.S. Reportable Account” means a Financial Account maintained by a Reporting Brazilian Financial Institution and held by one or more Specified U.S. Persons or by a Non-U.S. Entity with one or more Controlling Persons that is a Specified U.S. Person. Notwithstanding the foregoing, an account shall not be treated as a U.S. Reportable Account if such account is not identified as a U.S. Reportable Account after application of the due diligence procedures in Annex I.

Information reported by the United States

Article 1 – For purposes of this agreement and any annexes thereto (“Agreement”), the following terms shall have the meanings set forth below:

The term “Brazilian Reportable Account” means a Financial Account maintained by a Reporting U.S. Financial Institution if: (i) in the case of a Depository Account, the account is held by an individual resident in Brazil and more than $10 of interest is paid to such account in any given calendar year; or (ii) in the case of a Financial Account other than a Depository Account, the Account Holder is a resident of Brazil, including an Entity that certifies that it is resident in Brazil for tax purposes, with respect to which U.S. source income that is subject to reporting under chapter 3 of subtitle A or chapter 61 of subtitle F of the U.S. Internal Revenue Code is paid or credited.

As a result, the U.S. reporting institutions are obligated to report only depository accounts held by individuals and non-depository accounts with U.S. source income (e.g. U.S. securities). This means, for example, that depository accounts in the USA held through entities are not reportable to Brazil and there is no need for due diligence to be conducted. On the other hand, Brazil must report depository accounts held by U.S. persons (individuals and/or entities) ultimately identified by mandatory due diligence procedures. For illustration purposes of the asymmetrical information exchanged between the United States and Brazil, please see below:

The United States essentially provides superficial information regarding reportable assets and its holders although it receives information obtained through a due diligence process. Hence, the obligation to exchange information is not “reciprocal.”

Based on such an asymmetrical obligation to exchange information, it is fairly simple to structure one’s affairs to legally avoid reporting to foreign countries under FATCA.


The previous section of this article discussed situations in which the United States either does not provide any information at all to Brazil regarding assets booked in the United States, or it provides information solely at a superficial level if U.S. source income is present.

Due to such “non-reciprocal” obligations, avoidance of FATCA with respect to Brazilians may be quite easy. A Brazilian whose intention is to legally avoid the disclosure of personal information under FATCA can simply hold an account in a U.S. financial institution through a domestic U.S. entity (in case of depositary accounts) or assure that no US-source income is earned if a non-depositary account is held.

Therefore, a Brazilian whose intention is to legally avoid the disclosure of personal information under FATCA is well advised to explore the non-reciprocal obligations under the IGA Brazil-USA and structure his or her affairs accordingly.


Is it possible or likely that the IGA Brazil-USA will become truly reciprocal in the near future? Although of course we can not know for sure, there are at least two good reasons why it is unlikely that the IRS will provide additional information under IGA Brazil-USA in the short run.

The first reason is because it is expensive to do so. The exchange process requires: (i) development of a consistent data reporting format and the agreement to use this format by all jurisdictions with IGAs; (ii) creation of a data transmission system to meet high standards for encryption and security; and (iii) establishment of the details and procedures required to assure data confidentiality.

Second, and perhaps more important, it will take political capital in the United States to pass legislation requiring additional disclosure by U.S. financial institutions. One reason for this is that genuine reciprocal treatment between the United States and FATCA Partners like Brazil is likely to reduce the current competitive advantage for U.S. banks which do not have to provide fully reciprocal information uner FATCA.

Consequently, fully reciprocal treatment between the United States and Brazil will likely not take place any time soon. Therfore we would expect that the technique to avoid reporting under FATCA which is described in section 4.1.2 above, may be expected to be used by Brazilians for a long time.

4.2.  CRS

Members of the OECD adopted a similar, but stricter, version of FATCA: the CRS.

Although both FATCA and CRS call for the automatic exchange of information on an annual basis, CRS is more detailed than FATCA in regard to the financial institutions required to report, the different types of accounts and taxpayers covered, and due diligence procedures to be taken by the reporting institutions.

CRS is either already in effect, or will soon become effective, in nearly all of major countries in the world. According to the OECD6, as of December 2016, there were already over 1,300 bilateral exchange relationships established under CRS with respect to 87 jurisdictions actively committed to the program. In the specific case of Brazil, the first exchange of information shall occur in 2018 regarding 2017 data.7


Taking into account that there over 1,300 bilateral exchange relationships with respect to 87 jurisdictions actively committed to the CRS, one should think that it is very hard to avoid reporting under CRS. Is this correct?

Not necessarily! Surprising as it may seem to some, the United States has not signed the CRS. Therefore, a Brazilian may avoid reporting under CRS by using holding structures and financial institutions both located in the United States.

More specifically, if a Brazilian holds all of his or her assets in a financial institution in the United States through a holding structure located in the United States or one of its territories, the CRS would be inapplicable.

By contrast, a structure with assets held outside the United States in a jurisdiction participating in CRS might not prevent reporting obligations under CRS. For example, entities in the United States, such as trusts, which own assets located offshore might be subject to look-through reporting by financial institutions of participating jurisdictions. Thus, in such a structure, assets should be held in the United States by a United States person, i.e., an entity formed under the law of one of the states or territories of the United States. Otherwise a non-US financial institution in a participating jurisdiction might have its own reporting obligation regarding the assets regardless of whether or not the assets are held by an entity in a non-participating jurisdiction such as the United States.


It is not likely that the United States will join the CRS at any time in the forseeable future because foreign investments and account information of U.S. persons is already being collected and reported to the IRS through FATCA. Furthermore, it is unlikely that the U.S. Congress or the current administration will move to expand IRS authority with respect to agreements entered into with foreign jurisdictions.


As explained in section 4.1.2 above, a Brazilian does not have to be concerned about FATCA if the account is held by an entity deemed to be a U.S. person that does not receive U.S. source income, regardless of who is the ultimate beneficiary.

As explained in section 4.2.1, CRS reporting is avoidable if assets are held in a financial institution in the United States through a holding structure that is not deemed to be a reporting institution in a CRS participating jurisdiction.

Combining the information in sections 4.1.2 and 4.2.1, reporting under FATCA is avoided if, for example, a Brazilian holds an account through a trust resident in the United States; and CRS reporting is also avoided if all assets are held in a U.S. financial institution (which is not obligated to report under CRS) by the U.S. resident trust, which itself is not deemed to be a reporting institution in a CRS participating jurisdiction.

So given that there exists a potential structure that may avoid reporting under both FATCA and CRS, the next question is: Since the assets are held in a U.S. financial institution by a trust also resident in the United States, will the investments be subject to a very high taxation in the United States?

The answer with respect to many types of income is “yes”, but there is also a solution for that. There are hybrid entities deemed to be non-US residents for tax purposes while still qualifying as U.S. resident for all other purposes. In fact, it is easy to set up a U.S. trust for purposes of avoiding CRS which is not a resident for tax purposes and therefore is not subject to worldwide taxation under U.S. tax rules.

For example, under U.S. Treas. Reg. § 301.7701-7, a trust whose trustee is a U.S. person is treated as resident in the United States for CRS purposes, but would not be treated as resident in the United States for tax purposes if there is another person who is a non-U.S. person who can veto decisions of the trustee. Note that this type of trust will still be treated as a U.S-resident whether or not for tax purposes it is also treated as resident in a participating jurisdiction, e.g. Cayman Islands, British Virgin Islands, Bermuda, etc.

What then is an ideal example of a structure for a Brazilian whose intention is to legally avoid reporting under both FATCA and CRS? The answer: A trust resident in the United States, but structured as a non-U.S. trust for tax purposes and with all assets held in a U.S. financial institution. In many cases, such a structure may also include an underlying domestic (i.e., U.S.) holding company owned by the trust.

This type of trust could be resident in one of the U.S. territories – such as in the United States Virgin Islands (“USVI”) – in case there is any additional reporting concern about the Tax Information Exchange Agreement between Brazil and the United States (“TIEA”). As explained below, the USVI is one of the U.S territories although it has its own tax system administered separately from the IRS and it is not subject to either FATCA or CRS and thus has minimal disclosure requirements.

6.  TIEA

Although signed in 2007, the TIEA entered in force only in 20138 following Brazil’s efforts to implement FATCA. The TIEA solely provides for the exchange of information upon a request (not on an automatic basis) relating to a specific criminal or civil tax matter under investigation. In contrast to FATCA and CRS, there is no automatic exchange of information regarding financial assets or bank accounts contained in the TIEA.

The requesting party (either Brazil or the United States) must follow a strict set of rules to request the information under TIEA. Any request for information made by one of the countries must be framed with the greatest degree of specificity possible. In reality, such requests must specify in writing all of the following: (i) the identity of the taxpayer whose tax or criminal liability is at issue; (ii) the period of time with respect to which the information is requested; (iii) the nature of the information requested and the form in which the requesting party would prefer to receive it; (iv) the reasons for believing that the information requested may be relevant to the tax administration and enforcement of the requesting party; (v) to the extent known, the name and address of any person believed to be in possession or control of the information requested; (vi) a statement as to whether the requesting party would be able to obtain and provide the requested information if a similar request were made by the requested party; and (vii) a statement that the requesting party has pursued all reasonable means available in its own territory to obtain the information, except where that would give rise to disproportionate difficulty.

If the rules have not been followed, the request for information can be declined, since these rules are designed to protect confidentiality and guard against “fishing expeditions” (i.e., a tax authority looking for general information, with a mere hope that it may be useful). The only documents or information to be disclosed by the requesting party are those within the specific range set forth in the request.

In this context, the real application of the TIEA is substantially narrower than under FATCA. Even if one’s concern is whether, under the TIEA, it is possible to disclose the identity of the beneficial owner of an entity resident in a U.S. territory,9 domestic rules in the USVI may avoid such disclosure. For example, there are no requirements for an agent of a company in the USVI, or a trustee located there, to identify or disclose information about the beneficiaries of a trust who, in many cases, may not even be named in the trust instrument.

Accordingly, structures similar to the one mentioned in section 5 (a U.S. resident trust deemed to be a non-U.S. trust for U.S. tax purposes) are likely to be outside the scope of the TIEA.


There also exist anti-avoidance rules to prevent a person from adopting practices intended to illegally circumvent the reporting obligations under FATCA and CRS. Most of these rules have been promulgated to assist in the effort to fight against tax evasion and related crimes (e.g., money laundering). Each FATCA Partner and/or CRS participating jurisdiction applies different anti-avoidance rules according to specific facts and circumstances. A discussion of these rules is beyond the scope of this article.


This article demonstrates that the United States is a good jurisdiction for tax planning, asset protection, privacy, and data protection. But how can Brazilians achieve these legitimate goals under FATCA and CRS?

First, bank and investment accounts should be held in U.S. financial institutions because such institutions do not have any CRS reporting obligations. The assets should be held through a holding structure because the United States does not require beneficial ownership reporting under FATCA “reciprocal” obligations.

Second, the holding structure of accounts and investments should involve a U.S. resident entity, for example, one established in the USVI. If properly established, the holding structure will not be deemed resident in the United States for tax purposes.

An example of an ideal structure for a Brazilian considering both FATCA and CRS is to have a USVI trust structured as both a non-U.S. trust and a non-USVI trust for tax purposes. All assets owned by the trust should be held in a U.S. financial institution or a USVI financial institution, often by way of a U.S. or USVI holding company owned by the trust.


July, 2017

About Solomon Blum Heymann LLP

Solomon Blum Heymann LLP is a commercial law firm based in New York City and the U.S. Virgin Islands. The firm solves problems for domestic and international businesses, trusts, estates, partnerships, foundations, entrepreneurs, individuals, and their families, and provides skilled counsel for complex financial and legal transactions and disputes in the U.S. and abroad. The firm’s core competencies include international and domestic tax, business and commercial law, international law, mergers and acquisitions, intellectual property, corporate compliance, asset protection, estate planning, real estate, and commercial and trust and estates litigation.

1 Mr. Dumont earned a Masters of Laws (LL.M) in International Taxation from the University of Florida, Fredric G. Levin College of Law in Gainesville, Florida, a Post-Graduate degree in taxation from Escola de Direito de São Paulo da Fundação Getúlio Vargas in São Paulo, Brazil, and a Bachelor’s Degree in Law (LL.B) from Pontifícia Universidade Católica De São Paulo in São Paulo, Brazil. He is currently a foreign associate with Solomon Blum Heymann LLP in New York, NY and later in 2017 he plans to be affiliated with Miguel Neto Advogados of São Paulo, Brazil. Both firms are members of the Interlegal network of law firms (

2 While this article focusses on Brazil and Brazilian taxpayers, and uses Brazilian examples, the concepts it discusses are equally applicable to most other jurisdictions in Latin America and worldwide that have adopted CRS and have entered into bilateral exchange relationships under CRS.


4 FATCA is still in place under nonreciprocal agreements with countries that have no interest in receiving information.

5 For Brazilian purposes, FATCA is essentially ruled by Decree no. 8,506/2015 and Normative Regulation no. 1,571/2015.


7 Information regarding the implementation of the CRS by Brazil can be found at Normative Regulation no. 1.680/2016.

8 Decree 8,003/2013.

9 By their terms, IGAs do not cover the U.S. territories, including the USVI. This is because the territories are not included in the definition of “United States” under FATCA or the IGAs, while some of the TIEAs (including the one signed with Brazil) do include the Territories in the definition.

José Dumont Neto Joins Solomon Blum Heymann LLP

Solomon Blum Heymann LLP is pleased to announce that José Dumont Neto, has joined the firm as a Foreign Associate in the Tax Department of our New York City office.

Solomon Blum partner Robert A. Solomon commented that “We are so pleased that José has joined our firm.  His international skill set complements our private wealth management practice and his Brazilian credentials puts us in a great position to broaden our Latin American practice representing high net worth individuals, families and companies in Brazil,  including advising on direct investment in Brazil and mergers and acquisitions.”

Solomon Blum tax partner William Blum added, “Mr. Dumont’s combination of familiarity with U.S. tax law and Brazilian regulations provides our clients with a depth of understanding about how to navigate the rapidly changing international tax environment, especially with regard to international compliance in Brazil, the implications of tax treaties and foreign bank account reporting under the Common Reporting Standards, as well as matters relating to transfer pricing and import and export transactions.”

About José Dumont Neto

Mr. Dumont has practiced tax law in Brazil for six years, including with the well regarded Brazilian law firm of Miguel Neto Advogados.   Mr. Dumont earned a Bachelor’s Degree in Law (LL.B) from Pontifícia Universidade Católica de São Paulo, São Paulo, Brazil, a post-graduate degree in taxation from Escola de Direito de São Paulo da Fundação Getúlio Vargas, São Paulo, Brazil and recently completed his Master of Laws (LL.M) in International Taxation from the University of Florida, Frederic G. Levin College of Law, U.S.A.

About Solomon Blum Heymann LLP

Solomon Blum Heymann LLP is a commercial law firm based in New York City and the U.S. Virgin Islands.  The firm solves problems for domestic and international businesses, trusts, estates, partnerships, foundations, entrepreneurs, individuals, and their families, and provides skilled counsel for complex financial and legal transactions and disputes in the U.S. and abroad.  The firm’s core competencies include business and commercial law, international law, mergers and acquisitions, intellectual property, corporate compliance, asset protection, international and domestic tax, estate planning, real estate, and commercial and trust and estate litigation.

For further information please contact Robert A. Solomon at or José Dumont Neto at

The Trademark Application Process in the United States

By Maria Tzokova, Esq., Counsel
Solomon Blum Heymann LLP
New York, NY and St. Thomas, U.S. Virgin Islands


Manufacturers and service providers who wish to protect the brand names and symbols which distinguish their goods or services from those of competitors may do so by registering a trademark or service mark.  Words, logos, phrases, colors, sounds, or some combination of these, used on goods or in connection with services, are all capable of protection.

To register a trademark in the United States there are a number of different steps required in the process.  Even after the trademark has been registered there are actions that need to be undertaken in order to continue to maintain the trademark in good standing.

A trademark may be registered on a federal level or state level. A federal trademark registration is accomplished by making the appropriate filings with the U.S. Patent & Trademark Office (USPTO) while the agency to file state trademark registrations varies from state to state. While state trademark registration is relatively quick and inexpensive, federal trademark registration, although more complex and expensive, offers far more protection since state registration protects the trademark only in the state where it is registered. This article will focus on federal trademark registration only.

Benefits of Federal Trademark Registration

Some of the benefits of federal trademark registration are that it: (i) creates a legal presumption of ownership of the mark and right to use it nationwide for the class of goods or services identified in the registration; (ii) grants the right to use the registered trademark symbol: “®”; (iii) grants the right to file a trademark infringement lawsuit in federal court and to obtain monetary remedies, including infringer’s profits, damages, costs, and, in some cases, treble damages and attorneys’ fees; (iv) acts as a bar to the registration of another confusingly similar mark for related goods or services; (v) serves as a basis for obtaining an international trademark application; and, (vi) allows registration with the U.S. Customs and Border Protection Service to prevent infringing products from being imported.

Selecting a Mark

Selecting a trademark is an important step in the registration process because not every mark is registrable or legally protectable with the USPTO. It should be noted that company names (“trade names”) that do not function as trademarks cannot be trademarked. Thus, use of a business name does not necessarily qualify for trademark protection unless the business name is also used as the source of goods or services and creates a separate and distinctive impression.

Search for Prior Trademarks and Pending Applications

Prior to filing a trademark application, it is recommended to conduct a search of prior trademarks and pending trademark applications to determine whether any person or company is using a mark confusingly similar to the proposed one. Trademark searches are often conducted by either online searches with commercial databases or by obtaining comprehensive trademark searches from recognized trademark search firms such as Thomson & Thomson. A comprehensive trademark search involves a search not only of the USPTO trademark database but also state trademarks, common law trademarks, and the Internet. Although more expensive, performing a comprehensive search is recommended to avoid another confusingly similar trademark that would likely prevent a successful application, as well as to avoid the possibility of an infringement lawsuit by unregistered users of identical or confusingly similar trademarks.

Preparation of the Trademark Application

There are two types of federal trademark applications: an “intent to use” application, and a “statement of use” application. If the mark is already in use in interstate commerce, a statement of use application should be filed. If the mark has not yet been used in commerce, but the owner is planning to use the mark in the future, then an intent to use application should be filed. A trademark may not be officially registered, however, until the mark is actually used in commerce and the period for the commencement of such use is limited.

The application must contain the following information: the name and address of the applicant, a specimen of use of the mark, the proposed International Class or Classes of the mark, and the identification and description of the type of goods and/or services represented by the mark.

After the USPTO determines that the minimum filing requirements have been met, an application serial number is assigned and the application is forwarded to an examining attorney.  Assuming that there are no major difficulties during the examination process, approval of a federal trademark registration normally takes approximately 12 months; however, this period may be longer, particularly if the examining attorney identifies any issues that must be addressed and resolved.

The Examination Process

The examining attorney at the USPTO will check all of the following: (1) the description of goods or services as set forth in the application; (2) whether the mark is “inherently distinctive” or is merely “descriptive” and has not acquired any “secondary meaning” or become “generic”; (3) whether the mark is too similar to another mark and therefore may lead to a “likelihood of confusion”; and (4) whether the mark falls within certain excluded categories.  These categories may include the following:  the mark is scandalous or immoral; the mark constitutes a generic name by which particular products or services are known; the mark consists of the insignia of a government entity; the mark is primarily a surname that has not acquired a secondary meaning; or the mark identifies, without consent, a living individual.

Frequently the examiner will issue an “Office Action” that requires the trademark applicant to respond. If the Office Action rejects the registration and there exist arguable grounds for contesting the examiner’s determination, the applicant can file a “Response,” usually in the form of an Amendment of the application, to overcome the rejection. If the Response ultimately does not change the examiner’s determination to reject the mark, the trademark applicant may appeal the decision to the Trademark Trial and Appeals Board of the USPTO and, ultimately, the applicant may seek judicial review.  If the rejection is solely because the mark is descriptive and without secondary meaning, it may still be registered on the Supplemental Trademark Register, rather than the Principal Register.

Publication for Opposition of a Trademark

After the examining attorney approves a trademark for registration (or after a successful appeal of a rejection), the mark will be published in the “Official Gazette,” a weekly publication of the USPTO.  Persons who believe that they would be harmed by the registration of the proposed mark have thirty days after the publication (or longer if an extension is granted), to file an “opposition.” Generally, an opposition is appropriate if the applicant’s use of the trademark is perceived by the opposer to create a likelihood of confusion with respect to the opposer’s trademark for the same or related products or services. If an opposition is filed, a formal trial-like proceeding will be conducted by the Trademark Trial and Appeals Board.  After the proceeding, the Board will make a decision to allow or deny registration of the opposed trademark.

Allowance of a Trademark

If the trademark is not opposed during the thirty-day opposition period, or if the applicant prevails in any opposition proceeding, the USPTO will register the trademark and, in about three months, it will issue a Certificate of Registration for the trademark. At this point, the trademark owner may begin using the trademark registration symbol ® with their goods or services. However, if the mark was filed based on intent to use rather than actual use of the mark, and no opposition was filed after its publication, the USPTO will instead issue a Notice of Allowance.  This gives the applicant six months from the date of the Notice of Allowance to either use the mark in commerce and file a Statement of Use, or request a six-month extension of time to file a Statement of Use.  After the filing of a Statement of Use, the Certificate of Registration will be issued.

Maintenance of Trademarks

For a trademark registration to remain valid, an Affidavit of Continuing Use must be filed between five and six years after registration, and also between nine and ten years after the date of registration. The registrant may file the affidavit within a grace period of six months after the end of the sixth or tenth year, but this option requires payment of an additional fee. The owner of the trademark should continuously use the mark in connection with the goods or services to avoid abandonment of the mark, since the failure to use a mark for any considerable length of time maybe be considered an abandonment and will lead to the loss of the registration. Trademark protection only comes through continuous use of the mark in commerce.

Finally, it is important for the trademark owner to preserve its rights by enforcing them and preventing the use of identical or confusingly similar marks by others with respect to the same or related goods or services. To accomplish this, a trademark owner may file oppositions of pending applications with the USPTO, notify infringers of its federal registration and trademark rights, or bring a legal action to prevent a party from using an infringing mark. Of course, regularly checking the Internet and the USPTO database for infringing uses is prudent. Also, there are companies that specialize in monitoring trademark usage which will inform the trademark owner of any similar uses which may be of concern.

For additional questions regarding trademark registration and defense, please contact us to speak with one of our intellectual property lawyers.

Disclaimer: This article is intended to convey general information only and does not provide legal advice or create an attorney-client relationship. No action should be taken in reliance on the information contained in this article and both the author and Solomon Bum Heymann LLP disclaim all liability in respect to actions taken or not taken based on any or all of the contents.

About the Author

Maria Tzokova, Esq. is counsel to Solomon Blum Heymann LLP.  Her practice focuses on trademark registration and defense, and commercial litigation and commercial transactions, including mergers and acquisitions, private placements, real estate, bank compliance, and international law. She is admitted to practice in New York and California.  Ms. Tzokova is also admitted as a counselor-at-law in her native Bulgaria, where she has served as Judicial Law Clerk at the Sofia City Court. She is fluent in Bulgarian and Russian.

About Solomon Blum Heymann LLP

Solomon Blum Heymann LLP is a commercial law firm based in New York City and the U.S. Virgin Islands.  The firm solves problems for domestic and international businesses, trusts, estates, partnerships, foundations, entrepreneurs, individuals, and their families, and provides skilled counsel for complex financial and legal transactions and disputes in the U.S. and abroad.  The firm’s core competencies include business and commercial law, international law, mergers and acquisitions, intellectual property, corporate compliance, asset protection, international and domestic tax, estate planning, real estate, and commercial and trust and estate litigation.

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US Virgin Islands Company Brief – Limited Liability Entities

By William L. Blum, Esq.

The U.S. Virgin Islands offers a number of different limited liability entities including the corporation, the limited liability company (LLC), the limited liability partnership (LLP), and the limited liability limited partnership (LLLP). In addition, both the corporation and the LLC may be formed as “exempt companies” which are not subject to tax in the USVI if they meet certain ownership and income source conditions. This brief will provide basic information on the two most popular entities, the corporation and LLC. It will also briefly describe the USVI tax exempt company and the exemption of USVI companies from international reporting requirements.

USVI Corporations

Corporations in the USVI are based on the standard Delaware model. In fact, the USVI corporation law is based on a prior version of the Delaware corporate law. A USVI corporation is formed by three incorporators who elect the corporation’s directors. There must be a minimum of one director for every shareholder of the corporation if there are three or fewer shareholders; otherwise the minimum number of directors is three. All directors must be individuals and they may reside anywhere. Nominee directors are permitted. A USVI corporation is also required to have three officers: a president (who must be a director), a secretary (who must not be the same person as the president), and a treasurer. The impact of these requirements is that at least two individuals must serve as corporate officers and directors even where there is only one shareholder; a typical pattern is for one person (often the shareholder) to serve as director, president, and treasurer, with a second person serving as secretary.

The minimum capitalization for a USVI corporation is $1,000 and a “standard” capitalization for a closely held corporation is 1,000 shares of no par value stock, both authorized and issued, with a stated value of $1.00 per share.

A standard set of documentation for a USVI corporation is articles of incorporation (these are filed with the government to form the company and are subject to public inspection), by-laws, and minutes or resolutions of the incorporators and board of directors. Where there are two or more shareholders, there may often also be a shareholder’s agreement. Corporations are required to hold meetings of shareholders at least annually.

Corporate reporting obligations for corporations include filing an annual report containing basic information, including the identities of officers and directors (but not shareholders), and an annual franchise tax return with attached simplified financial statements. The reports must be accompanied by payment of the annual franchise tax and are due June 30 of each year. If the corporation is an exempt company, only one report is required and financial statements are not required. An annual income tax return needs to be filed by a USVI corporation with the USVI Bureau of Internal Revenue; however, this requirement generally does not apply to corporations which elect to be treated as USVI exempt companies.

USVI Limited Liability Companies

The USVI adopted the Uniform Limited Liability Company Act in 1998. Therefore, a USVI LLC is very similar to those formed in other U.S. jurisdictions such as Delaware or Nevada. An LLC is formed by a single organizer who is required to file Articles of Organization with the government. An LLC may be governed either by its members (one or more individuals who own the LLC) or by one or more managers appointed by the members. Typically the members will enter into an operating agreement with the company which sets forth in detail all of the regulations by which the company is to be governed. The initial members and managers are also named in the operating agreement.

Most LLCs are operated by managers. Managers may be individuals or entities, including nominee managers. Optionally, an LLC may appoint officers who may have roles in operating the company.

Meetings of managers and meetings of members are optional.

An LLC must file an annual report every June 30 which contains basic information about the company and which must be accompanied by an annual fee. The report must include the names of any managers, but does not name the members (owners).

An LLC may file an election to be treated as a corporation for tax purposes. In the absence of an election, the members are taxed on the LLC’s profits; however if an election is filed, then the LLC itself is liable for any tax on its profits. There is an exception, however, for an LLC that elects treatment as an exempt company, since exempt companies are generally not subject to tax and have no tax return filing requirement.

USVI Exempt Companies

Either a USVI corporation or a USVI LLC may elect to be treated as a USVI exempt company by including a statement to that effect in its articles. If the exempt company is owned 90% or more by non-U.S., non-USVI persons, then it is eligible for tax free treatment on all of its income except any such income from U.S. or USVI sources. A USVI exempt company may not conduct business in the USVI, although it may do so elsewhere.

An exempt company must file a simplified annual report and pay a flat annual franchise tax of $1,000. The report and payment is due on June 30 of each year. No income tax returns are required so long as the exempt company does not have U.S. or USVI source income. Beneficial ownership of exempt companies is not required to be made public.

Tax Treaties, FATCA and CRS

The USVI has a separate income tax regime from the United States and its taxes are administered by the local USVI Bureau of Internal Revenue and not by the federal IRS. As a result, the USVI is not included under any U.S. tax treaties or Tax Exchange of Information Agreements (TIEAs) with other countries and it has no such treaties or agreements of its own. Similarly, FATCA (the federal Foreign Account Tax Compliance Act) does not apply to USVI companies or financial institutions so the automatic reporting to foreign governments required under FATCA does not apply to USVI companies or accounts. Likewise, neither the United States nor the USVI have adopted the Common Reporting Standards (CRS) of the OECD and therefore no reporting of accounts or beneficial ownership of companies is required in that context either.


For non-U.S. persons seeking an offshore holding entity that has a 100% tax exemption, and that is not subject to reporting to foreign governments, a USVI exempt company is a good option. The exempt company may take the form of a corporation or an LLC. A corporation might be selected because of the well-developed corporate law under which it operates or where there is a desire for a traditional corporate entity with stock certificates and with directors and officers who have well defined roles. An LLC on the other hand is a more modern entity with more flexibility in corporate governance. It also has the advantage of being permitted to be operated by a corporate manager, thus eliminating the need for any individuals to take direct roles in representing or operating the company.


Solomon Blum Heymann LLP, and its affiliated corporate services provider, Arbor International Services Ltd., specialize in creating and administering offshore and domestic structures for foreign individuals and companies, as well as U.S. citizens. Their principals are attorneys with decades of experience in the USVI and other popular domestic and offshore jurisdictions including Delaware, the Cayman, Islands, and the British Virgin Islands.

William L. Blum, Esq., is a New York and U.S. Virgin Islands-based tax and business lawyer with particular expertise in international taxation. His practice emphasizes domestic and offshore tax matters and structures, as well as estate and asset protection planning.  He served as counsel to the Governor of the U.S. Virgin Islands, and is the leading expert on the USVI’s status as a tax haven for non-U.S. persons. Mr. Blum has written articles for CCH, BNA and Euromoney on tax issues in the U.S. as well as the USVI, and he drafted numerous USVI regulations and statutes that relate to tax exemptions, including the USVI exempt company law.


Arbor International Services Limited (“Arbor”), a British Virgin Islands company, provides company fiduciary, regulatory and tax compliance services in the British Virgin Islands, Cayman Islands, Nevis, U.S. Virgin Islands, Delaware and a number of other U.S. and international jurisdictions. Arbor focuses its services on multi-jurisdictional trust and company management, and tax compliance, including assisting clients with the requirements of FATCA and the CRS. Through its licensed trust company in the U.S. Virgin Islands, Arbor offers trustee services. It also offers Delaware formation and registered agent services through its Delaware company, Arbor Delaware Services LLC.

Arbor provides services to clients in the British Virgin Islands, Cayman Islands, Nevis and other jurisdictions through qualified service providers established and licensed in the relevant jurisdictions.

New IRS Regulations on Reporting Obligations of Foreign Financial Assets by Domestic Entities

By Luca Cantelli, Esq.

On February 23, 2016, the Treasury Department published the final regulations for reporting of foreign financial assets by domestic entities.

As part of the Foreign Account Tax Compliance Act (FATCA), individual taxpayers and certain domestic entities are required to annually report to the U.S. IRS, on Form 8938, information about their foreign financial assets as defined by regulations, if the aggregate value of such assets is greater than $50,000 on the last day of the year, or above $75,000 at any time during the year.  The final regulations set out which domestic entities must file Form 8938.

Certain U.S. corporations (Delaware Corporations, for example), partnerships (Delaware Limited Liability Companies, for example), and trusts holding foreign financial assets are required to file form 8938.   A closely held corporation or partnership owned by a U.S. citizen or resident and whose main activity is to generate passive income, will be subject to the reporting requirement.  Likewise, a U.S. trust holding certain foreign financial assets for the benefit of a person who at any time during the taxable year is entitled to, or at the discretion of any person may receive, a distribution from the principal or income of the trust, will be required to file Form 8938.  Certain entities are excepted from reporting by the final regulations.  Entities that are not required to file an annual return with the IRS with respect to that taxable year are not required to file Form 8938.

Failure to report foreign financial assets on Form 8938 may result in a penalty of $10,000 and a penalty up to $50,000 for continued failure after IRS notification.

The regulations apply to taxable years beginning after December 31, 2015.

Our international tax attorneys are able to answer any additional questions regarding these new IRS regulations. Please contact us via our online form or call 212.267.7600.

Blum Video Interview Explains Structures for US Individuals Seeking Puerto Rico Tax Exemptions

Solomon Blum Heymann LLP partner William L. Blum conducted a video interview on January 20, 2016, with Cherif Medawar, a real estate investor, hedge fund manager, and host of educational retreats relating to real estate investing.  Mr. Blum’s interview, which took place at the Waldorf Astoria Hotel in New York City, was for the purpose of explaining Puerto Rico’s tax exemption programs known as Act 20 and Act 22.

In the thirty minute video (which may be viewed here in its entirety), Blum explains how the Puerto Rico tax exemption programs operate and he describes the potential benefits and pitfalls of participation in the programs as well as appropriate investment structures.  Blum’s explanations and examples are geared toward real estate investors but they have general applicability to various types of service related businesses that can be established or relocated to Puerto Rico and the U.S. Virgin Islands.

Blum regularly advises clients on the U.S. federal tax aspects of establishing Puerto Rico Act 20 companies and how U.S. taxpayers can take advantage of the 90% to 100% exemptions from federal taxes that the unique Act 20 and Act 22 tax exemption programs offer.  Blum’s background includes over thirty-five years of professional experience in U.S. territorial tax systems, including those in Puerto Rico and the U.S. Virgin Islands.  Blum, a former counsel to the Governor of the U.S. Virgin Islands, drafted several of the tax exemption laws in that U.S. territory.  He regularly represents taxpayers on federal tax matters including disputes with the IRS on matters relating to U.S. territorial residency and tax exemption programs.

What Borrowers Need to Know About New Mortgage Disclosure Rules

By Irina Shteynberg

The Consumer Financial Protection Bureau (“CFPB”) recently issued a new mortgage disclosure rule that combines mortgage disclosures established by the Truth-in-Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”) into a single rule known as TILA-RESPA Integrated Disclosure (“TRID”) rule.  The TRID rule has been in effect since October 3, 2015.

The goal of the TRID rule is to promote clarity during the loan process by providing borrowers with accurate and consistent information in connection with different loan and settlement cost options offered by their lenders.

The TRID rule applies to most closed-end consumer credit transactions secured by real property (e.g., all lenders making mortgage loans, including community banks), but does not apply to chattel-dwelling loans (e.g., loans secured by a mobile home or by a dwelling not attached to real property).

The TRID rule has replaced the four disclosure forms previously used under TILA and RESPA with two new integrated forms: a Loan Estimate (“LE”) and a Closing Disclosure (“CD”).  Here are details on the new forms:

  • The LE, issued by the lender, contains the loan amount, loan term, interest rate, and monthly payment, and states whether any of these terms can change and whether a prepayment penalty or a balloon payment is applicable to the loan. Additionally, the total closing costs (e.g., the lender origination fees, taxes, governmental fees, any deposits and down payments, and seller credits) are specified to reflect the amount of money due at closing. The LE must be received by the borrower within three business days of the receipt of the borrower’s loan application or placed in the mail no later than the seventh business day before closing.  Other than a reasonable credit report fee, lenders cannot charge any fees until the LE has been provided to a borrower who has been advised that the application can proceed.
  • The CD, issued by the lender or its settlement agent, reiterates the LE information and specifies the settlement costs. For example, the CD contains a table comparing the estimated closing costs on the LE to the final costs contained on the CD.  This allows the borrower to review the fees, terms and any changes and to question the lender about them.  The CD must be provided to the borrower at least three business days prior to closing.  Certain changes, such as an APR increase of more than 1/8 of a percentage point for fixed rate loans or 1/4 of a point for adjustable rate loans, will trigger a new CD form to be prepared and a new three-day waiting period to begin prior to closing.  The same is true if a pre-payment penalty is added to the loan or if there is a change to the loan product, for example, a change from a variable to a fixed rate mortgage.  For any other changes, a new CD will be required, but no new waiting period is triggered, and the CD can be provided at closing.  If there are changes after closing which result in a change to the amount actually paid by the borrower from the amount disclosed in the final CD, a new CD may be required.

The TRID rule provides that the borrower can waive the seven-business-day waiting period after receiving the LE and the three-day waiting period after receiving the CD if the borrower has a “bona fide personal financial emergency,” which requires closing the transaction before the end of these waiting periods. While this term is not defined, the CFPB’s example sets a high bar, as it involves a borrower facing an imminent foreclosure sale of his or her home unless loan proceeds are available to the borrower during the respective waiting periods.

It is important to note that the TRID rule imposes significant liabilities on lenders and does not allow for much leeway or flexibility.  Because lenders face substantial penalties for violating the TRID disclosure requirements (e.g., from $5,000 per day for a violation to $1 million per day for known violations) and also may be required to refund the excess payment when the borrower’s costs involved in obtaining the loan exceed certain parameters for the costs specified in the LE, lenders will need to exercise extreme caution in complying with the TRID rule by scrutinizing any variations between the LE and the CD.  Therefore, borrowers should be prepared for delays, as any variation may have the potential to cause lenders to delay closing rather than incur any violation.

In order to expedite the closing process, a borrower must maintain communication with his or her lender during the loan process and should provide all documentation and closing information, including homeowner’s insurance, as early in the process as possible.  For example, in order for the lender to meet the timeline for providing the LE, all documents and charges that are related to the transaction should be submitted to the lender at least 10 days prior to closing.  Furthermore, to avoid last minute delays in connection with the issuance of the CD, which must be finalized within three-day period to prior to closing, the borrower should promptly notify the lender of any changes to the transaction, so that the lender has sufficient time to determine their impact on the terms of the loan and to update the CD.

To speak to a real estate transaction attorney about the TRID rule or other concerns regarding residential and commercial transactions, please contact Irina Shteynberg at Solomon Blum Heymann LLP.  Our corporate and transactional lawyers are experienced in providing counsel to clients in the US, offshore, and abroad.

Arbor International Services – New Fiduciary Services Company Established by Solomon Blum Heymann

Solomon Blum Heymann LLP is pleased to announce its recent establishment of Arbor International Services Limited, an entity formation and fiduciary services company.  Arbor is owned and managed by Luca Cantelli, who joined Solomon Blum Heymann LLP in 2014, together with the partners of Solomon Blum Heymann LLP — Robert A. Solomon, William L. Blum, and Andrew W. Heymann.

Arbor will provide its clients with international company services, including company formation, registered agent, and director and secretary services in the Cayman Islands, the British Virgin Islands, Anguilla, Delaware and a number of other jurisdictions.  Arbor will also offer trust, fiduciary and succession planning services, as well as investment fund establishment and administration.

What distinguishes Arbor from other company service providers is its attention to client-based service and the cross-border tax expertise that it will supply in cooperation with its affiliates.  Arbor has the expertise to create unique solutions for international clients because it is owned and managed by legal and tax professionals with decades of experience in their respective practice areas.

The focus of Arbor is on multijurisdictional tax planning and tax compliance — a necessity in the rapidly changing fiduciary services industry.  Navigating the intricacies of tax laws of multiple jurisdictions without professional guidance can have adverse consequences for clients.  Arbor also will advise and assist clients with respect to the new regulatory and compliance burdens that they must bear, including, for example, those imposed by FATCA, CDOT, and the Automatic Exchange of Information under the Common Reporting Standard.   Arbor stands ready to assist clients in navigating through the complexities that these regulations have created.

In cooperation with Arbor International Services, the attorneys at Solomon Blum Heymann LLP look forward to assisting clients in the area of fiduciary services, as well as with tax and estate planning, with a further enhanced level of service.



FinCEN Targets Money Laundering in Luxury Real Estate Transactions

By:  Michael J. Semack, Esq.

U.S. Department of Treasury Crack Down on Large Cash Real Estate Purchases in Manhattan and Miami by Shell Corporations or Other Entities

In its continuing efforts to curtail money laundering activities, the U.S. Department of Treasury has now turned to scrutinizing large “all cash” real estate purchases (i.e., those without bank financing) in certain U.S. cities.  With the proliferation of international “all cash” purchases of high end real estate in New York City and Miami, Florida, and the corresponding concern of government officials that these transactions may be used for illicit money laundering purposes, on January 13, 2016 the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury issued a Geographic Targeting Order (“GTO”) that will temporarily require certain U.S. title insurance companies to identify the natural persons behind companies which pay “all cash” for high-end residential real estate purchases in the Borough of Manhattan in New York City, and in Miami-Dade County, Florida.

For this initial GTO, FinCEN is requiring that “all cash” real estate purchases by corporations or other entities in excess of $3,000,000 in Manhattan and in excess of $1,000,000 in Miami-Dade County will require title insurance companies to identify and make disclosures regarding the “true owners” of these entities. These disclosures will then be utilized by law enforcement officials charged with safeguarding against improper money laundering  activities.

This initial GTO becomes effective as of March 1, 2016 and is scheduled to expire on August 27, 2016, although there is a possibility that such directives may be extended or made permanent by further rulemaking.

As an international law firm that specializes in domestic and international corporate, transactional, and tax matters, Solomon Blum Heymann LLP has extensive experience with assisting foreign purchasers in all aspects of U.S. real estate transactions.  For questions regarding compliance with this GTO, or generally with the purchase by foreign persons of real estate in the United States, please contact Michael J. Semack or Robert A. Solomon at (212) 267-7600.

Ladislaw’s Article on Gifts from Covered Expatriates Published in Tax Notes

Tax Notes: Gifts from Covered Expatriates

Solomon Blum Heymann tax partner Robert Ladislaw’s article entitled “Proposed Regulations on Gifts and Bequests from Covered Expatriates” was published in the December 7, 2015 issue of the well-known American tax periodical, Tax Notes.

Ladislaw’s article explains in detail the Proposed Regulations published recently by the Internal Revenue Service to implement a new tax enacted in 2008 on the recipients of gifts from “covered expatriates.”  Although the tax has been on the books for over seven years, it does not become payable until after the regulations are finalized, which will not occur until 2016 or later.

As Ladislaw explains, notwithstanding Congressional statements to the contrary, the new tax is designed to discourage expatriation for tax purposes of American citizens (as well as certain departing “Green Card” holders), a practice that has become more and more popular in recent years.  American tax expatriates are already subject to an “exit tax” which applies to income and certain appreciated assets that the expatriate owns on the date of expatriation.  The new tax on gifts and bequests adds to the tax burden of such individuals or, more specifically, their families, as it is designed to substitute for the gift or estate tax that a U.S. citizen would normally be liable for upon making a gift.  Instead the tax applies to the recipient of the gift or bequest if that person is a U.S. taxpayer – a unique arrangement, as historically the United States’ transfer taxes have always applied to donors and not donees.

Ladislaw’s article delves into the intricacies of the new tax and regulations, including the definitions of “covered expatriates” and “U.S. recipients”, as well as the provisions detailing the types of gifts and bequests that are covered.  He also discusses the rules that are applicable when foreign trusts are used as the vehicle through which gifts are made, as well as the tax computation rules.

Solomon Blum Heymann LLP conducts a sophisticated international and domestic tax and estate planning practice designed to advise U.S. citizens, foreign persons, and business entities on tax issues including those relating to income taxes, estate and gift taxes, territorial tax exemptions and offshore tax structures, FATCA, and many other related subjects.   Solomon Blum Heymann attorneys involved in this practice in addition to Ladislaw, include partners William L. Blum and Andrew Heymann, as well as counsel Luca Cantelli.