The Rise and Fall of Malta Pensions: Taxpayer Positions, IRS Enforcement, and Remaining Solutions




Imagine a world where you could create a retirement plan in a foreign country with which you have no affiliation, contribute appreciated property to such plan without triggering immediate taxation, face no limitations on the contributions you can make, defer taxes on the accretion inside the plan, start taking distributions as early as age 50, and avoid tax on the majority of the distributions from the plan. Many U.S. taxpayers, relying on flexible interpretations of the bilateral treaty between Malta and the United States, took these positions for several years. The IRS put its proverbial foot down in late 2021, announcing that taxpayers were misconstruing the treaty, and that the IRS was committed to pursuing those who participated in or promoted such abuses. This article explains general U.S. tax treatment of foreign pensions, key aspects of the treaty, examples of taxpayers claiming auspicious results, terms of the recent Competent Authority Arrangement designed to halt future activity, declarations by the IRS of severe enforcement actions, and resolution options still available to taxpayers.

 Read the full article here.

About Hale E. Sheppard
HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

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