Foreign Account Tax Compliance Act (FATCA) - US Citizens

[JohnLocke]

In March last year, the US President signed the HIRE Act, thus paving the way for the implementation of the Foreign Account Tax Compliance Act (FATCA). In our first brochure “Mastering the challenges of the new US regulations”, we presented the fundamental considerations which were necessary following the introduction of the FATCA regulations.
We also explained how FATCA works, and how participating foreign financial institutions (“participating FFIs”) will be affected as from 2013.


Because the text of the HIRE Act functions within the meaning of a framework legislation and the specific guidance are still to be drawn up that there is considerable uncertainty among financial intermediaries. The focus is particularly on the question of whether or not a financial service provider consitutes an FFI as defined under the FATCA regulations and must make appropriate analysis. On the other hand, there are the issues of identifying customer and US accounts and the treatment of withholdable payments. Finally, there also appears to be widespread uncertainty concerning the question of what – if any – alternative strategic options an FFI has.


The US Internal Revenue Service (IRS) shed some light on this issue by releasing Revenue Notice 2010–60. This notice deals in particular detail with the issues concerning the identification of customers and US accounts as well as

Learn more; Foreign Account Tax Compliance Act (FATCA)

 

[dwilson]

This is bad news for US citizens. I've been monitoring this for sometime now! Effective Jan 2 2013 FFIs will have to disclose account information pertaining to US citizens to the IRS. This includes company accounts with US account holders. There is a penalty of 30% holding tax applied to non-compliant account holders. The count down is on! :smok:

 

[ItemNine]

so does this mean that any US citizen with say an offshore company in the Seychelles and an offshore bank account in Cyprus would be reported to the IRS?

 

[dwilson]

Unfortunately, this could very well be the case. I specialize in Caribbean offshore jurisdictions so my comments will only be based on the reaction in the Caribbean, but please keep in mind that this affects all Foreign Financial Institutions (outside of the USA). Caribbean banks are now making reporting provisions to comply with this new legislation.


It would appear that Uncle Sam will most likely penalize the banks themselves by freezing or holding assets in US correspondent bank accounts for FFI. This is why it is important to have a thorough understanding of the risks of offshore business before engaging in it and to keep up-to-date with regulatory changes.


There must be a change in mindset from offshore consumers from seeking "no tax paying solutions" to reducing their tax liabilities. It is possible to maintain an offshore company and declare it to the IRS as a tax reduction tool. This is the correct approach rather than hiding in the dark.


Let me know if you have any further questions.

 

[JohnLocke]

There must be a change in mindset from offshore consumers from seeking "no tax paying solutions" to reducing their tax liabilities. It is possible to maintain an offshore company and declare it to the IRS as a tax reduction tool. This is the correct approach rather than hiding in the dark.

I agree, this is actually advisable for any offshore company solution. This hit and hide game many think they play will not bring anything good.

 

[ItemNine]

I had read this on a website that was mentioning FATCA the other day and was wondering if it is true...


" There is also a de-minimis exemption where U.S. persons who maintain no more than US$50,000 in accounts with the same institution will not be affected by the new disclosure requirements."


does anybody know anything about this?

 

[ItemNine]

I should have mentioned in the above post that i also read in another article regarding the FATCA that The disclosure requirements are not required for citizens who have under $50,000 in foreign accounts. that's why i was asking in my previous posts.


it just seems to me like they are going after the bigger fish that are trying to hide money offshore.

 

[dwilson]

I can't say that I am aware of the provisions that you quoted. However, consider that the mandate of the IRS is to investigate or pursue any amount of taxable principal and any instances of non tax compliance pertaining to US persons. It does make sense that the IRS would pursue large amounts first, but that would in no way cause or exclude discoveries of smaller instances.


The short version of my recommendation is this:


US persons must be transparent with the IRS regarding their offshore solutions and they need to ensure that their solutions are and remain tax compliant. :coffe:

 

[fundmanager]

The short version of my recommendation is this:
US persons must be transparent with the IRS regarding their offshore solutions and they need to ensure that their solutions are and remain tax compliant.

Indeed bad news for US citizens, I'm happy Im not in that boat:evil:

 

[fionix]

The short version of my recommendation is this:
US persons must be transparent with the IRS regarding their offshore solutions and they need to ensure that their solutions are and remain tax compliant. :coffe:

In the case a US person don't want to live in the USA any longer, how would it change the situation, do you know that?

 

[chvoon]

I totally agree that OFCs should not be used as tax evasion tool. My question is what if the FFI has no correspondents bank account in US?


There are a lot of countries that are moving away from USD settlement i.e. China. Now Malaysian are use RMB to settle payment with their China suppliers. If the trend keep up the pace, they will not need and correspondent bank in US. People who deposit with these banks will have a better access to protecting their wealth from devaluation of USD due to sovereign debts, QE or whatever economic indicator. What is you take on this?