The USA will not provide its ‘reciprocal’ FATCA partners any information about...

[FATCA]

In case you didn't know, here's some good information. I can't confirm if this is 100% true but I believe the writer analyzed the FATCA agreement texts. For example, this one: https://home.treasury.gov/system/files/131/FATCA-Agreement-Sweden-8-8-2014.pdf

The USA will not provide its ‘reciprocal’ FATCA partners any information about the following types of accounts held at US financial institutions:
- Depository (i.e., cash) accounts held by entities. This includes entities that are resident in the FATCA partner country, or,
- Non-cash accounts (e.g., brokerage accounts), whether held by individuals or entities, even those that are resident in the FATCA partner country, unless the accounts earn so-called US-source income.
Furthermore, the US will not provide information to its ‘reciprocal’ FATCA partner about the “controlling” persons of any entities having accounts in US financial institutions. This is so regardless of whether the entities are from the reciprocal partner country or from third countries, and even if those entities are owned and controlled by residents of the reciprocal partner country.

I'd like to ask some questions about this.

1. If you have a margin account at a broker, that's a non-cash account? I suppose yes
2. If you get paid dividends from stocks, that's US-sourced income? I suppose yes
3. If you avoid holding dividend paying stocks, you wouldn't have US-sourced income for this category, right? I suppose yes
4. If you get paid interest on the cash sitting in your account, is that a US-sourced income? I assume yes. Even if its like $10 per year? So this $10 would make US provide information about your account (and what's in the account) to the FATCA partner country? I suppose yes
5. How can you avoid getting this interest so you wouldn't have US sourced income? This means US wouldn't provide information to FATCA partner country.
6. If you talk to your broker, can they change the interest to 0%?

7. Can a US LLC (entity instead of individual) own a US bank account? So you can essentially have a cash account.
8. I assume "hold" means the same thing with "own"?

These questions might be more interesting
9. Do US brokers (or banks) get notified by countries about where people reside?
10. Will my US broker (or bank) know that I reside in country X, if X knows I officially reside in X?
11. If I don't interact with my US broker (or bank) from X, and if I don't tell my broker I live in X, can my broker know that I live in X? (By not interacting, I mean no debit or credit card usage in X. No logins from X. No call or text interaction from X. No apps on the phone)

12. If you own US LLC, you have to fill out 1120 and 5472 every year and send them to the IRS. Can those forms tell your US broker (or bank) that you live in X?
13. What if you say you don't live in X in those forms? Maybe you're in X only temporarily for a few years and maybe your actual permanent residence is NOT in X. In that case, I suppose this would be ok?

I'm just trying to learn the current system before it changes. I also would ike to learn the jargon. I'd really appreciate it if you can help me understand

 

[extremedox101]

michael reader .....??​

 

[fshore]

4. The banks only notify irs about the account if the account earned at least $10 interest. That's also why fatca doesn't cover accounts with less than $10 earned (as irs/the government doesn't know about them).

 

[FATCA]

michael reader .....??​

I don't understand what you mean

4. The banks only notify irs about the account if the account earned at least $10 interest. That's also why fatca doesn't cover accounts with less than $10 earned (as irs/the government doesn't know about them).

Thanks for sharing. To fix this problem, can one split his accounts so each one earns <$9?

 

[fshore]

I don't understand what you mean


Thanks for sharing. To fix this problem, can one split his accounts so each one earns <$9?

It might be $10 across accounts in the same bank. Note that this is for banks, not brokers.

 

[OffshorePhantom]

I don't understand what you mean


Thanks for sharing. To fix this problem, can one split his accounts so each one earns <$9?

Just open a US account that does pay 0% interest on deposits. That way technically you can keep even $100M without earning any interest thus avoiding the reporting.
Also, this applies only to individual accounts. LLC/Companies depository accounts are not reported as per the bilateral facta agreements.

 

[extremedox101]

I don't understand what you mean

https://www.offshorecorptalk.com/search/899228/
i see something in common

 

[Marzio]

LLC/Companies depository accounts are not reported as per the bilateral facta agreements.

Foreign owned LLC bank account details are not shared with the tax residency country of the beneficial owner?

 

[OffshorePhantom]

Foreign owned LLC bank account details are not shared with the tax residency country of the beneficial owner?

No, depository account information is shared only for individual accounts and if they earned more than $10 of interest per year.
You can read it in every FACTA bilateral agreement. LLC depository bank account information is not shared as per agreement.

Example: https://home.treasury.gov/system/files/131/FATCA-Agreement-Germany-5-31-2013.pdf

The term “German 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 the Federal Republic of Germany 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 the Federal Republic of Germany, including entities that certify that they are resident in the Federal Republic of Germany for tax purposes, with respect to which U.S. source income that is subject to reporting under chapter 3 or chapter 61 of subtitle A of the U.S. Internal Revenue Code is paid or credited.

Depository accounts (checking and saving accounts) are shared only for individuals.

Funny thing is that on the other side Germany for example has to share all the bank accounts of US individual without the $10 interest note, so it is a bilateral agreement but not very equal on both sides

This shows how US has the power to do what it wants and in my option has added those loopholes in order to retain the offshore tax-heaven advantages that it has.

I have also read an article (EU hits out at US for ‘lack of reciprocity’ under Fatca) where it says that US hasn't reported any accounts even if it signed those bilateral agreements.

 

[Marzio]

So a German with a single member LLC that receives dividiends or royalties payments in a US bank account is not reported? Man this is really hard to believe even if i read the agreement.

Maybe when they say "the account is held by an individual resident in the Federal Republic of Germany" they mean that the beneficial owner is an individual resident in the Federal Republic of Germany?

In that case the US bank account is for the LLC but the beneficial owner is German.

 

[OffshorePhantom]

No, individual refers to an individual account (personal account, i.e. I open an account in my personal name in a US Bank), not a beneficial owner.
For entities (like a US LLC), it clearly states that only the non-depository account of some specific kind are reported.
The agreement also has a definition for "Controlling person" but they do not use it for German Reportable account.

They use it for US Reportable accounts:

The term “U.S. Reportable Account” means a Financial Account maintained by a Reporting German 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.

That is why previously I said it is incredible how they want all whole information from other countries but they share only a little. The bilateral agreement in theory should have the same definition both for German Reportable Account and US Reportable Account (in terms of who is reported) if it was really bilateral, while in reality it isn't.

It is hard to believe but it is what the agreement says.
Also in the second article I linked, it clearly states that one of the loopholes that US has is that it does not report the beneficial owner.

Clearly, you have to file forms 5472 and 1120 to IRS (every year) for foreign-owned LLC stating all the transactions between you and the LLC, this document may be exchanged from IRS to the beneficial owner country but there is no agreement or treaty stating it and I frankly doubt IRS shares it seeing how the system currently works.

 

[lavel]

4. The banks only notify irs about the account if the account earned at least $10 interest. That's also why fatca doesn't cover accounts with less than $10 earned (as irs/the government doesn't know about them).

so if you are serious you will get reported.. if you have less than $10 in interest in the account you don't need any account.

 

[FATCA]

It might be $10 across accounts in the same bank. Note that this is for banks, not brokers.

Oh ok, then one should do this across multiple banks.
Do brokers snitch on clients even if interest is like $2 per year?
I can't find any brokers that have 0% interest. Seems like they purposely pay some low interest so clients can be reported

 

[JosephLL]

"For entities (like a US LLC), it clearly states that only the non-depository account of some specific kind are reported"

What can those be?

 

[fshore]

However a llc is disregarded and taxed as you personally. If you have a brokerage account for the llc they will report interest income to you personally to IRS.

 

[FATCA]

However a llc is disregarded and taxed as you personally. If you have a brokerage account for the llc they will report interest income to you personally to IRS.

Why don't they do the same for LLC bank account? That's also pass-through, isn't it?

Seems like the best solution as a work around is to get 0% interest. But how?

 

[OffshorePhantom]

"For entities (like a US LLC), it clearly states that only the non-depository account of some specific kind are reported"

What can those be?

This is the definition of a Depository Account:

The term “Depository Account” includes any commercial, checking, savings, time, or thrift account, or an account that is evidenced by a certificate of deposit, thrift certificate, investment certificate, certificate of indebtedness, or other similar instrument maintained by a Financial Institution in the ordinary course of a banking or similar business. A Depository Account also includes an amount held by an insurance company pursuant to a guaranteed investment contract or similar agreement to pay or credit interest thereon.

In the agreement I linked it also present other definition like Custodial Account, etc. I do not know if a brokerage account falls in the definition of Depostiory Account, in the definition it refers also to investment certificate but I am not an expert here to say what it includes and what it doesn't.

 

[fshore]

Why don't they do the same for LLC bank account? That's also pass-through, isn't it?

Seems like the best solution as a work around is to get 0% interest. But how?

Interest from a LLC bank account will also be reported by the banks on the 1099-int form.
https://www.irs.gov/forms-pubs/about-form-1099-int
It's relatively easy to open a non interest bearing bank account.

 

[FATCA]

It's relatively easy to open a non interest bearing bank account.

Can you elaborate?
Its easy to open an account but they all have interest like 0.1 or 0.01 or something

 

[Golden Fleece]

Can you elaborate?
Its easy to open an account but they all have interest like 0.1 or 0.01 or something

There are plenty of banks in the U.S. that offer zero interest bank accounts. Whether you can open one as a foreigner is another question. It is probably best to first compile a list of banks that most easily open accounts for foreigners -- and then identify those on the list that offer zero interest bank accounts to prevent wasting time.