Danoz

Ahhh but isnt that the privilege afforded to you for having at some point been a citizen of the greatest country on Earth?



I am preparing to move from UK to US and have been speaking to some US Tax consultants (i am not paying for it), it didnt sound overly complex in terms of what needs to be declared. How it exactly needs to be declared I am yet to find out.

But one question I do have is, does FATCA actually change any of this? I thought FATCA was more aligned to foreign FI's identifying US persons and their assets and withholding tax to pay the required tax based on a citizen taxation system. Essentially the agreements are in place to make foreign institutions and Government reporting bodies do the IRS's job.

I am guessing that many of the good posts on here so far are outlining many of the pitfalls of the US tax system for the unwary, especially if many are coming from UK where the majority of people will never fill out a tax form (the privilege of paying ridiculous high tax rates on small earning brackets).

Hotscot

It concerns me because it's not just Financial Institutions, they also have a vague, "Foreign stock or securities not held in a financial account."

I have an investment in a company I used to work for although no stock was issued and I am less than 10% owner, and not on the board.
The investment will be evaluated when the company is sold in a couple of years and there's no mechanism for evaluating the assets before that.

I've asked several financial advisers if I should be reporting this and their responses have ranged from "I don't think so" to "I don't know."

Since I cannot provided the information asked for on form 8938 I'm tending not to mention it but I shall pay the Capital Gains tax applicable when I realize my gains. If any. Could go up or down.

Bit worried though about the lack of clarity and potential penalties.

theOAP

You're correct. As nun and robin pointed out in previous posts, the requirement has been in place for two years. If the US Person has been filing returns as required, and declaring assets if required, there is no change for them once FATCA is up and running in mid 2014 as far as their individual reporting goes.

What will happen to accounts is unknown at this time. Right now, everything is speculation. Will US Person accounts be segregated by some FFI's, will their interest rates on savings be reduced in order to cover the FFI's costs; it could happen, but hopefully it won't.

The main concern for expats is their financial info will now be available on many more computers. If you think the Luddite movement was radically progressive and liberal, then your data being stored around the world on multiple computers isn't reassuring.

But, who knows. Probably nothing will change, but right now it's all speculation.

Danoz

Just downloaded the FATCA regs to have a look at the reporting requirements and you are right a fair bit of information disclosure around balances, interest, but also importantly account information (come handy for subpoenas and the likes).

Whilst looking at this came across the UK FATCA across crown dependencies regs. There goes places like Jersey, IOM etc....

I am guessing that the average investment savvy person will begin looking for other jurisdictions to park their funds in (rightly or wrongly)

robin1234

Not sure what you mean by " the average investment savvy person." Presumably investment savvy people comply with the law anyway, so what has changed for them? I'm a US citizen living in the US, I have had my pound sterling bank accounts in the IoM for years. As far as I know, going back many years, IoM has complied with US regulations, to the extent that UK banks have steered their US customers to IoM subsidiaries for bank accounts.

Danoz

People typically bank offshore for tax advantages, not for the fun of it. As a result, if they feel their tax advantages are going to be impacted, then they will tend to look to invest their funds elsewhere, where they will still get tax advantages.

This doesnt presume that they are automatically doing something wrong, as tax advantages and tax evasion are two completely different things. E.g. if i pay income tax on my income, then wire it offshore for investment for returns are taxed a nominal rate, verse someone who sets up an offshore beneficial ownership structure and gets paid through this offshore whilst working onshore, are two different things.

A lot of people are also paranoid about their information being shared (as has already been suggested here), so will move their funds away from information sharing jurisdictions to ones that do not.

but when you also now have situations like the UK tax system that indicates you are only non domiciled if you meet certain conditions (one being full time employment i another justification), what do you do if you have legitimately invested into IOM, you then move country as a spouse but no longer are working, why should you be forced to pay tax on your returns to HMRC because IOM now must report to them?

FATCA is different, that is tax evasion.

Sally Redux

US citizens have to pay tax on worldwide income.

Danoz

Yes we know

robin1234

Yes, yes, but you didn't answer my question. What has now changed? Why is IoM now less attractive?

As for IoM and HMRC, wasn't there always* a European Tax Directive that IoM institutions, under IoM law and regulations, complied with?

*for the last several years, that is

Danoz

Yes, sorry bad example, so replace IOM with Jersey.

What has changed... as outlined in earlier posts in this thread, governments are looking for additional ways to fill the coffers. They are not trying too hard to go after big business, so are concentrating on the average citizen and wealthier individuals to collect taxes from. You are seeing changes in the tax regimes across the western world to find additional ways of ensuring taxes are liable. This is including additional treaties (FATCA is only one example (to keep the thread on topic)), ways of declaring somebody tax domiciled etc.... this is what is changing.

My comment about investment savvy people is, that they will look to move their funds (some from a legal perspective, others from an ongoing evasion perspective) to other jurisdictions and tax regimes. This is not prediction, this is what is already happening. Flight of funds is going on in a big way.

nun

For the US citizen FATCA, FBAR etc does not change liability to taxation, they are just reporting issues. A US citizen who pays tax as they should gains nothing by moving money from one place to another as far as their US tax liability is concerned. It has always been the responsibility of the tax payer to file correctly and pay the tax that is due. I have long been amazed at the lax domicile rules in the UK and the ability of people to move money offshore and avoid taxation. Changes to UK law that plug these loopholes is a good thing IMHO.

Orangepants

I am writing a paper re: FATCA from a FFI perspective ie Cayman domiciled, US managed/sponsored hedge funds - yesterday the Cayman Islands and the UK signed a 'FATCA'-type intergovernmental agreement (IGA), preparing the way for Cayman to automatically share financial information with the UK on UK taxpayers who hold Cayman Islands accounts.
So now not only do the fund administrators have to modify their systems to take into account searching for US indicia but now they must look for UK indicia. Good news is the model looks materially the same as the US IGA.

FATCA just has a life of it own! Cash cow for KPMG etc.. knew I should have stayed down there..

robin1234

So long as the wealth trickles down from KPMG etc., it'll become a perpetual motion machine and we'll all be rich, forever.

celticgrid

It isn't primarily a case of "ensuring taxes are liable", it is about ensuring that liable taxes are collected. There's a difference.

The issue about flight of funds is overplayed. The same concerns were raised about the European Union Savings Directive from some years back, but despite lots of doom and gloom there was very little movement of funds. It certainly wasn't then, and probably isn't now, "going on in a big way".

theOAP

There was a seminar at Pepperdine University Malibu about 8 months ago. One of the topics was FATCA. Main room for participants and the panels, a second room for students to observe. During a pause after the FATCA discussion, the moderator did an aside to students, telling them if they wanted to get into the 'hot' job market for the next 20 years, forget Wall Street and look for FATCA compliance positions. There was a video on the Pepperdine site of the seminar and the exchange.