nun

For anyone who is a US green card holder or citizen who has assets overseas I advise you follow the new FATCA laws that the IRS is going to implement. These will impose reporting requirements and penalties above FBAR on you and your foreign financial institutions. Here is a letter I sent to my Senators recently.

Dear xxxxxxx

I'm writing to you about my concerns regarding the Foreign Account Tax Compliance Act (FATCA) and how it will affect the 5 million US citizens resident abroad.

I have recently been making provisions to move to the UK to look after my 86 year old mother as her health is beginning to fail. As part of that planning I have researched my IRS and the HMRC (the UK equivalent) tax reporting requirements. The regulations are complicated, and if any area of US taxation needs simplification it is the international aspects, however, regulations like FBAR and PFIC, while onerous, do not actively hinder daily life for the US expatriate as FATCA will.

FATCA will impose reporting and tax with holding regulations on Foreign Financial Institutions (FFI) with US clients that will probably result in the denial of local banking services to US expatriates. Combine that with the refusal of US banks to provide accounts for US citizens living abroad and the non-resident is left in a denial of banking service "Catch-22" situation.

There must be a way to make FATCA a more precise tool for preventing tax evasion rather than it's current sledge hammer incarnation that assumes all US citizens with foreign accounts are trying to evade their tax responsibilities. One change I would like to see is the exemption of FFI's from the reporting requirements with respect to their US clients who can show they they are a bona fide resident of a foreign country. The US citizen would still be required to report foreign accounts above some dollar amount to the IRS, but the local bank would have no reason to deny them banking services.

Five million potential voters would certainly appreciate some action and understanding on this matter.

ian-mstm

At this point in time, FATCA is effective after 12/31/2012 and only if you have $50,000 or more in the account. At any rate, the US government can't force a foreign government to comply with US law.

Ian

Giantaxe

It's not that simple though. FATCA authorizes penalties on the banks themselves if they don't comply by imposing a 30% withholding on income produced on any investments the bank may have in the US. All the major UK banks have interests in the US. I can well see foreign banks dumping their US customers if they conclude it's simply too onerous (and imo an outrageous example of extra-territorial law) to comply. I also wonder whether it would actually be illegal for banks in EU countries to comply? This is going to be a mess.

ian-mstm

Ah, good point. I hadn't fully thought that through!

Ian

nun

The congress didn't think it through either. After getting input from lots of international banks etc I've sen quotes from the IRS that they are going to implement FATCA to minimize its impact on US citizens. So they might just put it in place for big accounts in the usual tax havens that have poor reporting.

I'll want to have a local account and some fixed income in the UK in GBPs so that I can even out currency fluctuations so FATCA might become an issue. If it does I'll probably use NS&I and make the UK government do the reporting to the IRS....I wonder how they'd feel about that. Actually those accounts might be exempt