taxes - implications of FATCA on non residents
#1
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taxes - implications of FATCA on non residents
Hi All
Have been searching around for a while and could not find a good answer to this.
I currently live and work in Switzerland, where I have my savings and investments. I now will move to live and work in the US (as of January) and the Swiss banks are telling me they have to close my accounts, they do not want any trouble. However, my swiss broker says I can keep my account open with them.
I have had a consultation session with E&Y and they strongly advised on bringing all investments and savings to the US, to avoid any issues.
any ideas what happens, tax wise if I do really bring it all to a US bank and broker?
any experience from anyone with the new rule,FATCA?
any experience anyone having offshore accounts in places like Singapore?
Have been searching around for a while and could not find a good answer to this.
I currently live and work in Switzerland, where I have my savings and investments. I now will move to live and work in the US (as of January) and the Swiss banks are telling me they have to close my accounts, they do not want any trouble. However, my swiss broker says I can keep my account open with them.
I have had a consultation session with E&Y and they strongly advised on bringing all investments and savings to the US, to avoid any issues.
any ideas what happens, tax wise if I do really bring it all to a US bank and broker?
any experience from anyone with the new rule,FATCA?
any experience anyone having offshore accounts in places like Singapore?
#2
Re: taxes - implications of FATCA on non residents
FATCA is really an issue for foreign financial institutions being in compliance with IRS regulations regarding US citizen and US resident tax payers. Many just don't want the trouble of being in compliance so they will close the account. The issues for the individual come out of the IRS code and how it taxes foreign investments and your need to file FBAR are 8839 informational forms.
So what type of investments, pensions etc do you have in Switzerland?
So what type of investments, pensions etc do you have in Switzerland?
#3
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Re: taxes - implications of FATCA on non residents
You know, the typical...
Savings account, broker account for trading as well as mutual funds /ETFs.
The corporate tax advisor is, as expected, advising to declare all to the US government as they say I will not be taxed at all for just declaring those investments, but rather I would be taxed when I make income out of them....
Savings account, broker account for trading as well as mutual funds /ETFs.
The corporate tax advisor is, as expected, advising to declare all to the US government as they say I will not be taxed at all for just declaring those investments, but rather I would be taxed when I make income out of them....
#4
Re: taxes - implications of FATCA on non residents
You know, the typical...
Savings account, broker account for trading as well as mutual funds /ETFs.
The corporate tax advisor is, as expected, advising to declare all to the US government as they say I will not be taxed at all for just declaring those investments, but rather I would be taxed when I make income out of them....
Savings account, broker account for trading as well as mutual funds /ETFs.
The corporate tax advisor is, as expected, advising to declare all to the US government as they say I will not be taxed at all for just declaring those investments, but rather I would be taxed when I make income out of them....
#5
Re: taxes - implications of FATCA on non residents
I currently live and work in Switzerland, where I have my savings and investments. I now will move to live and work in the US (as of January) and the Swiss banks are telling me they have to close my accounts, they do not want any trouble. However, my swiss broker says I can keep my account open with them.
Yes you might have to fill in 8621s and/or 3520s depending on what investments you have in Switzerland or elsewhere, but that is your problem, not their problem. (8621 is pretty easy to do, 3520 can be a pain).
Your Swiss broker sounds a bit wrong, unless he's SEC registered you can't use him anymore once you become tax resident in the US. Well not for US investments anyway. Although you can keep any investments you had already (as no brokerage takes place).
#6
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Re: taxes - implications of FATCA on non residents
I have no idea why E & Y are suggesting you bring all of your investments to the US. This is a risky investment choice and nothing to do with tax advice.
#7
Re: taxes - implications of FATCA on non residents
There is nothing intrinsically more risky in moving the money to the US.....that will depend on the types of investments made.
#8
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Re: taxes - implications of FATCA on non residents
so one question, as I did not get it quite clear from the tax advisor: as a non US citizen but as a US resident, if I declare my investments (as I am suppossed to anyway)when I get in the country, am I expected to pay extra taxes on those investments just for having them?
or just on the income/dividends?
what about the implications on the overall world wealth/tax/whatever its called?
or just on the income/dividends?
what about the implications on the overall world wealth/tax/whatever its called?
#9
Re: taxes - implications of FATCA on non residents
so one question, as I did not get it quite clear from the tax advisor: as a non US citizen but as a US resident, if I declare my investments (as I am suppossed to anyway)when I get in the country, am I expected to pay extra taxes on those investments just for having them?
or just on the income/dividends?
what about the implications on the overall world wealth/tax/whatever its called?
or just on the income/dividends?
what about the implications on the overall world wealth/tax/whatever its called?
Generally countries have tax treaties that avoid you being taxed twice on income and gains. These treaties provide exclusions and mechanisms for applying and allowing foreign tax credits. The basic result is that you'll end up paying the higher tax rate of the two countries and generally the residence country has primary taxation authority, but there are lots of subtleties. So if the US has a 20% tax rate and Switzerland has a 30% rate you'd end up paying 20% to the US and 10% to Switzerland. That's a gross simplification, but shows the principle.
Once are where the US taxes punitively is with foreign pooled investments like mutual funds. These come under PFIC rules and are to be avoided like the plague.
#10
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Joined: Jul 2012
Posts: 122
Re: taxes - implications of FATCA on non residents
so one question, as I did not get it quite clear from the tax advisor: as a non US citizen but as a US resident, if I declare my investments (as I am suppossed to anyway)when I get in the country, am I expected to pay extra taxes on those investments just for having them?
or just on the income/dividends?
what about the implications on the overall world wealth/tax/whatever its called?
or just on the income/dividends?
what about the implications on the overall world wealth/tax/whatever its called?
Effectively, all the Swiss banks are dumping any clients with ties to the US. It's a mess. Thank you, Chuckie Schumer.
#11
Re: taxes - implications of FATCA on non residents
Just having an asset doesn't incur a tax liability generally, but it maybe considered a 'red flag' depending on the amount and your income.
Red Flags are certain things that are 'triggers' for further inquiry. There is no hard and fast rule, but say you have a taxable income reporting $20,000 USD in salary every year, but then you have $2.5 million in Switzerland, $1.5 million in Abu Dhabi, $3.5 million in the Caymans, etc. These FBAR and FATCA reports on these assets would be a 'red flag' that your $20k in annual income is not quite accurate, and maybe an audit or other investigation is in order.
Having money in known 'tax havens' is just a mark against you when they are adding up red flags. There's also the paperwork hassle in keeping upto date with the balances and any interest income incurred such that if you don't really have a need for an account in that country, I think many financial advisors would suggest you consolidate to reduce the paperwork burden.
Red Flags are certain things that are 'triggers' for further inquiry. There is no hard and fast rule, but say you have a taxable income reporting $20,000 USD in salary every year, but then you have $2.5 million in Switzerland, $1.5 million in Abu Dhabi, $3.5 million in the Caymans, etc. These FBAR and FATCA reports on these assets would be a 'red flag' that your $20k in annual income is not quite accurate, and maybe an audit or other investigation is in order.
Having money in known 'tax havens' is just a mark against you when they are adding up red flags. There's also the paperwork hassle in keeping upto date with the balances and any interest income incurred such that if you don't really have a need for an account in that country, I think many financial advisors would suggest you consolidate to reduce the paperwork burden.
#12
Re: taxes - implications of FATCA on non residents
If you are considered US tax resident by the IRS the US will tax your worldwide income even if you are not a US citizen or green card holder. If you are coming to the US on any type of work visa and have foreign assets you need to understand the tax regimes of the US, the place you hold your foreign assets and the relevant tax treaty. If you don't understand any of those it's best to move your assets to the US so you have a chance at getting your taxes right or get professional help........eg if the OP keeps stocks in Switzerland he needs to know the notional tax withholding in Switzerland according to the treaty, then how to resource the dividend income from Switzerland to the US, how to pay the US tax and then how to claim the foreign tax credit from Switzerland.
Last edited by nun; Nov 5th 2012 at 11:07 pm.
#13
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Joined: Jul 2012
Posts: 122
Re: taxes - implications of FATCA on non residents
I don't agree.
If you are considered US tax resident by the IRS the US will tax your worldwide income even if you are not a US citizen or green card holder. If you are coming to the US on any type of work visa and have foreign assets you need to understand the tax regimes of the US, the place you hold your foreign assets and the relevant tax treaty. If you don't understand any of those it's best to move your assets to the US so you have a chance at getting your taxes right or get professional help........eg if the OP keeps stocks in Switzerland he needs to know the notional tax withholding in Switzerland according to the treaty, then how to resource the dividend income from Switzerland to the US, how to pay the US tax and then how to claim the foreign tax credit from Switzerland.
If you are considered US tax resident by the IRS the US will tax your worldwide income even if you are not a US citizen or green card holder. If you are coming to the US on any type of work visa and have foreign assets you need to understand the tax regimes of the US, the place you hold your foreign assets and the relevant tax treaty. If you don't understand any of those it's best to move your assets to the US so you have a chance at getting your taxes right or get professional help........eg if the OP keeps stocks in Switzerland he needs to know the notional tax withholding in Switzerland according to the treaty, then how to resource the dividend income from Switzerland to the US, how to pay the US tax and then how to claim the foreign tax credit from Switzerland.
#14
Re: taxes - implications of FATCA on non residents
Is it possible you are both right but it's just different terms? Could it be something like this:
"Assets" (bank accounts, homes, property) are not taxed. These are what are reported on FBAR and FATCA.
"Income" (salary, wages, interest, dividends, capital gains) is taxed. This is what is reported on an IRS 1040 'self assessment' (if that's the correct word).
Income which is derived off of assets can be taxed, but I'm not sure of many assets that are taxed simply because of their existence (with the exception of property taxes paid in some states in the USA).
"Assets" (bank accounts, homes, property) are not taxed. These are what are reported on FBAR and FATCA.
"Income" (salary, wages, interest, dividends, capital gains) is taxed. This is what is reported on an IRS 1040 'self assessment' (if that's the correct word).
Income which is derived off of assets can be taxed, but I'm not sure of many assets that are taxed simply because of their existence (with the exception of property taxes paid in some states in the USA).
#15
Re: taxes - implications of FATCA on non residents
Is it possible you are both right but it's just different terms? Could it be something like this:
"Assets" (bank accounts, homes, property) are not taxed. These are what are reported on FBAR and FATCA.
"Income" (salary, wages, interest, dividends, capital gains) is taxed. This is what is reported on an IRS 1040 'self assessment' (if that's the correct word).
Income which is derived off of assets can be taxed, but I'm not sure of many assets that are taxed simply because of their existence (with the exception of property taxes paid in some states in the USA).
"Assets" (bank accounts, homes, property) are not taxed. These are what are reported on FBAR and FATCA.
"Income" (salary, wages, interest, dividends, capital gains) is taxed. This is what is reported on an IRS 1040 'self assessment' (if that's the correct word).
Income which is derived off of assets can be taxed, but I'm not sure of many assets that are taxed simply because of their existence (with the exception of property taxes paid in some states in the USA).
FBAR and 8938 are informational forms. Both however come with heavy fines for incorrect filing or forgetting to file them.
If you are US tax resident and you meet the account value thresholds FBAR and 8938 must be filed. Also you must declare your worldwide income and gains on your 1040 so the US can tax those. The difficulty often comes in reconciling US and foreign taxation systems.