Liberty and justice for all United States persons abroad

The Isaac Brock Society

1,012 thoughts on “FATCA Discussion Thread (Ask your questions) Part One”

  1. @john Brown…

    All these FFIs sure want to socialize the cost across the entire country and be bailed out from having to make a market driven business decision, don’t they?

    It is intended that signing the IGA with the US Treasury Department would significantly reduce the compliance costs of South African FFIs, which would include South African banks, asset managers, private equity funds, long-term insurers and other participants in the financial sector.

    “This would be achieved through the exchange of information between South Africa and the US on a reciprocal basis, in terms of the existing double taxation agreement between the two countries,” said a statement from the National Treasury and SARS.

    “National Treasury and SARS have met with representative bodies for the affected FFIs to discuss the impact of FATCA,” the statement added. “These bodies expressed strong support for an IGS for the automatic exchange of information between South Africa and the US.”

  2. Cheers Just Me. Here’s an article from Costa Rica.

    Tropical Daily: “FATCA Compliance Looms for Costa Rica and Panama”

    http://tropicaldaily.com/panama/is-avoidance-the-best-policy-for-facta-compliance/

    From the article:

    “Very few financial institutions in Costa Rica and Panama are prepared to meet the Foreign Accounts Tax Compliance Act regulations. The reason? Most are waiting for clarification from the U.S., especially given the possibility that there exists more agreements to be signed to simplify the reporting process.”

  3. Here is another from Germany.

    Just Landed (blog): “FATCA Legislation – US Expats and the IRS”

    http://www.justlanded.com/english/Germany/Articles/Money/FATCA-Legislation

    From the article:

    “Many members of Germany’s American expat community are now considering renouncing their US citizenship, as the FATCA Legislations prepare to be implemented from January 1st 2013.”

    “The majority of US expats are being prompted to consider relinquishing their US citizenship due to the complexity of the reporting process to the IRS, plus the threats of heavy penalties, which includes fines for previous, inadvertent non-compliance.”

    “This sense of anxiety is compounded by the fact that a growing number of Americans are being left stranded by their foreign financial institutions. All banks and wealth management firms will also have to declare the assets of their American clients. This process is perceived as very costly and burdensome, meaning many are refusing to deal with US citizens.”

  4. @John Brown…

    I am trying to get some gardening done today, and visit with friends, but you keep sending me these links requiring me to put up a comment! LOL Actually, thanks for keeping my mind occupied with new ways to say the same ole thing. “IGAs, don’t do it! ”

    Glad to see that type of comment out of Germany. They were one of the first FATCA partners and still, a year later, they have not yet followed the UK down the path of capitulation. Assume they are still holding out for some real reciprocity.

    Cheers

  5. Thanks @John Brown:
    Continues to be powerful to see another expat (first I’ve read from Germany) say flat out that they and many others they know are going to renounce because of the jeopardy of potential draconian penalties, the complexity, etc.

    Re renouncing: “I know many others who feel the same as I do,” says Claire.”….

    ………..”The majority of US expats are being prompted to consider relinquishing their US citizenship due to the complexity of the reporting process to the IRS, plus the threats of heavy penalties, which includes fines for previous, inadvertent non-compliance.

    This sense of anxiety is compounded by the fact that a growing number of Americans are being left stranded by their foreign financial institutions.”….”being turned down by foreign firms for jobs in which they will require signatory authority..”…..

    I see that another article http://www.justlanded.com/english/Germany/Articles/Money/Bank-secrets on the site describes the transparency of German accounts to the German tax authorities. Like Canada, there is no evidence that Germany functions in any way as a so-called ‘tax haven’, or home for money launderers, drug lords, etc. – that baseless and disingenuous rationale continually offered up in US Treasury soundbites to justify the imposition of FATCA and FBARs.

    Can’t see what Germany would possibly gain out of signing a FATCA IGA if the US will not deliver exact reciprocity. And even then?

  6. Tropical Daily (blog): “U.S. Goes After Dual Citizens’ Bank Accounts”

    http://tropicaldaily.com/panama/us-goes-after-dual-citizens-bank-accounts/

    From the article:

    “There are a lot of Panamanians who, for one reason or another, have U.S. citizenship – many of these folks have never lived in the U.S., have never earned a penny of U.S.-source income, and have never even heard of an FBAR … yet literally by accident of birth, they are now obligated under penalty of imprisonment to pay a huge portion of their assets to another government.”

  7. And @John Brown, I like the end of the Panamanian article above, which asserts that there is no social contract when only one party sets the terms and demands obeisance and obedience from the other – as if they are merely serfs, and subjects, as if of a king. The US prides itself on historical roots that flow from Rousseau and Paine, among others, but now tells us the exact amount of lifelong tribute we and our children, living lifelong or born outside the US are to give over annually, and forces us to submit complex documentation to make certain that we have been ‘compliant’. Or, creates complex documentation to create a debt through penalties, that it cannot assess or levy by any other existing means.

    The penalties are so fantastical as to bear no relationship whatever to any actual US tax assessed, and in fact can be so in the absolute absence of any actual US tax owed. This after we have already paid to the non-US country where we actually live, perhaps were born, and use services.

  8. Two comparative type of articles…

    Conformity and discrepancies between Fatca regulations and the IGAs explained by Alfi

    Jurisdictions signing the Model 1 IGA agree to adopt specified rules to identify and report information about US accounts. FFIs domiciled in these jurisdictions will therefore have to comply with local laws implemented to identify and report US accounts in accordance with the terms of the Model 1 IGA, and they do not need to apply the final regulations for the purposes of complying with, and avoiding, withholding under Fatca.

    However, the final regulations provide that in certain cases, as prescribed in the Model 1 IGA, the local laws may allow the resident FFI to elect to apply the provisions of the regulations instead of the rules otherwise prescribed in the Model 1 IGA. The UK-US IGA offers this choice e.g. with respect to the obligation to review, identify or report accounts as US reportable accounts.

    Read more here: http://bit.ly/Xtah6N

    Non-U.S. Financial Institutions: Due Diligence in the Final FATCA Regulations

    The U.S. Treasury Department and the IRS received numerous comments in response to the proposed regulations and many are reflected in the final regulations. Below highlights certain of the changes to the due diligence requirements. The proposed regulations were released on February 15, 2012. The final regulations that were released on January 17, 2013.

    Read more here: http://bit.ly/Z6C9Rf

  9. Solving the complexity of FATCA classification

    Under FATCA rules, every foreign financial institution (FFI) must identify and classify all its clients with US indicia, but also do the same for all parties to financial transactions, including other FFIs and non-financial foreign entities (NFFEs). The challenge here lies in the complexity of the classification that needs to be carried out to ensure that they are classified correctly and that the NFFEs are, in fact, legitimate companies.

    There are a couple of issues that this throws up. (literally make you want to vomit?)

    In an effort to identify and classify participating FFIs and NFFEs, FFIs need to have a clear understanding of who the beneficial owner is. For this, they may need to build a more holistic record of corporate clients by searching publicly available information such as company records from the companies’ registration office or from third party company data providers.

    There are two immediate challenges that this presents to FFIs.

    The first is how to ingest this information into existing software systems given that most information will be available in PDF format? Some sort of utility will be needed to extract data from un-editable formats such as PDFs.

    And secondly, with forms containing different types of information, how do you consolidate all of this into a single format to aid reasoned and structured decisions?

    Now when I say structured decisions, what I’m really talking about is the ability to make consistent decisions from a standard set of information from different data sources, as well as the ability to justify and backup classifications derived at times of review by any governing body (financial regulator or tax authority).

  10. Lisa at i-Expats is at it again… This gal is dangerous. I think she means well, but she is VERY sloppy with what she allows to be posted.

    See this story…
    FATCA Leads The Worldwide Search For More Tax http://bit.ly/12qCryN

    I had to post this response, which of course, if past experience is any indication of future behaviour, will never be let out of moderation.

    Re your statement: “Around 50 countries have now signed up to FATCA – or through their own Intergovernmental Agreements (IGA) which redefine how their own double-taxation agreements with the US will work.”

    Lisa… That is TOTALLY wrong. Please get it right and be more careful in your assertions! Treasury has said they are negotiating with 50 countries to join the IGA, but on the Treasuries own web site, so far, they have only 3 listed officially. http://1.usa.gov/ZawsRC

    Now I agree they have some that say they will, or others have initialed, like Switzerland, but NO WAY have 50 signed up. That is just wrong. So please be try to be more accurate It is important for your credibility.

    Thank you…

  11. The Swiss parliament is debating an IGA for FATCA today. Three points might be worth noting:
    1) The nationalist Swiss People’s Party (SVP) and the Socialist Party (SP) are against it and have the numbers to defeat it. The SVP does not support the IGA because it infringes on Switzerland’s sovereignty. The SP’s lack of support is due to the non-reciprocity of the the proposed IGA. Support for the IGA come from the centrist parties.
    2) A contentious topic is the requirement to automatically accept changes in US law which impact the IGA without further ratification, called “dynamic changes”. The Swiss NZZ newspaper indicates that the definition of “US Person” under US law could be changed, as an example, and this would automatically flow through to the approved IGA without further action by the Swiss parliament.
    3) The approved IGA is subject to referendum.

    Article (in German):
    http://www.nzz.ch/aktuell/schweiz/fatca-vertrag-sorgt-fuer-verstimmung-im-bundesrat-1.17996674

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