Petros isolates the term “Certificate of Loss of Nationality” (CLN) in the new FATCA rules.
The latest regulatory text (pdf) coming out of Mordor is the IRS’s new rules regarding FATCA (February 8, 2012). The text is in gobbledygook, the language of the Orcs of Mordor, and it is frankly impossible to read, though you can pay me to do it (we will start at $500 an hour–otherwise no deal–I have some experience reading exotic languages). But this is finally why people around the world will have to pay higher banking fees. It will will probably cost banks around the world at least a billion dollars just to pay interpreters to decipher the regulations.
Is your bank going to rat you out because you were born in the United States and you don’t have a CLN? Thanks to word search ability in Adobe reader, I was able to find the word “Certificate of Loss of Nationality” five times: I have isolated it and reproduced it below. If you want to skip reading all that because no one is paying you $500 per hour, then here are the working terms (emphasis mine):
A withholding agent may also treat the individual payee as a foreign person, notwithstanding the U.S. birth place, if the withholding agent obtains a non-U.S. passport or other government-issued identification evidence of citizenship in a country other than the United States and either a copy of the individual’s Certificate of Loss of Nationality of the United States or Form I-407, or a reasonable explanation of the account holder’s renunciation of U.S. citizenship or the reason the account holder did not obtain U.S. citizenship at birth.
Now we’ve already dealt with the term “reasonable cause“. In gobbledygook, that means you had to have been in coma or otherwise incapacitated. Here is a new term, “reasonable explanation”. I wonder what it means in the language of Mordor. Whatever it means, it appears that the CLN is not the only proof of loss of nationality, for we now have “reasonable explanation” as a second type of proof that one can use to get out of being in the cross-hairs of new FATCA regulations.
By the way, I still haven’t figured out what a “withholding agent” is.
Appendix: The occurances of the Certificate of Loss of Nationality are as follows: Twice on page 212:
(C) U.S. place of birth–(1) Accounts opened on or after January 1, 2013. For accounts opened on or after January 1, 2013, a withholding agent has reason to know that a withholding certificate provided by an individual payee or beneficial owner is unreliable or incorrect if the withholding agent has, either on accompanying documentation or as part of its account information, a place of birth for the payee in the United States. A withholding agent may treat the individual payee as a foreign person, notwithstanding the U.S. birth place, if the withholding agent has no knowledge that the individual has any other U.S. indicia described in this paragraph (e) and the withholding agent obtains a copy of the individual’s Certificate of Loss of Nationality of the United States or Form I-407, Abandonment of Lawful Permanent Residence Status. A withholding agent may also treat the individual payee as a foreign person, notwithstanding the U.S. birth place, if the withholding agent obtains a non-U.S. passport or other government-issued identification evidence of citizenship in a country other than the United States and either a copy of the individual’s Certificate of Loss of Nationality of the United States or Form I-407, or a reasonable explanation of the account holder’s renunciation of U.S. citizenship or the reason the account holder did not obtain U.S. citizenship at birth.
(2) Accounts opened prior to January 1, 2013. For accounts opened prior to January 1, 2013, a withholding agent will not be required to conduct a search of its documentation to identify a U.S. place of birth associated with a payee.
Next on pages 216-218:
(C) U.S. place of birth—(1) Accounts opened on or after January 1, 2013. For accounts opened on or after January 1, 2013, a withholding agent has reason to know that documentary evidence provided by an individual payee or [216]beneficial owner to demonstrate the individual’s status as a foreign person is unreliable or incorrect if the documentation contains a U.S. birth place for the payee or the withholding agent has, as part of its account information, a place of birth for the payee in the United States. A withholding agent may treat the individual payee as a foreign person, notwithstanding the U.S. birth place, if the withholding agent has no knowledge that the payee has any other U.S. indicia described in paragraph (e) of this section and the withholding agent obtains a copy of the individual’s Certificate of Loss of Nationality of the United States or Form I-407. A withholding agent may also treat the individual payee as a foreign person, notwithstanding the U.S. birth place, if the withholding agent obtains a valid withholding certificate from the payee that establishes the payee’s foreign status and either a copy of the individual’s Certificate of Loss of Nationality of the United States or Form I-407, or a reasonable explanation of the account holder’s renunciation of U.S. citizenship or the reason the account holder did not obtain U.S. citizenship at birth.
(2) Accounts opened prior to January 1, 2013. For accounts opened prior to January 1, 2013, a withholding agent will not be required to conduct a search of its documentation to identify a U.S. place of birth associated with a payee. However, if the withholding agent, on or after January 1, 2013, does review documentation that contains a U.S. birth place for a payee that is treated as a foreign person, then the account will be considered to have a experienced a change of circumstance as of the date that the withholding agent reviewed the documentation and the withholding agent will be considered to have reason to [217] know that a payee is a U.S. person. See paragraph (c)(6)(ii)(D) of this section for rules regarding the time period allowed to cure a change in circumstance.
Finally again on page 238:
(1) If the account holder is identified as a U.S. resident or citizen, the participating FFI must request a Form W-9 and a valid and effective waiver as described in section 1471(b)(1)(F)(i), if necessary, from the account holder.
(2) If the account holder information unambiguously indicates a U.S. place of birth, the participating FFI must request either a Form W-9 and a valid and effective waiver described in section 1471(b)(1)(F)(i), if necessary, or a Form W-8BEN and a non-U.S. passport or other government-issued identification evidencing citizenship in a country other than the United States. In addition, to establish the foreign status of any account holder with a U.S. place of birth, the participating FFI must obtain a copy of the individual’s Certificate of Loss of Nationality of the United States or Form I-407, or a reasonable explanation of the account holder’s renunciation of U.S. citizenship or the reason the account holder did not obtain U.S. citizenship at birth.
@Rick & Nobledreamer
I am surprised that the Canadian passport is ranked a bit lower now. It used to be really up there with the Scandanavian countries….Still, I can’t complain that Italy is one of the best now!
Best combination in terms of travel would be something like an EU passport+ any Latin American or especially Russia (CIS). Why? Because together with, for example an Italian and Russian passport you could visit 183+ countries visa free. The Russian passport is better for Africa, Cuba, Vietnam and obviously Russia itself and old Soviet Union countries. The Italian (or any other EU or industrialised passport) tend to allow the same access to almost anywhere else: Most of the Americas, Europe, Japan, South Korea, Hong Kong, Australa, New Zealand and so on. They all offer only limited access to Central Asia and Africa. Only catch is that if you are a man you might have to avoid Russia until you are 28 or whatever the conscription age is! I have several friends with this combination and they rarely, if ever, need a visa.
http://en.wikipedia.org/wiki/Visa_requirements_for_Italian_citizens
http://en.wikipedia.org/wiki/Visa_requirements_for_Russian_citizens
Seems like India and China require visas for almost everyone. I bet that they will have to open this policy up as their economies continue to grow. In terms of “citizenship planning”, the two passports that you can outright purchase, St. Kitts and Nevis and Dominica, are ok. Dominica only offers access to 82, but the St. Kitts and Nevis passport, which offers access to 131, is pretty good. 10 years back I think that 131 countries would have made that a top ten passport.
These indexes are fascinating though due to how quickly borders are becoming less and less of an obstacle. Just last year the UK passport was the best at 168, and now just a year later Danish citizens can visit five countries more than last year’s best. Russia and the EU are working on a visa free travel deal as well – Expect to see that in the next 5 years or so. We just need China and India to loosen up!
Quick follow up to my comment above. China is even more restrictive with granting visas than I realised. They only allow four nationalities to visit without a visa for tourist purposes. The best? San Marino, a city state in Italy which allows 90 days access. Looks like most of us wouldn’t need a transit visa to fly through some of the airports there though.
http://en.wikipedia.org/wiki/Visa_policy_of_the_People%27s_Republic_of_China#Ordinary_passports
And India is even worse, only allowing citizens of Bhutan and Nepal to visit without one, though they allow some to get a visa for no charge. Best passport on that list is from Argentina:
http://en.wikipedia.org/wiki/Visa_policy_of_India
@Don,
As far as I know, China’s visa policy is based on diplomatic equality.
Visa fee to Canadian citizen is $30, to US citizen is $140. Every time US increases visa fee, China will do the match.
China does, however, give Japan and Singapore with two exception. No visa is required for less than 15 days while Japan and Singapore don’t give Chinese the same treatment.
@ij
http://www.visaforchina.it/MIL_IT/visainstruction/251100.shtml
Russia is the same. I paid only 30 Euros for my visa to go there, but my friend from the UK had to pay a lot more due to reciprocity. He also had to fill out a huge four page form that asked lots of questions about salary, parents, etc, but mine was just a page long and just asked basically for my address and personal details!
Looks like I can get a Chinese visa for 30 Euros as an Italian citizen. US citizens get charged more than anyone else at 115 Euros…Wonder why Serbia only costs 2 Euro. Might as well just make it free at that rate. Supposedly Brazil charges US tourists around 100 dollars when they land in Brazil. Is this true? Anyone can confrim, maybe geeeez?
I live in a small’ish-sized city. All but 1 of the banks here have a presence in the US or trade on the NYSE. The 1 small bank is terrible – lines extending far outside during busy times. The big banks will implement this, like what has been going on in Uruguay for a while now.
@Don, actually, an American needs a tourist visa for Brazil BEFORE they come to Brazil. It’s $140. http://www.brazilsf.org/visa_tourist_eng.htm – Personally, I think a Brazilian passport is pretty good because I can get into Schengen area visa free. Brazil is buddy-buddy with Cuba right now, sending $1,8 Billion to Cuba. This has stirred up some controversy in the media now because Brazil has $300 Billion in reserves, but the living conditions of some people are “questionable”. I say this in quotes because to me, Brazil is a place where you CAN make money if you want to work. You can make even more if you use your head along with physical effort. Most of the people I know who live “poor” lives are poor because they want to be, or they are addicted to drugs/alcohol.
@Researcher. This is not the first “parallel” I’ve seen with US policy and the Nazis. With some things, it looks like they are taking ideas from the book “How to Be a Nazi”. What I really think is that we are collateral damage. When I stop to think about it, I know very FEW people in my situation. Sure, lots of Americans go overseas every year, but doubt survive in the long-term. That’s why I really don’t buy into the 6 million figure to begin with. The Treasury is American, and I say it all the time: to Americans, we are *foreign* because we live overseas and speak other languages on a daily basis. The media portrays us all as rich and sipping wine on the French Riviera. Their aim is to keep US residents from having accounts overseas. They can care less about a few hundred thousand people like me.
@geeeez
Wow. That is quite expensive – I like that they are brutally honest on the info page and say that it is due to reciprocity and nothing else.
US visa policies are out of date with regards to Brazil, since my understanding is that lots of Brazilians based in the US are looking to move back and many other US citizens are moving there as well. There don’t seem to be many coming in the other direction anymore? Just going on what I read in this article here:
http://www.bbc.co.uk/news/business-14728833
@Don, if you saw the US consulates here you would see that they are huge income generators for the US. I bet likewise for India. Even though the Brazilian Real has climbed significantly against the dollar in the last decade, and fewer Brazilians are working in America, I doubt that they will ever abolish the visa requirement due to $$$. They make significant amounts of money from visas. Here it is amazing: they process thousands of people every day. I saw a line of around 100 people every 10 minutes pass through. Meanwhile, US “Citizens” have to wait around forever and are treated as a lesser priority.
I will go get (hopefully) my last “important” document I need to enter in with citizenship here this week. After the Policia Federal here actually accepts all of my documentation, I’m going back to the consulate to pay the $450. For my renunciation paragraph, I think I’m going to cut and paste language from the FATCA along with peoples’ stories of getting kicked to the curb by banks in Uruguay. I have a strong irking feeling the same will happen here. There’s no way out for people like me who have ONLY a US Passport, except to renounce, or pack up and move back which is out-of-the-question for me.
Quote from the above article:
“Rubens Barbosa, Brazil’s ambassador to the United States between 1999 and 2004, believes that his country’s rising geopolitical and economical importance has changed perceptions in Washington.
“The US State Department used to see Latin America through Mexico or Cuba. Now I’m surprised by the fact that their business attache has lived in Sao Paulo and that everyone in the US Embassy (in Brazil) speaks Portuguese. Their interest has changed.”
This is the exact same problem that I noted in another thread: US embassy personnel do not speak the local language. The US Embassy website in Belgium is lazily translated in Dutch and French and only information on visas is available in the local language. I followed through their website as if I were someone requiring an actual visa and not just the visa waiver to visit and it sent me to the Department of State visa website. Here you have the option to select “tooltip languages”. I chose French, but the whole page and application is still in English and I don’t see any hints in French anywhere.
I think it is a disgrace that the US posts embassy personnel to countries overseas who have no knowledge of the local language. I now wonder if the ambassador to Belgium even speaks French or Dutch now. I read his profile on the embassy website and it doesn’t imply that he speaks anything other than English. Seems like he was chosen as a reward because he has “experience as an advisor to the Democratic party”.
@Don, yes, I know of several people who worked abroad that moved back to live here (they hope) for good. Even other Brazilians know that if someone works hard here, they can make the same amount of money or more than people can make in America. I think it’s physchological for them: When in America, work 2-3 jobs; when in Brazil be lazy :-).
The reciprocity fees for Americans are a killer. Imagine being a salesman with a US passport: to visit every country in South America would cost more than a $1,000 just in reciprocity fees. For a large company that’s no big deal, but for a small business trying to sell American products, that would hurt. (I would never buy US products again. I will buy from China; they’re cheaper!)
I’m to the point where I don’t care anymore. I have already migrated my email accounts out of there. Hopefully I will be able to move every cent I own out of there within this year.
@Petros: Apparently in Bern the Embassy recently hired five new clerks to help take care of the sharp increase in demand of renunciations, and so now the wait is not long at all. Only one visit is required, and apparently it is a very simple and perfunctory procedure; I imagine that there are so many now, it is for them a simpler process than issuing visas. Plus they get $450 shot so it is possibly even financially interesting, seeing as to how each one costs them about 30 minutes.
@nobledreamer, what is this about “a growing tendency for many countries to follow the lead of the United States in taxing even non-resident citizens?” Where did you get that? Can you imagine what a bureaucratic nightmare that would produce if all the countries around the world would start taxing their non-resident citizens? Pretty soon, everything would come to a screeching halt because everybody would be so busy filling out forms and documents and wouldn’t have time to work anymore.
@don, they have more Brazilians working in the consulates here than Americans. The Americans I talked to said that they speak Portuguese, but I don’t know how fluently. They said that they had to study for 6 hours a day for 1 year…
@avowd, according to a source I read this morning, the US and UK pushed Urugay into taxing its *residents* on worldwide income in 2009. I am quite sure this all started with the US! Most countries that I know of have already adopted this system.
@sonpomodoro- Zbigniew Brzezinski was on the PBS Newshour show this week and he amongst some of his criticisms of America was the fact that the average America knows nothing about the world outside of America. Now if you think about the fact that the average politician comes out of the average American population then it is only logical to conclude that his/her knowledge and respect for other countries is going to be the same as that of the average non-elected American.
Mr. Brzezinski also said that America cannot police the world.
http://www.pbs.org/newshour/bb/business/jan-june12/brzezinski_02-08.html
@geez, @avowd – The US is still one of the only countries taxing its citizens on worldwide income regardless of residency. The only other one I have found is Eritrea, which US is heavily critical of. The ROW taxes it residents on domestic income, and sometimes on overseas income, but if you don’t live there you don’t paty taxes there.
Hi all – Just a comment on place of birth question. I have actually read all of the draft regs more then once, and In my view non-US banks are not in fact being required to ask directly about place of birth, but only if they find it in documentation presented by the client they should then insist on a CLN or equivalent. I guess that place of birth would be on any proof of identity/nationality, but if not no-one needs to ask for it as a separate piece of information. On the subject of parental nationality that’s even less likely to be an issue, as it is not one of the indicia that the banks are being asked to look for, and so even if they knew it, it would not trigger any sort of review of nationaliy.
@ Tim
On 11 February above, you mentioned five European countries. If I understand, they may comply with FATCA. Could you tell me which countries you were talking about?
Thank you.
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