FATCA could stand for “For Americans Toiletpaper Costs Alot”.
FATCA is a shoot yourself in the foot legislation. If banks around the world decide they won’t or can’t comply, then it will require that transfers to purchase goods will be subject to a 30% withholding. If I am not mistaken, to buy manufactured goods and resources, foreign companies which use non-compliant FFIs, could be subject to a 30% withholding and US retailers will have to pay 30% (grossed up) just to put products on their shelves, because no foreign company is going to be rich or stupid enough to let the IRS have 30% of their gross sales until income tax time, and there is after all, international competition for products and resources. Walmart, which fills its shelves with barge after barge of goods from East, won’t be cheap if China refuses to comply with FATCA.
Simon Black writes the following about FATCA, in post, The Despicable truth emerges about FATCA:
Here’s the kicker. Foreign banks who thumb their nose at the US government and do not enter into the information sharing agreement face a steep penalty: a 30% tax will be withheld on US-source income that goes to, or through, their bank.
So let’s say XYZ Bank in some offshore jurisdiction doesn’t enter into the agreement. The next time a payment goes from JP Morgan to any account holder at XYZ Bank, JP Morgan will withhold 30% of it.
John Williams of Shadowstats (see video below) predicts that hyperinflation will soon be a problem. He recommends that Americans stock up on basic items that they need, such as canned foods and toilet paper, whose inflating prices will give American’s better nominal return on investment than a bank account. It is true that stocking up on food and other items with real value and rotating their inventory is a means of storing wealth. I bought Toronto public transit tokens at $2.00 each about seven years ago. They are now worth $3 each. Thus, they gained 50% in nominal dollars, and zero % in actual value. No savings account has done that well in the same period. And that’s in Canadian money, which does not function as the world’s soon-to-fail reserve currency. But Williams is only thinking about monetary policy. He does not include the devastating impact that FATCA (For Americans Toiletpaper Costs Alot) will have on prices.
Hat tip: Monty Pelerin
I am so confused! I moved my UK investments into a UK account that is a specialized investment house that is uniquely US-compliant. It required me to sign a W-9 and will thus report my annual income and/or gains to the IRS.
The portfolio is a mixture of US and UK-based blue chip shares in individual stocks. But what I don’t understand though is whether I would have 30% withheld from the proceeds of the sale of the US-based stocks if I were to transfer this money to a non-participitating account with my local credit union.
I simply don’t understand this. It seems onerous enough that I will have to report all my assets on the FBAR and 8938; why then do I have to face potential 30% withholding if i were to transfer any assets out of this participating FFI? It’s as though I can’t even do what I want with my OWN money.
I have been told that I can’t keep my US-based account open because they can’t use my mother’s US address or my UK address. It thus looks as though I will have to find completely compliant accounts over in the UK which isn’t going to be easy.
I am not happy with this account I opened because all the dividends are being swallowed up in fees so it’s effectively useless to me as an investment because i wanted a dividend income stream. Perhaps I should sell it all and move it into my local credit union before FATCA actually starts taking full effect so I don’t suffer the 30% withholding. Very, very confusing and I think it was naughty of my financial planner not to forewarn me of this effective lack of liquidity if this is indeed the case.
But I also suspect that she may not have fully understood all this herself. It’s very complicated, after all. It just seems though as if all this FATCA business if effectively restricting me even within the UK. It’s bad enough that I had to sign away my privacy to the IRS but even worse that I would suffer a 30% withholding on the PROCEEDS of a sale if I were to move the money to a local credit union that’s not technically compliant because it would not be participating directly in FATCA.
But because of all the possible draconian fines for not complying, I will still be fully reporting all my assets and non-US based income on my tax return and FBAR so why the HELL can’t that be enough???
The cynical side of me can’t help wondering if the adviser was mainly after commission instead of truthfully looking out for my best interest. I also begin to think it would be better just to transfer everything to my British husband. F*ck ’em!! 😛
@monalisa1776: “I also begin to think it would be better just to transfer everything to my British husband.”
If you’re going to do this, watch out for US gift tax. Because your husband isn’t a US citizen (and I doubt he wants to become one after seeing your treatment), you don’t get the unlimited marital deduction on gifts:
http://intltax.typepad.com/intltax_blog/2010/04/beware-gifts-to-noncitizen-spouses.html
“Unfortunately, the normal marital deduction for gifts between spouses does not apply where the recipient spouse is not a U.S. citizen. Code § 2325(i). ”
It looks like you’ could be okay if you can dodge under the lifetime unified credit, but that’s well outside my area so you’d want to do your own research if you go that route.
The other question I’ll ask is how exactly would a basic Canadian checking or savings account be in anyway considered US source income. Isn’t this the same problem that exists for witholdable passthru payments as in the US is trying to tax income that has no link to the US.
monalisa1776 – Your efforts and desires to make a clean slate with the United States are admirable. You have started from a very unhappy morass. Your prise de conscience is rational. The basic two hard facts you grapple with are: (1) The United States will never offer you certainty. Only certainty of continuing uncertainty, mutable rules, new reporting requirements, no support, conflicting information, promise of penalty, etc. The domain of disorder. (2) In so many serious ways you can never enjoy the freedom to manage your own affairs rationally or effectively while squirming under the US jackboot. At the kindest in their view, you are insignificant collateral damage. Watcher offered you a good comment. Pursue that suggestion with a good professional, sooner rather than later. Each year is its own quicksand. The task of finding a good professional is also daunting, but at least achievable. They do exist. Unlike so much else in this mess that seems nothing but a gateway to nauseating infinite regress.
@US, I agree more and more. I actually already have a very good specialized accountant, albeit an expensive one. I am going to discuss the possibility of renouncing with her when I next speak to her but am aware that she won’t be encouraging this for various reasons because both she and my financial planner have their own agendas….it’s in their interest to keep me compliant and a US Citizen because that’s what they make their living on.
I would imagine that the earliest I could actually start doing anything would be sometime next year and possibly as late as 2016 due to the statute of limitations. I don’t want to risk punitive fines by raising red flags via a renunciation.
We’ll see; I think more and more that if it were a simple case of filing an annual fbar and moving my former UK mutual fund holdings into company shares that it wouldn’t be so difficult to be compliant; but the fact that I am currently stuck in a very expensively run investment house in which all the dividends are swallowed up in fees seems unacceptable as a longterm solution.
I also resent that I will have to budget for at least $2000 per year just for the accountant and possibly double this. I would also have a mess if and when my older British spouse were to die. As I have no plans to ever return to America to live and now understand that my family are not going to fall out with me over it, I’m starting to think that renouncing might be the most pragmatic way to get around all the difficulties. I wish it didn’t have to be this way though because I still love the US as a place.
@ mona
I suspect that your financial planner and specialized accountant will have quite enough US clients to handle with all that is going on. Many are wanting to rid themselves of US clients, just as the banks in some countries. If you suspect that the professionals you have engaged are looking out for their best interests over yours, it might be time to find someone who has your trust.
monalisa1776 – At least four kinds of professionals are on deck for the situation, some more formally qualified than others. Your two are both on the financial side. There is also the legal side, where at least maybe three specialties are relevant: interjurisdictional tax law, wills and estates and trusts, and citizenship and immigration. Consider checking out the legal side. The Just Me screed on drudgery translates well to the “financial planning” arena. Financial planners seem to guarantee nothing but taking their cut, never mind whether you have made or lost money, while holding your hand and reciting basic truisms (some good, some not so good) to be drawn from reading a few decent books and articles. This comment is a pointer only, with no specific claims. It is not clear how the “statute of limitations” stuff amounts to anything more than a bugbear red herring.
Addendum. What a coincidence. I just stumbled across a substantial piece on financial planners published today by none other than Barrie McKenna –
http://www.theglobeandmail.com/globe-investor/the-flaws-in-canadas-financial-adviser-system/article2342799/singlepage/#articlecontent
– Is that synchronicity or what?
@mona: “I wish it didn’t have to be this way though because I still love the US as a place.”
Maybe if you frame this differently you can come to terms with it. I differentiate “America” from “the US”. America is the geography, topography, people, ideals, hopes and aspirations, and it’s great. The US is the government and “the system”, and it’s vile. From that perspective it’s easy to be an American yet not a US citizen. Citizenship becomes just a label of convenience, a form of residency visa that can be acquired or disposed of as needed. No longer being a US citizen wouldn’t diminish either you or America.
@Watcher — Your differentiation of ‘America’ vs ‘the US’ may help those stuck and not able to really protect their own and their family’s best interests and move on. We all can value our heritage without feeling some unwarranted guilt in doing what we need to do to free ourselves of abuse. So, thanks.
@watcher, calgary, mona
Guilt for relinquishing the United States citizenship is misplaced. The feeling should be one of regret not guilt. We are forced away by their criminalization of our basic day to day life.
Simon Black wrote a comment about Tacitus, the Roman historian:
Also consider Augustine: “A law which is unjust does not seem to me to be a law.”