Posted on June 9, 2012 by Just Me Posted in Issues regarding US persons abroad 35 Comments Thanks to the International Revenue Service, there is now a new service you can subscribe to to get the latest instructions on what you are supposed to do to be GATCA compliant. We are reaching out to you! Subscribe here. Share this:TwitterFacebookEmailLike this:Like Loading...
@just me, apparently just asking citizenship. She said that they are going on the word of the customer, but could be an issue if they find out otherwise.
Yea, that sounds like KYC rules. Same in NZ with my wife opened our accounts. They wanted to know her citizenship. She is Australian, but a US person, however, they weren’t searching that out then, but expect they will be soon, as the Kiwis will go passively along with this, is my bet. There are a bunch of them that think / want to be part of the TPP (Trans Pacific Pact) and so wouldn’t want to do anything to upset the U.S. There is a number of lawyers that are protesting, but I am not for sure that will amount to serious obstacles. I have not been following it all that closely.
For those of you that didn’t want to sign up at the IRS for announcements, here is the first that I have received regarding FATCA
Details on the FATCA Registration Process for Foreign Financial Institutions (FFIs)*
If you don’t want to wade through it, and you want someone to summarize it for you, here is one…
@justme, they make it sound so systematic and easy, don’t they? Like as easy as lining up for the showers.
That is one way to put it! LOL
What strikes me, as someone who had some contract administration work in my back ground, is how, from a practical matter to you manage as many FFI contracts as the IRS seems to think will sign up?
How many FFIs are there in total, and how many of those will voluntarily sign up and register? Certainly all the BIG BANKS will, as they have armies of IT workers, lawyers and CPAs to make this happen, but how many smaller and far flung FFIs will there be?
Then, the IRS has to have contract administrators to deal with each of them, and how many administers will that require, and what will be the ratio of Administrators to compliantly registered FFIs?
How much can you really believe this? “IRS will closely monitor the account creation and FATCA registration process”
Given all the complexity and requirements that will lead to lots of confusion and errors, after the creation and registration process, who is going to check for the actual compliance actions that the FFIs have signed up for? I assume that it will just be a random audit process, as there is no way they could actively manage it, given IRS resources, it except via another audit lottery regime that will get gamed. You can bet on it.
Think I might apply for a job as an IRS FFI contract Administrator! Might as well get on the Compliance Complex band wagon, eh?
@ Just Me – my understanding of the reciprocal agreements is that the FFIs won’t have to individually register with the IRS. Instead they will be reporting directly to their own governments so no need for individual FFI agreements. There is some article somewhere about how these reciprocal agreements are actually a HUGE benefit to the IRS just for this reason. It will still require the FFIs to implement large, costly systems to weed out their Americans, and the IRS gets the full benefit with little cost to them.
Adding to this – here is a paper by some world-wide firm called PwC where they discuss these issues: http://www.pwc.lu/en/fatca/docs/pwc-global-fs-tax-newflash-120312.pdf
It definitely states that the reciprocal agreements will keep FFIs from having to sign on directly with the IRS. It’s all quite clever, really. Little cost with all the benefits.
@Expat in the UK
I don’t know. I have heard similar, but then the IRS has not completed the proposed Partnership Agreements, and given how they write regulations for FFIs, how could they be less stringent? Or, I suppose, they are deliberately making the FFI regulations onerous to force the FFIs to beg their governments to join in the partnership agreements in hopes that it will be easier on them somehow. Frankly, if I were in charge of an FFI, I would be beleaguered and bewildered about which way to go, and where to spend my $$$ resources until I saw some final regulations and agreements.
I think you are exactly right. I think they are deliberately making the FFI regulations onerous to force foreign countries into joining into partnership agreements that will give them the information they want with as little time/money as necessary. Saying that individual FFI filing won’t be required is a carrot that makes joint agreements very attractive.
Reading the actual Treasury press release related to Switzerland, I note that we have hybrid model proposed here of Partnership, IE Model II that talks about bi-lateral agreement reporting along with direct reporting to the IRS. So, does this make is simpler or more complicated? Humm..
Now, what if you are a Bank with operations in 3 countries, Switzerland, UK, and Canada…
So, now you have to have 3 different models of reporting within one organization. (Model I, Model II, and regular direct FATCA reporting! Plus reporting US persons to your governments Revenue department.) How is that going to be better for the FFI? I beginning to think they will rue the day they thought the “government to government” exchange was going to be better.
Here is the entire thing, with the emphasis which is mine…