Full Reciprocity Under FATCA Is a Work in Progress, IRS Official Says
ORLANDO, Fla.–Although the United States has committed to achieving reciprocity regarding the exchange of financial transaction information under the Foreign Account Tax Compliance Act, domestic banks are not subject to the same reporting requirements as are their foreign counterparts, an Internal Revenue Service official said Jan. 25.
According to Ted Setzer, manager of IRS’s Large Business & International Division, although existing requirements on U.S. banks will provide other governments with similar information required of foreign banks under FATCA, “clearly existing U.S. rules don’t require U.S. financial institutions to provide the exact same information that a foreign institution has to under FATCA.”“How we get to full reciprocity and how long it takes is something we’ll have to be working on.”Ted Setzer, LB&I Division
Setzer made his comments during a session at the 2013 midyear meeting of the American Bar Association Section of Taxation on recently released implementing FATCA. [snip]
Responding to a question about reciprocity, Setzer said the United States had committed to such a concept. However, U.S. reporting rules for domestic banks “are what they are,” and do not require identification procedures identical to those required under FATCA, he said.
“How we get to full reciprocity and how long it takes is something we’ll have to be working on,” Setzer said.
I have a better solution lets FIRE Ted Setzer and strip him and his family of all US General Services Administration employee and retirement benefits.
NEVER, NEVER, NEVER. The customers of U.S. banks actually VOTE and the shareholders VOTE, and the banks have their well paid lobbyist. There will NEVER be full reciprocity. Anyone who thinks otherwise is lying to themselves. No country should sign onto FATCA unless their agreement is contingent upon the implementation of full reciprocity.
What a joke!!!
They’ll never ‘reciprocate’. What deliberate and disingenuous fabrication. The US government has no shame or honour.
Better forward this to the Department of Finance. The more obvious it is that the US is lying, the more it will make any politicians who sign onto an IGA into dupes or traitors to their countrymen.
Gee, I think we could see this coming from several light-years away. Hopefully this will give pause to the countries, like Canada, that haven’t yet booked their tickets for the FATCA IGA train to the gulag.
The United States has absolutely no intention of making good on its “promises” of reciprocity, for what benefit would it provide to them? They’re already holding a big, fat 30% withholding stick, so why would they need to dangle a baby carrot as well? Americans have little patience for countries that do not swiftly bend to their will, so they choose negative reinforcement every time, like any tyrant would.
Fun Facts – here are the number of times certain words appear in the 544-page final FATCA regulations document:
“must” – 319 times
“compliance” – 92 times
“requirements” – 395 times
“withholding” – 1764 times
“reciprocity” – 0 times
Sounds like Germany and the UK got screwed royally.
As we have been saying for some time. There is NO reciprocity in the IGAs… For the History of DATCA attempts, go here….
Great fun facts… Well done using that Find function!
@swisspinoy Why Germany? I know we are rightly demanding reciprocity, which may very well be the reason we haven’t signed an IGA. Do you have information which suggests otherwise?
Small countries with no balls to stand up to the US will be screwed.
Countries like Brazil and China I’m not worried about. If these countries ever have IGAs with the US and if the US doesn’t reciprocate, simple, no data passed to the IRS.
And if the 30% withholding penalty arrives, Fortune 500 companies in these countries will be seeing a surprise exceptional charge in their Brazilian and Chinese tax bills to cover the loss suffered by Brazilian and Chinese banks.
Will be interesting to watch Fortune 500 executives tear this law down in congress when their vital foreign operations start getting a haircut.
They say FATCA is the cost of doing business with the US? US will soon discover the cost of doing business with the outside world if it doesn’t change its ways.
CHF, I don’t think it’s the actual banks that pay the withholding tax. It’s the client. The other day, I was reading about Americans opening bank accounts in Uruguay. They said the ONLY banks that will allow this is Itaú (a Brazilian bank) and Uruguay’s state-controlled bank. It sucks to be an American and have your options severely limited. This has been my gripe the entire time.
The *only* reason I don’t walk into the consulate and tell them to cancel my passport is that I’m worried that I will need their notary services during the naturalisation process here. I don’t want to get the run-around from the consulate because I would no longer be a US Citizen. Does anyone have any experience with the US Consulate after renunciation?
you should be able to get documents certified from local service providers for much less than the 50$/page charged by the consulates. You only need US certified documents or originals if you need to provide them to some US agencies.
The IGA are between national governments, the US insists that the applications within the US be IAW US laws. Banks are the only financial institutions complaining in the US because they are federally chartered, all others are state incorporated and would argue that they are exempt from reporting requirements of federal chartered corporations until the enabling legislation has been passed and argued through years of court challanges
The US appears not to negotiate with “lesser nations”, including Russia. It simply demands and then grants little or nothing in return. The following excerpt from an article in the current issue of “The Nation” illustrates how unsuccessful an important country like Russia was in negotiating with the US. Russia granted Obama three concessions his administration wanted and received nothing in return:
“Obama wanted three concessions from the Kremlin: a. assistance in supplying NATO forces in Afghanistan, b. harsher sanctions against Iran and c. Russia’s abstention on the UN Security Council vote for a no-fly zone over Libya. The White House got all three. In return, Moscow wanted a. a formal end of NATO’s expansion to the former Soviet republics, b. a compromise on European missile defense and c. a cessation of direct American involvement in Russian political life. Instead, it got an escalation of all three offending US policies, again with virtually unanimous bipartisan and media approval.”
Due primarily to the exercise of US power in the relationship with other countries, FATCA reciprocity for countries signing IGAs should not be expected.
Several stories this morning on the coming Obama Budget…
I am using that opportunity to try and put some light onto the FATCA reciprocity issue, if it is indeed in the budget.
I just posted this at NPR.
Look carefully in this budget about to be released for other provisions not covered in the media, including NPR
It is rumored to include FATCA reciprocity imposition on the entire domestic U.S. Financial Industry and create a DATCA similar to the FATCA that Congress imposed on the rest of the world back in 2010.
Didn’t know about FATCA? Google it, or read the Press Release from its authors back in 2009. They think it will end tax evasion ‘once and for all’. Just like the War on Drugs has stopped drug abuse ‘once and for all. http://bit.ly/V6Aee7
Now, will any MSM press notice or report on on these provisions? Probably not, as they didn’t report on the original FATCA and still mostly ignore it. Not China, however. This in the Asian Investor today http://bit.ly/10zZsks with some in the FATCA Compliance Industrial Complex (FCIC) speculating if China will go along.
Also for those who have never heard of FATCA, this story in China Briefing is a general boiler plate about what FATCA is, told to us again, by those in FCIC. Characterizations are not ones I would make, although it is fairly accurate accounting of the historical story, I will give them that. http://bit.ly/Y3mQT
If the FATCA IGA reciprocity provision is indeed in this budget, it could be a game changer for FATCA, as it will create domestic opposition that has been mostly silent for years. The prevailing thought has been, “The cost of compliance was offshore, so not my problem.”
However, that is about to change. A full FATCA reciprocity regime is what Treasury requires to meet its promises in the FATCA IGAs that Treasury is trying to negotiate (cram down) those countries it has a Tax Treaty with. (That is only 50, and the other 143 countries still have to comply with FATCA as written if they expect to do any business in America and not be hit with 30% withholding on U.S. sourced financial transactions.)
These IGA agreements will NEVER come back to Congress for ‘Advise and Consent’, even though the rest of the world considers them Tax Treaties. Why is that? Treasury is using a legal technical maneuver by calling them ‘Competent Authority’ Agreements and so no further Congressional review required.
However, they still need legislative approval to impose similar 544 pages of new regulations on U.S. domestic Financial institutions to collect and report all the data automatically on all those Non Resident Aliens from 193 countries around the world back to their respective governments revenue departments. The Obama Budget is being chosen as the vehicle to do that, in hopes that it won’t be noticed.
Reciprocity is a BIG COMPLEX undertaking, and the implications are profound, as this involves a wide array of Financial institutions in America including Mutual funds, Insurance agencies, Companies making payments to offshore vendors, Hedge funds, etc, etc, etc, and banks are just a small part of those effected.
We are creating something that has never existed in the history of mankind, a global automatic Tax data exchange mechanism or GATCA if you will.
For some reason, that is not seen as an important enough story to report on by any pubic media like NPR, PBS, PRI. Go figure. I don’t get it. Even if you think this is a great idea, shouldn’t Americans have an opportunity to know and debate this global trend led by the FATCA “Tip of the Spear” in this so called War On Offshore Evasion (WOOTE) ?
If reported it might actually cause some much needed public discussion as to the merits. I think it is bad for the worlds economy, but understand others might think the world needs another 544 pages of regulations on top of Frank Dodd, 1099-B and 1099-K reporting requirements, Basil III accords, etc. http://bit.ly/YNmVvR
Stay tuned. This will be interesting to watch if that provision is indeed in this budget. Just too bad NPR just can’t seem to find a journalist with enough interest to report on it.
Will U.S. financial institutions have to report only non resident aliens’ accounts or will they have to report all accounts that have a foreign address (can it be U.S. citizens who live in such a country) that is in a country who has signed an IGA 1 agreement?
yes it could be US citizens (US persons) living in such a country.
The banks look for anyone who has US indicia (uses any post office box, US telephone number, standing transfer orders to USA, and other indicia).
oops, excuse me, you meant USA banks reporting to foreign govts. Disregard my response.
Yes, sorry. I meant if U.S. citizens who live in a IGA Model 1 agreement country, U.K., Ireland-have financial accounts-bank, brokerage, insurance, etc-in the U.S. will those U.S. financial institutions have to report those accounts to the IRS who in turn will report this to the respective foreign governments? Or is just non resident aliens who have accounts in the U.S.?
That’s what REAL reciprocity would be. However, the IRS thumbs its nose. They admit it is a joke.
I do believe there is in the IGA Model 1 where the U.S. will report all financial accounts of people who reside in the country involved in the IGA. I’m reading articles that mention non-resident aliens’ accounts will be reported. I suppose I have two questions, one will U.S. citizens who live in a agreeing country IGA Model 1 have their accounts reported by the IRS to that country and two, is this dependent on Congress passing this as law or because it is an IGA, there is no need for legislative approval? The IRS can and has to implement reciprocity
There is no law supporting that type of reporting, although the IRS and administration would like it to be so.
Mark Twain is right that there is no law supporting full blown reciprocal reporting, however, the IRS has issued a bulletin 2012-20 using what it says are its regulatory authority to require US banks to start reporting on NRA interest to the IRS for trading / exchanging with the governments of the IRS choosing. I call that DATCA lite.
Florida and Texas banking associations are opposing it. Read more here…
So the U.S will be reporting non resident alien’s accounts to their respective government but not the accounts of U.S. citizens who reside in a pertinent country with an IGA Model 1 agreement, correct?
I don’t know that to be a fact. I would have to read the IGAs carefully. As a TAX resident of that country with a TIN, you could in theory be reported also, but not sure how that would work, as your US bank would only see you as a US Citizen. As a practical matter maybe not, but really not sure.
Came across this great quote by Emily McMahon of Treasury – and wanted to highlight it somewhere at IBS.
…”we see no principled basis on which to require that financial institutions based in other countries collect and provide us with information on U.S. taxpayers, if we take the position that our own institutions should be exempt from similar requirements. To the contrary, we believe that it will be critical to the success of our efforts to implement FATCA that we are able to reciprocate….”
Remarks by Acting Assistant Secretary Emily McMahon at the NY State Bar Association Annual Meeting
Remarks by Emily S. McMahon, Acting Assistant Secretary for Tax Policy
New York State Bar Association Tax Section Annual Meeting
Tuesday, January 24, 2012
Thnks for that. I will reference this link on my post with the history and timelines of DATCA