FATCA and New Zealand

42 thoughts on “FATCA and New Zealand”

1. Thousands of bank customers called on to reveal US connections
   AMANDA CROPP
   April 19 2016

   http://www.stuff.co.nz/business/79049481/Thousands-of-bank-customers-called-on-to-reveal-US-connections

2. Is it really legal for the US and NZ to FATCA lawyer’s trust accounts?

   “FATCA trust account discussions continue

   21 April 2016

   The New Zealand Law Society says it is continuing its discussions with the New Zealand Bankers’ Association and Inland Revenue concerning the effect the US Foreign Account Tax Compliance Act (FATCA) will have on moneys held in solicitors’ trust accounts.

   In a letter to law firm trust account administrators, the Law Society says the discussions have continued much longer than anticipated.

   “It is hoped this matter will be resolved in the near future on a basis that will involve lawyers in significantly fewer obligations than previously contemplated,” it says.

   The Law Society says that while it cannot give legal advice, it considers that in the meantime it is desirable that law firms which can elect, and wish to elect to be NFFEs (Non-Financial Foreign Entities), do not delay making this election.

   “The benefit of making this election is to avoid the law firm and its trust account entity being financial institutions with all the attendant FATCA reporting obligations to Inland Revenue which that status involves.”……………
   https://www.lawsociety.org.nz/news-and-communications/latest-news/news/fatca-trust-account-discussions-continue

3. Keep an eye out here re NZ law firm trust accounts and the NZ IRD instructions re FATCAnizing them;
   https://www.lawsociety.org.nz/search?query=fatca&start_rank=1

4. And yet another update re NZ law firms, their trust accounts, and FATCA:
   https://www.lawsociety.org.nz/news-and-communications/news/nzls-awaits-fatca-advice-from-banks-and-ird

   “NZLS awaits FATCA advice from banks and IRD

   15 June 2016

   The New Zealand Law Society says it is awaiting responses from the New Zealand Bankers’ Association and Inland Revenue as to how FATCA requirements will affect moneys held in lawyers’ trusts accounts.

   The Law Society has been working with the Bankers’ Association and IRD to clarify the situation with the US Foreign Account Tax Compliance Act (FATCA).

   In a letter sent to law firm trust account supervisors on 19 April 2016, the Law Society said discussions had continued much longer than anticipated…………”

   See also;
   http://www.lawsociety.org.nz/news-and-communications/latest-news/news/fatca-trust-account-discussions-continue
   “FATCA trust account discussions continue

   21 April 2016
   “The New Zealand Law Society says it is continuing its discussions with the New Zealand Bankers’ Association and Inland Revenue concerning the effect the US Foreign Account Tax Compliance Act (FATCA) will have on moneys held in solicitors’ trust accounts…………”

5. @badger
   Thank you for keeping an eye on what is going on in New Zealand. Very little, if anything, being reported here these days. NZ banks/institutions response is variable. Some simply ask “Country of Citizenship”. Others are asking for birthplace. We have received requests to fill out W8-BEN forms from one FI.

6. @osgood, happy to contribute when I find something of relevance to NZ.

   The issue of law firm trust accounts may prove to be an important one – and not only in NZ. Good to keep an eye on it.

   Sorry to hear about the requests. Hope that whatever happens on the Canadian front (and efforts in France and Israel) will help those in other countries.

7. I saw link to this on Twitter. Great letter from NZ;
   https://drive.google.com/file/d/0B6CrpzwfE4CvQzQ1eGJfclhCN2VDRUF1eWJjeFBULXZWUF9B/view?pref=2&pli=1

8. KIWIS check out and join

   http://isaacbrocksociety.ca/fatca-and-australia/

9. I emailed the Privacy Commission of New Zealand to ask about why a ‘non-US person’, would have financial information transferred to the Inland Revenue Department and then on to the IRS. The ‘non-US person’ of course being my spouse, and the accounts being our joint bank accounts at the bank 1 kilometre down the road.

   Here’s the reply:

   Dear XXXXX

   Thank you for your email.

   The Privacy Act 1993 (“the Act”) contains 12 information privacy principles that generally deal with the collection, use and disclosure of personal information by what the Act defines as an agency. An agency can be a public sector body like a government department or a Minister of the Crown, or it can be a private sector body like a company, a business. a club, or a charity or other non-profit body.

   Principle 11 of the Act sets limits on the disclosure of personal information. Principle 11 requires an agency not to disclose personal information, unless an exception to principle 11 may apply.

   However, if another statute directly contradicts principle 11 of the Privacy Act, that statute will override, or “trump” the Privacy Act. So, where other New Zealand law states that your and your [spouse’s] financial information is to be provided to the US government, that other law will apply, and the Privacy Act becomes the subordinate piece of legislation. Here is a link to information about Inland Revenue’s role in FATCA: http://www.ird.govt.nz/international/nzwithos/fatca/role/

   Furthermore, section 23 of the Privacy Act requires each agency to appoint a Privacy Officer to deal with Privacy Act matters within the organisation. Accordingly, you may wish to contact the Privacy Officer at each of the agencies you mentioned to discuss your privacy concerns, in the hope the matter can be clarified.

   I trust this information is useful to you. However, if you wish to discuss any aspect further, you are welcome to contact us on 0800 803 909.

   Kind regards

   Marilyn xxxxxx
   Enquiries Officer

   Office of the Privacy Commissioner Te Mana Matapono Matatapu
   PO Box 10094, The Terrace, Wellington 6143
   Level 13, 51-53 Shortland Street, Auckland 1010
   T 0800 803 909
   E enquiries@privacy.org.nz
   privacy.org.nz

10. @Jay Noone, thank you for sharing that letter with us.

    It is unconscionable that NZ privacy rights could be trumped merely because of marrying someone of a particular national origin or having a particular birthplace. Of what point is it to purport to have human rights in NZ (or in Canada and elsewhere) if they can so easily be overridden just because a more powerful country – the US, demands?

11. https://www.lawsociety.org.nz/news-and-communications/news/update-on-fatca-trust-account-requirements
    Update on FATCA trust account requirements for law firms in NZ

    13 October 2016

12. My complaint to the New Zealand Human Rights Commission has been accepted, but the reply doesn’t hold out much hope for change.

    ‘Hi XXX
    I write in response to your complaint to the Human Rights Commission received late last year. You complained that the Foreign Account Tax Compliance Act 2010, an inter-country agreement developed by the US and adopted by a large number of countries, including New Zealand.

    You have argued that the Act discriminates against you because of your ethnic or national origins.

    Your complaint was considered by our assessment group this week. They determined that we would be agreeable to notifying the relevant government department of your complaint. It is important to point out that our process is limited to dispute resolution and mediation. We have no investigation or opinion forming powers in relation to complaints. Complaints about legislation generally result in no change, but rather, an explanation from the relevant department explaining the requirements of the agreement or legislation and perhaps the reasons it was passed / agreed to.

    I should also point out that there is an exception in the Human Rights Act (sec 129) which allows an agency to refuse to answer a complaint where it concerns international relations.   (Reference below)

    129 Disclosure of certain matters not to be required (1) Where—(a) the Prime Minister certifies that the giving of any information or the answering of any question or the production of any document or thing might prejudice the security, defence, or international relations of New Zealand (including New Zealand’s relations with the government of any other country or with any international organisation); or

    I do not know which Government Agency administers this agreement, it may be NZ Inland Revenue.
    Please advise whether you wish us to progress the matter in the way outlined above.
    kind regards

    Maria XXX Mediator
    Human Rights Commission
    DDI 03 353 0954 / 0800 378 254
    BNZ Building, 201 Hereford Street, CHRISTCHURCH
    Postal address: PO Box 6751, Auckland 1141 ‘

13. That does look pretty useless. But, if the NZ government will acknowledge that they have violated your rights due to bullying by the US, perhaps that will be useful in either the fight to repeal FATCA on the US side, or as further evidence in other countries where people are fighting FATCA (through the courts or otherwise).

14. Jay Noone: It’s good to see that your concerns have passed the first hurdle. That’s more than I can say for our United Nations’ Complaint which is still awaiting attention. I agree that the letter you received doesn’t hold out a great deal of hope. The result of your efforts will probably be a self-serving letter from the government that tells you why they “had no choice” but to cave in to the United States. It won’t be much comfort to you but at least you will have registered your dismay at the whole situation. Do keep us posted!

15. Just came across this FATCA questionnaire from a New Zealand Finaancial Institution. Admittedly, they are small and probably don’t know what they are doing, but it’s the first time I have ever seen the question “Do any applicants have a US citizen parent?”

    See page 6 of the Application Form:

    http://www.norfolktrust.co.nz/uploads/6/2/4/4/62448045/application_form.pdf

    1 Definition of US citizen:
    (a) Were any Applicants born in the US? Yes / No
    (b) Do any Applicants have a US citizen parent? Yes / No
    (c) Are any Applicants US naturalised? Yes / No
    2 Test for US tax resident:
    (a) Do any Applicants have a green card? Yes / No

16. Call to Action from our overseas representative to the US Taxpayer Advocate Service: Sign petition to New Zealand Government to withdraw from FATCA:

    Petition to NZ Parliament to withdraw from #FATCA. You do not need to be a NZ citizen to sign (indeed, I am not a NZ citizen + I signed). So please sign!

    https://twitter.com/TAPInternation/status/1109218893451706368

17. Gordon Elliot Davison posts on Facebook Group: Fix The Tax Treaty:
    https://www.facebook.com/groups/FixTheTaxTreaty/permalink/921278118218193/

    Petition update : the finance and expenditure committee have asked for written evidence in support of why NZ should withdraw from the FATCA IGA. Would anyone here be interested in helping me compile this evidence into a report I will create a google document that we can all collaborate on to maximize our chances of success. After giving written evidence the next step is testifying before the committee which I will be doing via video chat.

    This is my input:

    Response to the Finance and Expenditure Committee request for:

    Written submission supporting the petition: Why NZ should withdraw from the FATCA IGA.

    The withdrawal might be implemented as follows: suspend collection and provision of data under the FATCA IGA to the U.S. on the basis that the U.S. is not providing reciprocal FATCA data; and state that New Zealand will withdrawal from the arrangement in three years if the U.S. does not provide reciprocal FATCA data to New Zealand.

    1) While there was strong indication from The U.S. Treasury that the provision of FATCA information would be reciprocal, including the U.S. providing specified information for all N.Z. citizen accounts in the U.S., the U.S. has not lived up to its end of reciprocity. Nor are there laws in place in the U.S. requiring U.S. banks in future to ask for the country of citizenship and residency of account holders.

    2) Not only is the U.S. not providing reciprocal FATCA information to N.Z., but the U.S. is not a CRS signatory country. CRS is an international effort to determine country of tax residency of domestic account holders, as part of a global effort to combat tax evasion. New Zealand should request that that the U.S. join CRS as this is the international standard which proscribes reporting non-resident accounts to the country of residency. A reaction from the U.S. is that they don’t need CRS as they have [one way] FATCA.

    3) The provision of FATCA information by New Zealand to the U.S. has come at significant administrative cost to banks in N.Z.; to ask account holders if they are U.S. residents for U.S. tax purposes or U.S. Citizens, to keep track of this information, and for annual reporting. If such provision of data was reciprocated, then there would be benefit to N.Z. However, as the U.S. is not providing reciprocal data nor has any plans in place to do so, the benefit is only to the U.S. with the cost shouldered by N.Z. banks. Some say with the continuation of this one-way arrangement that New Zealand should demand that the U.S. pay for the costs to N.Z. of FATCA implementation and ongoing administration.

    4) The required reporting of accounts of New Zealand citizens resident in New Zealand who are also U.S. citizens or Green Card holders, represents to these New Zealand citizens a violation of their privacy. Additionally the New Zealand tax treaty with the U.S. does not shield these people from extra and intrusive FATCA account reporting through form 8938 to the U.S., under threat of significant U.S. penalty at the individual level for nonreporting, if account value thresholds are met.

    The Government of New Zealand may rightfully take the position as a sovereign nation that it may resist laws of other nations imposed on its citizens, on its soil, without its consent. The New Zealand – U.S. Tax Treaty is flawed where there are significant areas where new U.S. law may apply without treaty “protection” against double taxation and intrusive reporting to the U.S. FATCA form 8938 is only one example of many taxes and compliance forms including the recent Repatriation Tax on small New Zealand businesses retroactive back to 1986, as part of the Tax Cuts and Jobs Act, GILTI, AMT, NIIT, tax on N.Z. resident home sales, and other U.S. Federal taxes present and future that New Zealand does not have.

    Proper respect for the sovereignty of New Zealand, would involve the U.S. government asking permission to the New Zealand government for each new tax or reporting law to apply to New Zealand Citizens resident in New Zealand. This is not the practice and thus arguably demonstrates U.S. disrespect for the sovereignty of New Zealand.

    Some say that the U.S. government does not care about how their domestic tax and compliance laws impact citizens of other countries tax resident in other countries, and that they don’t care that they don’t care. The U.S. Treasury may say that they are restricted by legislation passed/not passed by Congress.

    (Note: the U.S. claims right to taxation of global income of its “persons” no matter where in the world they are tax resident, with extra penalty, tax and reporting for assets and income “foreign” to the U.S.; that in exchange for such taxation, reporting, and penalties the U.S. provides zero in the way of resident services to them while they live outside the U.S.).

    Taking this viewpoint into consideration that the U.S. does not care (or consider) how its laws impact citizens of other countries, then the assertion may be made that the U.S. Congress and U.S. Treasury cannot be relied on to formulate its laws in the best and sovereign interests of New Zealand. The government of New Zealand needs to act and has right, and should intervene, to stem, control, and block such extraterritorial U.S. tax and compliance law. A fundamental obligation of sovereign government is to protect its citizens from other countries.

    Arguably the New Zealand – U.S. tax treaty is overdue for proper due diligence into flaws outlined above as part of tax treaty modernisation. The U.S. FBAR law (separate and in many respects duplicative to FATCA 8938 reporting) that U.S. “persons” must report accounts they have signatory authority over (in New Zealand) to the U.S. Financial Crimes Enforcement Unit; as this impacts on job prospects, job promotions, and partnership opportunities for New Zealand Citizens resident in New Zealand, should not be allowed on New Zealand soil. New Zealand should not permit the U.S. to dip into New Zealand’s tax base or permit the compliance reporting that facilitates it.

    Facts:

    1) FATCA was passed by the U.S. Congress in 2010 undebated, without cost-benefit analysis, and attached as a “pay for” to the unrelated Hire Act. The FATCA IGA’s implement FATCA with various countries, under authority of the U.S. Executive Branch by Executive Order, and not as “treaties” approved by the U.S. Senate as tax treaties are.
    https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act

    2) There is no U.S. FATCA reciprocity, it has not been legislated, and is not likely in the future. These were key findings from the European Parliament: Special Committee on Financial Crimes, Tax Evasion, and Tax Avoidance (TAX3): Delegation to Washington D.C. 16-18 July 2018.
    Key findings from the delegation visit: 2.7: FATCA –
    “-FATCA reciprocity: Congressman Pearce would not be against but states that there might be constitutional obstacles connected to protection of [American resident] privacy. Most Republicans however would oppose.”
    http://www.europarl.europa.eu/…/2018%2009%20%2024_TAX3…

    3) Republicans Overseas backed a lawsuit that FATCA violated the U.S. Constitution with 7 claims. This lawsuit was blocked in the courts as it was questioned on standing grounds that the U.S. Government did not directly cause harms under FATCA, but harms resulted from the banks in various countries implementing the FATCA IGA. Republicans Overseas is seeking new complainants for a new effort and angle against FATCA that it violates the Bill of Rights of the U.S. Constitution.
    https://republicansoverseas.com/fatca/fatca_lawsuit_timeline/

    4) In Canada there is an ongoing lawsuit against the FATCA IGA by ADCS: That the FATCA IGA violates privacy protections and the Canadian Charter of Rights, where it prohibits discrimination based on national origin.
    https://isaacbrocksociety.ca/…/lawsuits-involving…/

    5) There are gaps in nations tax treaties with the U.S. that guarantee double taxation and double compliance, even if a person designated by the U.S. as a US person for tax purposes never lived in the U.S. Tax treaties may mitigate double taxation on “like for like” taxes yet often there may be double taxation from the mismatch of two dissimilar tax codes, different timing, and currency fluctuations. Many find preparing tax returns difficult and seek professional assistance. In the case of the overlay of the U.S. code on top of the tax code of New Zealand most find this unfathomable. It does not make sense as the U.S. does not provide resident services in New Zealand. This website documents such gaps in the Australia – U.S. Tax Treaty:
    http://fixthetaxtreaty.org/

    6) Of issue is not the numbers of US persons in New Zealand potentially impacted by FATCA, but the equal application of protections under New Zealand law for all New Zealand Citizens. There are perhaps 25,000 U.S. persons in New Zealand. Over half of these people are New Zealand citizens, based on statistics of dual Australian-U.S. citizens living in Australia. When children of U.S. persons are included who may be claimable by the U.S. as U.S. persons then the number is greater.
    https://en.wikipedia.org/wiki/American_New_Zealanders