FATCA Discussion Thread (Ask your questions) Part Two
Please ask your questions here about FATCA.
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Ok guys, here’s a question someone asked me:
Swiss citizen and resident, but studied in America for 5 years about 20 years ago. He was there on a student visa and was issued a SSN. His bank has given him a W8 to sign. A US person or not? My guess is no.
@AJ
From those details, absolutely not. Everyone who legally works in the US (including those on student visas and limited term wok visas) is required to get an SSN and pay both income tax and social security tax, but that in no ways makes them a “US person” after they leave. The only way such a person would be a “US person” is if they received a green card and later did not complete the process to cancel it.
Although not relevant in this case, all those working in the US on student visas and limited term work visas are required to file fbars if they have an equivalent total of US$10,000 back in their home country. This might not pertain to too many students, but I doubt very much that all the foreign businessmen, lecturers, musicians, etc, who spend something like 2 to 5 years working the US actually file fbars or even bother to report any income they have back in their home country.
I received a notice from my bank informing me that they were complying with FATCA and would be turning over information on me to the IRS. Of course, I threatened them with a lawsuit. They included forms W8-BEN and W-9 for me to fill out, and I made them aware that any official documents in France, in whose jurisdiction I live as a citizen, are legally required to be written in French. I next wrote a letter to the French government inquiring about my citizenship status, which follows in translation:
Subject: FATCA
Mr. High Commissioner,
With the application of American law FATCA, and as I am of both American and French nationality, I am calling on you for clarification concerning my French citizenship, whether I am still a French citizen enjoying all the rights and privileges of citizenship on the same, equal footing as all other French citizens, or whether henceforth, I could be treated as a citizen of a foreign country by France and its institutions, whether public or private, because of my place of birth, or for any other reason whatsoever.
I ask these questions because I received a letter from my bank informing me of the policies it will impose on me as well as other French citizens in a situation similar to mine, due to the initiative of the United States Internal Revenue Service (IRS) of the US Department of Treasury. This is forcing non-US banks and financial institutions around the world, under penalty of sanctions, to lift bank secrecy; to act as officers responsible for enforcing the rules and regulations of the IRS; to act as their collection agents; to execute the orders of the IRS, and, eventually, to assume other duties and responsibilities with respect to a particular class of citizens foreign to the United States. Thus, these requirements oblige banks and other non-US financial institutions to denounce to the IRS this class of citizens foreign to the United States because they have been classified by the IRS – in some cases arbitrarily – as “US persons.”
This has an effect, of course, on French citizens who are dual nationals, and it is the discriminatory nature of FATCA against this minority of citizens that poses a problem. Like so many others in the same situation, I am fully a French citizen residing in French territory under the jurisdiction and protection of France. I reject the idea that my country and the institutions of my country, whether public or private, may treat me differently as a citizen of a foreign country subject to its laws, and not as a French citizen with full rights equal all other French citizens, especially while I am on French soil. France should not permit a French citizen to be treated by any French entity as a “US person,” or “person” of any other country – that is, as a foreigner – or allow foreign countries to impose their definitions or characterizations of its own citizens.
Or, am I to understand that French public and private institutions can treat French citizens as foreigners, or as second-class citizens, because of their place of birth or origin, in a discriminatory and unequal manner with respect to other French citizens?
However, the French constitution states:
PREAMBLE
The French people solemnly proclaim their attachment to human rights and the principles of national sovereignty as defined by the Declaration of 1789, confirmed and complemented by the Preamble to the 1946 Constitution and the rights and duties set out in the Charter for the Environment 2004.
Art 1
France is an indivisible, secular, democratic and social republic. It guarantees equality before the law for all citizens without distinction of origin, race or religion.
Everyone has the duty to work and the right to obtain a job. No one may be harmed in his business or his job because of his origins, opinions or beliefs.
In addition, the Charter Of Fundamental Rights Of The European Union states in its Article 21:
Non–discrimination
1. Is prohibited, all discrimination based notably on sex, race, color, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation.
2. In the scope of the Treaty establishing the European Community and the Treaty on European Union, and without prejudice to the special provisions of those Treaties, any discrimination on grounds of nationality shall be prohibited.
I believe that a discriminatory and unequal treatment of a class of French citizens, especially incited by the hegemony of a foreign country, is in violation of the French Constitution, The Charter Of Fundamental Rights Of The European Union and morality.
Also, after some research, I see that it is not yet clear whether FATCA is even in compliance with the laws or the Constitution of the United States, as well as those of many other countries. There is ongoing litigation that has not yet been judged. My doubts arise, also, from the following views of American and Canadian lawyers specializing in the question, [of which an extract in English with translation is included]:
“The legal status of these IGAs is unclear and susceptible to challenge. They are not treaties under U.S. law because they have not been submitted to the Senate for advice and consent pursuant to the Treaty Clause of the U.S. Constitution, Art. II, sec. 2, cl. 2. Nor are they congressional-executive agreements because Congress has not authorized the Treasury Department to conclude the IGAs as part of the FATCA implementation effort. »
https://abolishfatca.com/BoppFATCALegalOpinion.pdf
Thus, I would like to know:
1. Whether the FATCA requirements accepted by the banks of the territory of French Polynesia arise from an agreement or treaty between the government of France and the government of the United States, which treaty imposes these obligation on banks and other financial institutions, as well as on individuals having dual French and American nationalities; or if the initiative comes from an agreement between French banks and the government of the United States with merely the authorization of the French government; that is, there is no legal obligation imposed on the banks to enter into these agreements with the US Administration.
2. The position of France on the constitutionality and legality of the measures taken by the French government and French banks if, by having to abide by the requirements of FATCA, this translates into discriminatory treatment with respect to certain French citizens or a certain class of French citizens.
3. If France will treat dual nationals of both French and American citizenship living on French soil as foreigners according to the terms of FATCA, or whether she will treat this class of persons as French citizens still under her protection.
My opinion is that we are in France, under French law, and not under the domination of a foreign government; that France is a sovereign country and not the vassal of a foreign country; that she must not give in to coercion, sanctions or threats of sanctions and other hostile and hegemonic acts coming from even ostensibly friendly nations. These troublesome policies of the United States, which are an admission of the limits of its legitimate jurisdiction and sovereignty revealed by the fact that it has to “twist the arms” of foreign financial institutions to carry out its will in its place, are the result of its poorly designed fiscal system of extra-territorial taxation, which creates a moral hazard that establishes the principle that foreign powers can impose on other nations the adoption of discriminatory policies against their own citizens.
France already has a sad and shameful past when, in the last century, according to the demands of German power, she had discriminated against a minority class of its citizens on the basis of their Jewish origin, with the consequences being the arrest and deportation of these French people to the death camps in Europe. While the consequences of the policies of today imposed by the United States might be less dramatic, the principle remains the same, and it is this principle that must be rejected and fought.
I know the banks are under pressure from the American government and risk sanctions for non-compliance with their requirements, but there are higher principles and interests to defend than mere convenience or profit, as well as the moral hazards to avoid. The agreements signed should have been negotiated more thoroughly and rigorously to protect all French citizens from harassment by foreign nations and, thus, avoid potential constitutional conflicts and the litigation that will surely follow.
For your information, be aware that American expatriates are deprived of voting for representation in Congress, whether the House of Representatives or the Senate. All these restrictive laws have been passed by the American Congress with no way for American expatriates to make their voices heard, or to have any influence whatsoever on the outcome of these laws that directly affect them. They are in every sense of the words, as well as in practice, second-class citizens, having all the responsibilities of citizenship, but without all the rights.
Thank you for your attention to my concerns, and I ask you, Mr. High Commissioner, to believe in the assurance of my sincere and respectful greetings.
That’s incredible, Yazz. All of your letter is very good, but I particularly like your words that draw a parallel between what’s happening today to the mistreatment of Jews in France during the Nazi occupation – “might be less dramatic, the principle remains the same…”
Yazz: Wow, Wow and WOW!!!! Once we hear about the status of our UN Human Rights Complaint it would be marvelous if you would forward your amazing letter to the UN High Commissioner for Human Rights. You can check on the status of the Complaint at the top of the sidebar here at Brock. You have made a stunning contribution to the documentation of the FATCA/CBT debacle.
@AJ, I have to ask why the bank of this friend thinks he has an American connection in the first place. He’s Swiss and presumably has a Swiss address. Why would they think he has any connection to the States? Did he tell them he’d studied there 20 years ago and was given an SSN?
He’s definitely NOT a US person for tax purposes in any way shape or form.
@Yazz, merci!!
The French Government should find it a complete irrelevance what any Foreign Government thinks any of its own French Citizens may be.
A French Citizen resident in France can only be France.
It is my understanding that a French Citizen resident in France will not be extradited from France. Does this mean that such protection will not be provided to a French Citizen if a foreign government (USA) considers them to be US?
@Yazz, great letter. Please contact Frederic Lefebvre, representative of the French abroad.
http://www.frederic-lefebvre.org/
He has been vocal about FATCA and may be able to help.
Thank you, Yazz, for your actions, including writing this letter and sharing it with us!
Bravo for your reminder of France’s shameful past in discriminating by origin.
Your words are ones that every one of our government representatives in whatever of our countries needs to contemplate as our elected government representatives are NOT carrying out their responsibilities to protect ALL of their citizens. How can the laws of our countries that define equal rights as a principle be made a sham? Litigation is necessary in all corners of this world.
Canada’s litigation is at a critical point, nearing a deadline with more $$$ needed: http://www.adcs-adsc.ca/ — not just *US Persons* but ALL Canadians. Somehow we must make our fellow countrymen better aware of the precedence of US extra-territorial actions, thereby eventually taking away their rights as well.
Again, so often cited here and which you remind your French government and we must remind all our countrymen,
from Martin Niemöller’s Famous words:
Thank you once again!
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@Yazz
Excellent letter. As Calgary noted, litigation is needed all over the world. You say that you threatened your bank with a lawsuit. Is there any way that a class action lawsuit could be initiated in France against the French government for violating the French constitution’s article of equality before the law for all regardless of origin (as well as the European Union’s Charter)?
@Yazz
Excellent letter!!! Thank you for sharing this.
A strong brief to launch a legal challenge – and to add to the legal challenge to Canada’s FATCA IGA.
If possible, could you please post the French language original as well? It would be useful resource for outreach and advocacy to the large Francophone population in Canada – especially in the Province of Quebec, where there seems to be little public awareness of FATCA.
Hello, There are very few forums on FATCA on the internet, so I’m posting here. Please point me to any other discussion sites you know of.
I am helping a person who is a dual US citizen. She has money in a Type 1 “deemed-compliant” (no formal treaty) Caribbean FATCA jurisdiction, as a small corporation. It is below the $250K de minimis entity cutoff for reporting. This means that the bank is not obligated to review or report the account because of its small size. The bank, however, may be free to report it if it wishes, subject to local law, and consistency rules. The internal mechanics of this bank are opaque. In fact, it is in financial difficulties.
Does anybody have a sense what the actual reporting policies of foreign financial entities will be when faced with de minimis accounts? One would think that the banks would want to maximize privacy while still respecting the law, but nobody is talking about the issue. One line of reasoning is that banks will be lazy, and they will report everything. However, this doesn’t quite make sense, because they still have to look for American indicia before reporting, so they save nothing by failing to implement the *de minimis* cutoff.
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Excellent letter Yazz !
Re comment by noone on reciprocity:
I read http://www.globaltaxenforcement.com/fatca/treasurys-fincen-proposes-rules-forcing-u-s-financial-institutions-to-collect-data-for-fatca-reciprocity/
Does this mean that the U.S. really intends to force American banks to require all customers, including American citizens living in the U.S., depositing and investing money from American sources, to answer questions about their birthplace, their parents’ birthplaces, and other questions to determine “indicia” used by the U.S. to identify a “U.S. person”? Or are they just interested in identifying foreign accounts, such as an account in a U.S. bank held by a Brazilian living in Brazil?
Those in the UK might want to keep an eye on this issue below, which sounds alarmingly like the UK is being inspired by the worst aspects of FATCA in terms of the potential catastrophic impact on ordinary people and the lack of meaningful distinctions or recognition of motivation, intent, scale, etc.; failing to surgically target only deliberate tax evaders, and imposing draconian and life altering penalty regimes on even the most minor error:
‘HMRC Chief Quizzed on Potential Offshore Tax Evasion Penalties’
by Lou Charlton
Published: 03 October 2014
“..Jim Ferguson, deputy director leading the HMRC Centre for Offshore Evasion Strategy, explained to the global forum of tax experts from Hong Kong, Malaysia and Ireland, as well as the UK, about the proposals to make failure to report offshore income or gains a criminal offence, regardless of motive or intent….”…..
“…..Tom Duffy, ACCA’s chair of the Global Forum for Taxation, said: “Although an innocent mistake might result in no more than judicial censure or a small fine, this would still result in a criminal record which could have serious repercussions for those involved.
“Making it easier to secure convictions of deliberate tax evaders is welcome, but we might question whether it is right for the government to use this very blunt weapon of a strict liability offence as a conspicuous display of legislative action when it will in fact have very little impact on dissuading determined evaders before the event, and may punish innocent taxpayers who are simply caught out by the complexities of international law.”..”
http://www.thecsuite.co.uk/CFO/index.php/tax/133-offshore-tax-evasion-penalties-454354
@Mr M
I’m not the foremost authority, but no one who knows more about this stuff seems to want to answer your questions right now, so I will attempt to. Several people who know more about setting up these kinds of systems say that it might be easier for banks just to comb all accounts rather than stick to the US$50K minimum account value. Also, to the best of my knowledge, the minimum account value for reporting on a FATCA form 8938 is US$200K for non-residents and US$50K for US residents. I hope this helps.
American Citizens Abroad is another great source of information.
@Bubblebustin – “I’m not the foremost authority … it might be easier for banks just to comb all accounts rather than stick to the US$50K minimum account value.”
Thanks you for your reply. I’ve read these replies too.
I’ve been thinking about reporting from the bank’s side. In any event, the bank has to produce a reporting database with the reportable information: 1) US indicia 2) account holder information 3) current balance. The question is what sort of a final query do they on this database, before sending off the data. The current balance is in the database because it must be reported for reportable accounts, after all, so selecting using the de minimis value is trivial at that point.
The non-trivial part is linking together accounts held by the same entity/person. If you have two $30K accounts, they are reportable because they sum to $60K if the bank can do so, but the rules on being able to do so are a little relaxed, so as not to burden the banks excessively.
The question is whether a jurisdiction that emphasized privacy will continue to do so, to the extent permitted by law.
I’ve seen references that state FATCA reporting is to report the December 31 balance of accounts, and never any reference to “the highest balance for the year”.
For example: http://www.cucentral.ca/Connections/Connections%20Dec%202013%20FATCA%20FINAL.pdf
Does anybody disagree, or have links to pages that state otherwise?
Of course, the question is, can you count on any particular FI to use the year-end balance only?
@Mister M.
The fallacy which confuses people on this is the underlying assumption that banks just have one “database” which contains all the information they need and they just need to click a button to select accounts with higher balances. Banks don’t work that way. They have many heterogenous systems which don’t necessarily communicate with one another for many reasons, i.e. technical, organisatorial, regulatory (in many jurisdictions these systems aren’t even allowed to communicate with one another). The list goes on. Querying customer static data for “US indicia” is one thing; querying account data for that customer is a whole different ballgame. If banks aren’t required to do that – and they aren’t – why should they bother to do so? There have already been reports of banks who are reporting on customers with less than $50K balance. Unless you’re a gambling man and you feel lucky, I personally certainly wouldn’t count on them filtering out “US persons” with low balances.
@notamusd – ‘The fallacy which confuses people on this is the underlying assumption that banks just have one “database” …’
I understand this. But at the end, they need to aggregate the customer info with the current balances into a single database for reporting purposes. Otherwise, they cannot combine the account balance with customer information. Then they send this of to their local government (Type 1 treaty) and the government puts into an XML format specified by a Treasury schema.
The de minimis cutoffs are there as a result of negotiations, so they must serve some purpose (apparently easing the reporting burden). Then after identifying US accounts I think they have to contact customers with W8 and W9 forms, another burden, so they have another incentive to ignore the ‘long tail’ of small accounts. And then they may still have applicable banking privacy laws. And there may be manual review of reportable accounts, so that there’s an incentive to impose the account value cutoff using a database query before expensive employee time to check the info.
As you say, this is very uncertain, which is why I’m asking if anyone has any insight on how the process inside these banks operates.
@Mr M,
You make an interesting point that I haven’t noticed before. Since the beginning, many people have been guessing that banks will not elect the optional $50K reporting threshold “because it’s easier from an IT standpoint to just report everyone”. The fact that electing to use the $50K threshold could well save banks a lot of time and money curing indicia is encouraging in that more FIs may make the election than we might guess.
On the other hand, I think we’ve seen an indication that some banks desire to get the information of all pre-existing account holders “filled-in”, including their US personage, regardless of current balances. This makes it a one-time task to gather info on pre-existing account holders and get it behind them. New account holders get queried when the account are opened. This way, they don’t have to be forever on the lookout and updating files on old account holders and the tasks that that requires.
Both ideas seem reasonable, to the point that I’m guessing we’ll see both procedures used by different FIs. That still leaves the safest option being to go with totally non-reporting FIs such as credit unions with local client bases.
@WhatAmI
Yes, these conflicting goals are what make it all uncertain, and it’s why I’m looking for information on how banks are really carrying the process out. On the one hand, banks want low-burden reporting today. On the other, as you say, they want to put their house in order for the future, and not monitor old accounts that will cross the threshold in the future.
The treaty was written with more knowledge of the internal reporting process than I possess. There’s a reason those limits are in the treaty, and a reason somebody wanted them.
This document says that certain revisions were made in 2012 to reduce compliance cost, including the de minimis rules and loosened rules for mandatory aggregation. So the thresholds, more likely than not, will be used, because the banks asked for them, after all. But ‘likely’ is still a big risk for a small accountholder.
The government really wants the whales with the big ($1M+) accounts, and it sounds like they don’t care about the minnows one way or another. They won’t chase them, but if they get sucked in as collateral damage, they won’t spare them either.
Here’s a somewhat quantitative argument. If bank accounts follow the usual wealth distribution of a 1.42 ‘Pareto powerlaw (ie, a long tail of rich people), then the number of bank accounts between $5000 and $50K is 25x larger than the number containing over $50K. (The number of tiny bank accounts smaller than 5K is astronomical under this assumption so I’ve imposed a lower cutoff of $5K). So a bank that decides to report only over the $50K threshold will have 4% of the workload of a bank that reports everything. I think that this logic must have gone into making the law.