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FATCA Discussion Thread (Ask your questions) Part Two

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Please ask your questions here about FATCA.

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NB: This discussion is a continuation of an older discussion that became too large for our software to handle well.  See FATCA Discussion Thread (Ask your questions) for earlier discussion.

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3,498 thoughts on “FATCA Discussion Thread (Ask your questions) Part Two”

  1. @DoD

    With respect, we don’t know whether monalisa1776’s dividends are low or not. In the meantime, having spent a lot of both cash and LCUs getting compliant and then renouncing, it seems odd for her give up just yards from the finish line by not tidying up any final loose ends.

    It is at least worth seeing what will happen if she send her US broker a W-8BEN, because not doing so usually causes more problems in future than operating as designed. Despite some alarmist press articles, it is actually pretty likely they will handle it correctly rather than summarily close the account. In the worst case, perhaps the current holding can be moved to a UK broker (not a bad way to distance oneself further from the IRS in any case).

    Ironically, if these dividends really are tiny, the IRS would hear nothing absent a W-8BEN. Brokers only have to issue a 1099 if dividends or interest exceeds $10, whereas they have to issue a 1042S for any amount at all. I received one this year from Vanguard that, thanks to rounding, showed $0 in interest and $0 in withholding. Now that’s a genuine waste of paper.

  2. @Watcher, I decided in the end to post the W8-BEN today to them and am hoping they’ll let me keep my account open…I agree that it’s best to do the thing correctly, even it it means losing the account. @DoD, thanks for trying to reassure me! 😉

  3. Interesting but any advertising at least gets the word out . I am sending queries to MANY people Senate Finance Committee members / media / politicians here and there I have and will again keep on telling superannuation funds they MUST advertise to American clients the negative effects of Super on them.

    I query their legal position if Americans took out a mass law suit to cover any taxes to pay

    http://www.mondaq.com/unitedstates/x/518610/property+taxes/The+Super+Reason+Australians+Are+Renouncing+Their+US+Citizenship

    http://www.superannuation.asn.au/policy/contact-form

    Person I was advised to contact at QSuper

    James.Cheetham@qsuper.qld.gov.au

  5. I have a trading account wherin i trade only equity. Day trading and short term.do i still have to submit fatca compliance

  7. Badger… I can’t understand what they are on about here, but I get that they are having problems. Are you able to put this into layman’s terms?

  8. @Gwevil, alas, as a layman, I don’t understand it. However, the part that initially interested me was that it was related to FATCA, and to this reference to lack of expertise in treaty terms and application, “…we are concerned that withholding agents would need tax treaty expertise and information that they do not currently possess…” and the organization flagging the danger of errors and over-witholding, with an IRS form that is characterized as “an already difficult form for which the error rate already is high.” ;

    “..Part III of Form W-8BEN-E regarding “Claim of Tax Treaty Benefits” includes new checkboxes for the limitation of benefits (“LOB”) provisions that may be included in an applicable tax treaty. This inclusion is a substantial change compared to prior versions of this form and will entail significant effort to update systems and procedures to allow withholding agents to validate Forms W-8BEN-E that include a tax treaty claim. It is unclear to what extent a withholding agent is required to substantiate the accuracy of the LOB box checked, and we are concerned that withholding agents would need tax treaty expertise and information that they do not currently possess to fully validate these boxes. We also believe that without adequate implementation time this new requirement will result in a high level of failed treaty claims, which will give rise to over withholding. This requirement adds significant complexity to an already difficult form for which the error rate already is high.”…………

    Perhaps someone else can weigh in if they understand the issue more fully. But it looked like another instance of the IRS pushing non-experts to make significant judgements on a form already prone to errors, with over-withholding as the result.

    I posted it in case it had significance.

  10. W8-BEN E is the version of the form for entities (rather than individuals).

    From the IRS website:

    The “Limitation on Benefits” (LOB) article is an anti-treaty shopping provision intended to prevent residents of third countries from obtaining benefits under a treaty that were not intended for them. Entities that are residents of a country whose income tax treaty with the United States contains a LOB article are eligible for the benefits provided in Table 1 only if they satisfy one of the objective tests under the LOB article or obtain a favorable discretionary determination from the U.S. competent authority with regard to the specific benefits

    So essentially, an FFI accepting form W8-BEN E would need specialised knowledge to know whether the account holder qualified for the LOB provision claimed on the form. In the letter Badger linked, SIFMA is arguing (with reason) that FFIs should not be responsible for determining whether the form is completed correctly with respect to LOB provisions claimed.

    The individual version, form W8-BEN, has no mention of LOB provisions.

  11. Thanks Karen for that explanation. I got the impression that the form would often apply to small non-US businesses with US clients?

  12. My understanding is that the W8-BEN series of forms is meant for non-US entities or individuals receiving US source income that requires withholding by the payor; especially when a treaty provides for a lower rate of withholding. Under FATCA, FFIs would collect the form if it was possible for the account to pay out US source income (such as a brokerage account investing in US securities). I suspect many FFIs are requiring this form regardless of the source of the income from the account. Unless the non-US small business is considered a financial entity of some sort, I don’t think the location of clients matters under FATCA. W8-BEN may be required by any US payor (such ss a client) if withholding is required on the payment – this is not due to FATCA.

  13. Thanks @Karen for your comments. Since I don’t own/operate a business I often can’t recognize how/when businesses (other than FIs) are affected by US extraterritorial CBT/FBAR/FATCA practices, aspects, forms, etc. . I try to post links when I find them in case others do recognize and can explain/anticipate their relevance to the those affected.

  14. @Badger
    Love your links. They often highlight aspects I hadn’t thought of. Happy to help when I can.

  15. Found your blog very helpful, can you help me with a question about FACTA and closing of Chinese bank account?

    If I have a bank account there that is dormant with just over 50k in it, money is my family members, not mine, and I don’t want to file the deliquent fbars, can I just close the account and transfer the money to relatives? Or is it too late to do?

  16. “I feel your pain. I long thought that all of the Brockers who were excited over the potential change in government would be severely disappointed once Muclair or Trudeau got into power. But especially if it was the Liberals.”

    My view was the same, however I was willing to give them a chance and they F’d it up. Won’t be ever voting for them. Never did during my 46 years of life. I voted NDP this election, and the Liberal in my riding won. He didn’t have much of a chance anyway.

  17. Maybe thank him

    https://www.facebook.com/Repmarkmeadows/

    Mark Meadows
    ·
    Our tax laws should never violate a U.S. citizen’s right to privacy–the Fourth Amendment is not negotiable.
    Today I introduced a bill–H.R. 5935–that will repeal America’s global tax law which violates Fourth Amendment privacy issues and places unnecessary burdens on taxpayers. You can read more about the bill at the link below.
    https://meadows.house.gov/…/…/rep-meadows-introduces-hr-5935
    RELEASE: Rep. Meadows introduces H.R. 5935
    Washington, D.C. – On Wednesday, Rep. Mark Meadows (R-NC) introduced H.R. 5935—a bill that would repeal America’s global tax law which violates Fourth Amendment privacy right. H.R. 5935 will repeal provisions of the Foreign Account Tax Compliance Act (FATCA), included as part of the 2010 HIRE Act, t…
    MEADOWS.HOUSE.GOV

  18. In addition to the “trail-blazing” U.S. FATCA fishing expedition law imposed on the world — there is now this new Dutch-Swiss fishing expedition ruling:

    Swiss Supreme Court rules, on an appeal, that the Dutch fishing expedition request to turn over Swiss bank accounts of Dutch residents to Netherlands (without naming specific accountholders) is a perfectly acceptable fishing expedition.

    “Moreover, under the OECD administrative assistance convention concerning Switzerland, group requests [fishing expeditions with no names disclosed] will be possible in any case as of 2017.”

    See: http://federaltaxcrimes.blogspot.ca/2016/09/swiss-supreme-court-approves-netherland.html

    and http://blog.kpmg.ch/swiss-federal-supreme-court-considers-dutch-group-request-permissible/

  19. @john lee, sorry no-one has responded to you yet. I don’t know enough about your local situation to comment. I will post it on the specific country thread and see if anyone sees it there. Caveat; can’t really give you firm advice though – we’re not lawyers.

  20. February 28, 1983:

    “…just another few weeks in the life of Canada-U.S. relations. These crises come out of nowhere and can affect the lives of thousands or the sovereignty of foreign states. Crises not caused by the foreign policy of the United States but by the action of assholes occupying obscure positions in obscure agencies. And who do you discuss the crises with — the assholes who caused them? High officials in the administration who have no control over them?…”

    —Allan Gotlieb, Canadian ambassador to United States

  21. Canadian credit unions, CRS and FATCA:
    “……….CCUA is urging the federal government to apply a risk-based approach to CRS implementation in Canada.

    As currently proposed, legislation implementing the CRS would require all Canadian financial institutions to report on accounts held by non-residents of Canada or the U.S. to the Canada Revenue Agency. But not all financial institutions pose the same risk for cross-border tax evasion, a fact that is implicitly recognized by the exemptions embedded in the Foreign Account Tax Compliance Act Inter-Governmental Agreement (FATCA IGA) that Canada signed with the United States in 2014, and on which the CRS is based.

    However, size-based exemptions similar to those in the FATCA IGA were, by agreement of participating countries, omitted from the CRS during its development and are consequently also excluded from the legislative proposals. As a result, even financial institutions, such as credit unions, that are at low-risk of being used for cross-border tax evasion because they only have a handful of accounts held by non-residents1 will be required to put in place new policies and procedures as well as alter their operational, record-keeping and reporting processes to comply with CRS. Moreover, since the U.S. will not be participating in the CRS, credit unions that have obligations under the FATCA IGA will have to maintain two separate, though related, record keeping and tax reporting regimes.

    The CRS does, however, open the door to the designation of jurisdiction-specific “low-risk non-reporting financial institutions,” subject to certain criteria being met, including a clear demonstration of their low-risk nature. To that end, CCUA is proposing that implementing legislation include a test similar to the “98 per cent Test” used under the FATCA IGA to annually exempt institutions that have two per cent or less of their assets held by non-residents from CRS obligations. In doing so, the federal government would reduce unnecessary regulatory burden on low-risk financial institutions, while compliance efforts in and on financial institutions could be focused where there is the greatest risk of being used for cross-border tax evasion.

    .The overwhelming majority of credit union members are Canadian residents, and a survey conducted by CCUA, found that the median number of non-resident credit union members who are residents of countries other than the US was just three. ”

    from;
    Submission to the House of Commons Standing Committee on Finance re: 2017 Federal Pre-Budget Consultations
    August 5, 2016
    https://www.ccua.com/government_relations/submissions_appearances/2017_pre-budget_submission

  22. People should be following what is happening in Trinidad. re FATCA
    For ex.

    “…..Young insisted the legislation was “not legislation that affects the rights of citizens of T&T. This legislation affects US taxpayers and residents. So all the propaganda that they (Opposition) are attempting to protect citizens of T&T are completely false, inaccurate and wholly irresponsible.”

    Young added: “This legislation is not about T&T citizens.”

    He insisted that the issue of reciprocity “will not come into play until the US Government passes domestic legislation.”….”

    How is it possible that anyone at this stage could possibly say of FATCA that;
    “………. the legislation was “not legislation that affects the rights of citizens of T&T. This legislation affects US taxpayers and residents…..” ??

    Is that deliberate obfuscation similar to Canadian CON MPs claiming the same, or is it shameful ignorance?

    And how will the US respond? Will they grant an extension in order not to be seen to be punishing a small country for exercising its own sovereign political system as democracies are supposed to do? Unlike Canada where the CONS had a majority and treacherously pushed it through in an Omnibus bill. What does it say to the rest of the globe about the US if it is seen as likely to punish a much smaller country simply because that country’s representatives carried out their duty of care to their fellow citizens and their country’s sovereignty by actually subjecting this foreign USextraterritorial extortion to some kind of scrutiny and democratic political process?

    What do these events in T&T mean for countries like Canada, where the previous opposition party – the Liberals – are now the craven ones currently abusing Canadian taxpayer revenues in order to defend the FATCAdeal with the devil that their foes the CONS signed – and that they now abuse our taxpayer revenue and government resources to defend? Apparently the Opposition party in Trinidad have bigger gonads than all of Trudeau and his minions put together in Canada http://ipolitics.ca/2016/03/22/brison-garneau-endorse-deal-to-share-canadian-banking-records-with-irs/ https://ipolitics.ca/2016/03/17/trudeau-liberals-reverse-position-on-controversial-irs-information-sharing-deal/ since now the previous opposition party – now the Liberal ruling party has reversed itself and twists itself in knots in order to rationalize its treacherous about face and betrayal of fellow Canadians;
    “………Lebouthillier’s position is also in sharp contrast with the positions taken by three of her current cabinet colleagues prior to the election – Treasury Board President Scott Brison, Public Safety Minister Ralph Goodale and Transport Minister Marc Garneau.

    Lebouthillier’s position also contradicts the position taken before the election by her own parliamentary secretary, Emmanuel Dubourg, a former CRA official, who warned in a June 2014 oped in the National Post that FATCA and the information sharing deal was dangerous.

    “The largest assault by the Conservatives against personal information came in the form of Bill C-31, the omnibus budget implementation bill,” Dubourg wrote. “This bill would amend the Income Tax Act, allowing an officer of the CRA to provide confidential information to domestic or foreign police organizations. This breach of Canadian tax secrecy is dangerous. Under this act, an official could unilaterally disclose confidential information, regardless of whether criminal proceedings had been initiated.”

    Dubourg said Canada should require a judge’s order before turning information over to the IRS.

    “We must deny the Conservatives permission to allow the transmission of personal information without the authorization of a judge, under the pretense of combating tax evasion. Instead, the government should focus its energies in countering the scourge of tax havens, where they could recover billions of dollars.”…”…..

    Instead, the Liberals presided over the transmission of that same personal information, under the very same pretense, while the current Finance Minister Morneau’s business interest (until after the election) is now found to have an offshore operation https://www.thestar.com/news/world/2016/09/21/1-tax-haven-3-of-canadas-biggest-banks-2000-offshore-companies.html and the wealthy and influential attempt to explain why they have actual offshore accounts https://www.thestar.com/news/world/2016/09/22/how-a-senator-ended-up-as-a-director-of-an-offshore-bahamian-company-without-her-knowledge.html

    And yet, strangely it is ordinary Canadians http://ipolitics.ca/2016/04/14/baby-girl-drawn-into-cra-irs-information-sharing-controversy/ who the Conservatives and now the Liberals are denying their Charter and constitutional rights when their local Canadian bank account and personal information is sent without consent to a foreign country http://maplesandbox.ca/wp-content/uploads/2016/04/TD-Baby-Elle-Letter.pdf http://ipolitics.ca/2016/04/14/baby-girl-drawn-into-cra-irs-information-sharing-controversy/ http://www.forbes.com/sites/robertwood/2016/04/19/dear-president-obama-im-a-baby-not-a-tax-cheat/#6463683b32b1 .

    And despite sending the account and personal information of Canadian infants to a foreign country, our Revenue Minister Lebouthillier thinks that FATCAnizing Canadians with Canadian taxpayer revenue is worth defending https://openparliament.ca/search/?q=Party:+%22Liberal%22+Person:+%22Diane+Lebouthillier%22+fatca&sort=date+desc

  25. Don’t know where to put this as it is not directly FATCA related, but does raise issues of how Canadian’s personal information can be impacted by the US Patriot Act:

    https://www.priv.gc.ca/en/opc-actions-and-decisions/investigations/investigations-into-federal-institutions/2015-16/pa_20160517_cra/
    Complaint under the Privacy Act (the Act)

    ” The complainant raised concerns about a contract (the “Contract”) between the Canada Revenue Agency (CRA) and Mobilshred Inc. for the outsourcing of the storage of Canadians’ personal taxpayer information. More specifically, the complainant is particularly concerned that Canadians’ personal taxpayer information could be vulnerable to disclosure to authorities in the United States (US) under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act, since he believes that Mobilshred Inc. is a division of Recall, a company that is based in the US.
    Although the complainant did not allege a specific violation of any provision of the Act, our investigation centered on whether the CRA has, in the context of the Contract, properly safeguarded any and all of the personal information entrusted to Mobilshred Inc. from unauthorized disclosure under the Privacy Act.”

    “Background to Complaint

    This Office has previously raised concerns about the privacy implications of the cross-border flow of personal information.Footnote 1 Once personal information about Canadians is transferred outside of Canada, whether by a Canadian government agency, a private organization, or by Canadians themselves, the laws of the country in which the information is held will apply. Those laws will determine when government agencies such as police, security, and tax authorities can obtain access to that personal information. In some cases, foreign laws may provide access to personal information about Canadians in situations that many Canadians might find objectionable or inappropriate.
    Under US domestic law, there are various legal mechanisms that could allow authorities to access records from foreign companies. While a determination of the law in the US relating to compelling information from an entity located in another jurisdiction falls outside our mandate, for background purposes and in general terms, records in the custody of a foreign organisation could be compelled by a US authority or Court if the organisation has some sort of physical presence in the US or has sufficient ties to the US, regardless of whether the foreign organisation is owned by US or domestic shareholders and regardless of where the records are physically stored.
    One example of such a mechanism is an order under section 215 of the USA PATRIOT Act, which permits the Director of the US Federal Bureau of Investigation (or a delegate) to apply to the Foreign Intelligence Surveillance Court for an order to produce “any tangible things” from any individual or organization that is relevant to an investigation of international terrorism or clandestine intelligence activities.Footnote 2 There are also other mechanisms that could be used, such as grand jury subpoenas or administrative subpoenas.
    There are also other means that US authorities could employ to obtain records from a foreign entity over which a US authority or Court does not have jurisdiction. Examples include Mutual Legal Assistance Treaties (“MLATs”), bilateral treaties regarding evidentiary assistance, and letters rogatory.Footnote 3
    However, the complainant’s specific concern is that US authorities could gain access to the personal information of Canadian taxpayers under the USA PATRIOT Act if it were held in theUS, which he believes is possible, since Mobilshred Inc.’s parent company, Recall, is a foreign-owned company with operations in theUS. In support of this position, the complainant made reference to the business listing for “Recall & Mobilshred Inc.” with Industry Canada:

    Recall Canada Holdings Inc., is a Canadian company and is part of the Recall Global family which today is known as a global leader in lifecycle information management offering Document Management, Digital Solutions, Data Protection and Secure Destruction. Currently, Recall supports approximately 80,000 customers in more than 20 countries on five continents.Footnote 4″………………..

    Informative since the description of how the CRA proceeded demonstrates that they fully understand what happens to Canadian data if it crosses into the US. Which makes their support for the FATCA IGA even more egregious given that they also know that there will be some data which will belong to Canadians who are not even subject to FATCA as they are not “USpersons”. Yet, they have not been able to give assurances that this will not happen – and in fact, we know that reporting has taken place on accounts below the reportable threshold https://ipolitics.ca/2016/06/15/cra-shared-information-on-smaller-bank-accounts-with-irs/ .

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