FATCA Discussion Thread (Ask your questions) Part Two
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.
@Just Me, thanks for posting that list of the ten things that were red flags for FATCA. It reminded me of those self administered questionnaires featured in glossy women’s magazines (“Know your FATCA-esque quotient!” or “What’s your FATCA score?”). I know it was for practitioners re their US resident clients, but as a ‘US person’ living outside the US, I administered it to myself for a laugh, and since I live permanently outside the US, my score was predictably high! Luckily I don’t meet the FATCA reporting thresholds.
@RRSP Question
In theory, looking at the regulations and the IGAs, yes. $50K is the ‘safe harbor’ rule that keeps you below the threshold…
However… and this is a BIG HOWEVER, and not to want to be accused of “fear mongering”, I think you have to consider that under individual country IGA regulations, like those that are being written by the UK right now, they might ignore the $50K limit.
I can foresee the scenario, where the IRS says, “We only need those accounts over $50, and the UK says, ah shucks, that’s too hard. We will give you everything and you can do your own filtering, if you want.”
This is due to comment petitions by the UK Financial institutions to make their software writers life easier. Too hard to look for and separate out those over and under the $50 threshold.
The UK, who has not finalized their IR regulation instructions, said they understood the need to simplify, and they might just accept the reporting of everything. (Can’t find the link quickly this morning, but I have posted it previously.)
Need to keep our eye on that, as the UK is first IGA, and in the copy cat world of financial regulations, they will be the model that every other county will follow.
I meant to say… “not to be accused of “fear mongering”
@Petros, we need that editing function back, please! 🙂
@RRSP Question,
and to add to Just Me’s comments above about the bank reporting thresholds, if I understand it correctly, the US could change those thresholds in the future too if it wanted to.
Though there is serious reason to doubt that FATCA is actually an extension of existing US tax treaties (see Prof. Allision Christians blog ), the US reserves the right to override treaty terms (using the ‘last in time’) provision – and change the terms unilaterally.
See Prof. Christians blog post excerpt below:
………….”I note that one other Q&A Sheppard mentions is also intriguing, though on the surface it seemed uncontroversial:
Existing IGAs will be interpreted to say that countries may choose the definition of an item in the final regulations which came later in time. Treasury will not amend IGAs wholesale when regulations change, Eggert explained.
This may seem benign–it provides flexibility despite the apparently rigid parameters of the documents (which are treaties, after all, and not so easy to just unilaterally alter at whim). But this is in fact very interesting as a legal matter because it quietly moves the world a little closer to yet another US tradition that many people in other countries find odd if not outright incompatible with international law, namely, the treatment of treaties as equal in legal status to other laws, including statutes and case law, so that treaties can be overridden at any time by a new statute or judicial decision. But it goes a further step to include regulations within that overriding scope–where they might not so clearly belong even under US law.
In other words, the IRS is saying that not only does the “last in time” rule apply to IGAs (as they would to any US international agreement), but we’ll apply the last in time rule to other countries too (even if under their own laws the treaty would override later-enacted domestic laws); moreover the last-in-time rule is now extended to treasury regulations (a unilateral law that will be used to “interpret” a bilateral agreement, yet another controversial treaty interpretation position), and finally we are going to make it the treaty partner’s choice to pick among the regimes to get the best result (which treats treaty partners not as negotiators in a bilateral agreement but rather in the same way as taxpayers subject to an elective regime).”……. from http://taxpol.blogspot.ca/2013/03/irs-brushes-aside-constitution-to-make.html
My understanding of FATCA and the IGA models, is that ALL RRSP’s would be protected in that banks will not be sending RRSP details to IRS regardless of the account balance.
In my opinion, RRSP’s are the safest type of Canadian account that you can have. Imagine if the bank decided on its own initative without your approval to close one because you had US ‘indicia’ and refused to prove your non-US status.. You could sue for damages because of the tax hit that would be forced upon you, nevermind the obvious discrimination issues.
That is my take on it anyway.
@RRSP Question,
I forgot to direct my prior post to you.
Re
@Just Me — I think it will be in comments of this post: http://isaacbrocksociety.ca/2013/01/21/uk-ffis-face-compensation-claims-under-fatca/
I would think that if CRA ends up reporting all information to IRS for a “US person” (based on a US place of birth) that became a Canadian citizen and considering that that person was told by a Canadian citizenship judge that he would lose US citizenship on taking the renunciatory oath, that if that person suffers damage from the CRA reporting that CRA could be subject to MAJOR legal action to recover damages.
Thank you Calgary for being my missing brain! 🙂
RRSP. Yes and yes.
Just Me there you go again with the wild speculation. It doesn’t really help RRSP question very much. Under the model agreements and the regulations both retirement plans and accounts< 50 k are exempt. Period.
Just Me is not speculating wildly. He is being realistic. Period.
Nonsense. Read the regulations and the model 1 agreement.
Thank you for the responses. I guess I am just in a holding pattern until there is something new.
The difficulty with the RRSP is that it is registered with the CRA and if I close the account I am paying withholding taxes or even worse, that the CRA may share/exchange my information with the IRS due to the tax treaty and then I may be in a whole world of pain.
@KalC
Whatever you want to think. I qualified my statement about the $50K threshold quite carefully. Wild speculation is something without reasonable support or bases, and I am just saying (actually repeating) exactly what the UK HMRC said, so I guess they are wild speculators too. 🙂 I was not thinking about the $50K in regards to an RRSP. If they are in a RRSP, than the $50K would be moot.
I do agree, that RRSPs would probably be exempt, if you use the HMRC model of what the US allowed to be exempted in annex 1.
Wild speculation? Governments have a proclivity of “moving the goal posts” whenever it suits them, particularly the US government.
As far as I know, there is nothing in the agreements which would compel them to report only on balances above a certain threshhold. That being the case, I would be extremely cautious about relying on any kind of reporting threshhold, for the simple reason that it will cost banks much more to adapt their systems to take client balances into account, than if they just consider US indicia in their customer static data.
@FromTheWilderness..
What you say is a truism….
Having watched the IRS change the goal posts in the OVDP FAQ35 ‘bait and switch’ and now with the rejection of Leumi bank clients into the OVDP after acceptance, I am very skeptical of everything. I would just take thresholds mentioned by FATCA with a grain of salt. None of these rules or guidance or reapplication by and IGA partner country is written in tablets of stone. Trust at your own risk. Safe harbors do not exist in the IRS sea of regulations.
@Just Me
It really doesn’t matter, even if they were to be written on stone! 🙂
I hope this gets embeded!!
http://youtu.be/lI1JJZuopig
Picture the complexity of the computer logic to first search ALL of the records for ALL of the Days of the year, and filter away those that had LESS than 50k every day of the year, and maintain what is left.
That means 365 Days of data for each person has to be investigated first.
So why not simplify it and just focus on the indicia and give away everybody?
For that matter, there is no penalty to the USA for sending in names of people who aren’t even US persons. And these local governments are stupid enough not to care about the privacy of their own Citizens, so it should only be just and right to send the data every Hans, Rikard, and Harald to the IRS. Who gives a flying fire truck about the privacy of their own Citizens?
@KalC
Those accounts over 50K are REQUIRED to search for US persons.
There is no statement in the 544 pages that those under 50K cannot also be reported.
That question was asked to the IRS attache from the London office, and she responded in confirmation that yes, it is possible that accounts under 50 k could be reported. She freely then added that, most likely they WOULD be reported as it would be a cheaper algorithm to implement at the banks.
The IRS attache was more than pleased with herself–more penalties to pass out.
FATCA koolaid being served up in the Swedish Congregation now, full go.
http://www.sydsvenskan.se/ekonomi/uppgifter-ska-utbytas-med-usa/
Data is exchanged with the U.S.. Stockholm.
Neither bank secrecy or the Personal Data Act provides no protection when the United States with the support of a new agreement begins retrieve account details from Sweden, probably next year.
In exchange, Tax more information about accounts in the United States. .
– It can be about as much information both ways, says Marcus Sjogren, ministry secretary at the Finance Ministry.
One difference is that Sweden does not want thresholds for information about Swedish capital accounts in the United States.
A Swedish draft agreement is taking shape.
– When it is finished it will be sent over to the U.S., says Sjogren.
The agreement is intended to replace the controversial U.S. FATCA rules, which come into force in January 2014 and is considered contrary to Swedish bank secrecy and data protection.
The aim is to get agreement from new Swedish legislation in place that allows banks, asset managers and insurance companies in Sweden are obliged to disclose the basis for the Tax Agency, which in turn forwards the relevant information to the United States.
– It is in line with recent developments in information exchange, the bank secrecy and data rules should not be relied upon as barriers against countries exchange information. The development has been important in Sweden, says Sjogren.
Accounts in Sweden with less than $ 50 000 (about 325,000 dollars) are not covered. In practice, it is a small percentage of the nearly 10,000 Americans who live in the country concerned.
Norway is expected in the days to sign a similar agreement. Denmark, Mexico and the UK are already clear.
Under FATCA rules is dual citizenship does not prevent the disclosure of information to the United States. That someone has lived, worked and underestimated in Sweden all his life does not matter.
Swedes of residence in the United States (so-called green card) is also covered.
ahhhhh, ok, I see this Sweden article is from Jan 18th. I had reported it then. I was Reading Another date on that page.
But, as I read it again, I see that Sweden is demanding reciprocity. And also, the author is pointing out dual citizenship and living whole Life in Sweden doesn’t matter. He dismisses it in that only 10,000 people will be persecuted.
So let me get this straight. The IRS gets a million or a trillion or whatever FATCA reports. Buried in there is one saying KalC from Canada has 15k in a RRSP. The computer in Detroit or Austin or Kalamazoo is going to have a WTF moment and say whoa! better go after this guy.
I wish you people would get serious, use your heads, gain some perspective and stop scaring people. RRSP question can relax.
Re: the technology, I also respectfully disagree that it’s any harder, unless I’m missing the entire purpose of reporting. Banking information is contained in databases, which in essence (and this is a big oversimplification) are just big tables linked to each other by common key records. A list of US indicia customers should be relatively easy to pull first and their associated account numbers and balances linked on one report. Once that is done it shouldn’t be particularly difficult to filter by a minimum dollar amount. The hardest thing is doing it in the first place. Don’t forget for each report they pull, they’ll need processing cycles and storage for them (I’m sure they’ll put them somewhere) as well as sending them to the IRS or local government, all of which costs something, so they have an incentive to minimize the amount of overall data. The other overarching element is risk… it is the holy grail of all banks to minimize risk. What is more risky overall? Sending a list with ONLY the required information, or sending a list with too much information? Which choice presents the bank with more exposure to lawsuits, errors, compliance issues, or overall unseen costs?