Category Archives: Issues regarding US persons abroad

http://www.jamesrajottemp.ca/issues/finance-and-taxation/offshore-voluntary-disclosure-initiative

Some constituents have expressed concern regarding the U.S. Internal Revenue Service’s Offshore Voluntary Disclosure Initiative. This is exclusively a U.S. program, with the federal Canadian Government playing no part in its creation or execution.

I appreciate that many individuals are frustrated to learn that they can face penalties for previously undisclosed foreign accounts and assets. The U.S. government requires its citizens, even those living abroad, to file income tax returns and associated tax forms – even if those U.S. citizens do not have to pay any U.S. income tax because they already pay Canadian income tax, and even if they have dual citizenship with Canada. This requirement has been in place since 1913.

It is unfortunate that the U.S. maintains this requirement as most other industrialized nations have moved away from this specific measure. However, it is entirely within the purview of the U.S. government to impose such a requirement.

While it is within the U.S. government’s authority to do this, it is not good policy in my view. That is why I have directly raised the concerns of many constituents of Edmonton-Leduc like you regarding the Offshore Voluntary Disclosure Initiative with the Honourable Jim Flaherty, Minister of Finance.

Minister Flaherty has been in constant contact with his U.S. counterparts, pressuring them to understand fully their actions against Canadian residents. Below is a letter from Minister Flaherty submitted to several American papers expressing concerns on FATCA/FBAR.

– See more at: http://www.jamesrajottemp.ca/issues/finance-and-taxation/offshore-voluntary-disclosure-initiative#sthash.saRd7CJc.dpuf

Something I think we need to better understand (or at least I do),

Roy Berg, director of U.S. Tax Law at Moodys Gartner Tax Law LLP, discusses concerns that Canada’s approach to FATCA may spark a dispute with the U.S. over personal trusts:

Advisor.ca, Dean DiSpalatro, March 31, 2014: “Feds bury FATCA law in Budget bill”

On Friday the Conservative government tabled legislation to implement key elements of this year’s Budget. But it contains more than tax credits.

Buried within is a revised version of draft legislation implementing the Intergovernmental Agreement (IGA) with the U.S. on FATCA. A Department of Finance press release makes no mention of this part of the bill.

…

If the trust has a Global Intermediary Identification Number (GIIN), the firm will consider it a fully compliant Foreign Financial Institution (FFI). As a result, the trust will receive the dividends in full.

If the trust doesn’t have a GIIN, the U.S. firm withholds 30% and passes it to the IRS. Berg says the same will happen with securities accounts based in the U.K., Ireland and other countries that have IGAs with the U.S. Their IGAs and guidance notes label trusts as FFIs.

How did our lives become so complicated?

“Bank of Hawaii is closing the accounts of Iranian nationals living in the state, a move that is angering Iranian activists and civil rights supporters.”

“It’s “outrageous” for the bank to take such action.”

“This is an extreme case, because even in the letter they say it’s not based on transactions,” Pourjalali said. “The accounts are closing based on citizenship.”

“We strongly urge for Bank of Hawaii to reverse this discriminatory action and to ensure its policies do not violate constitutional and legal protections for U.S. persons”

Source

FATCA is a US federal crime which violates the American constitution since it has caused Americans living abroad to be denied banking services due to their citizenship.

UPDATE:

Russian Finance Minister wants to discuss FATCA agreement with US during visit to Washington

Innocente has provided a Google translation of a new Russian article from Vedomosti which is worthy of its own post.  It has also been added as a comment to this previous related post:  Why Russia’s oligarchy supports FATCA.

A week or two ago, it appeared that a FATCA agreement between the U.S. and Russia was close to being signed, despite the events in the Ukraine and Crimea.  Now there are fears that the U.S. may delay the agreement as a sanction for Russia’s annexation of the Crimean peninsula.

There appears to be much more at play here than meets the eye.  Russia has been demanding true reciprocity from the U.S. for any FATCA or FATCA-like deal.  The Crimean crisis may be just the excuse the U.S. needs to back away from a promise it has no Congressional authority to keep.  Empty promises haven’t kept dozens of other countries from signing IGA’s, but Russia has been steadfastly calling America’s bluff.  Now, FATCA may move to the very centre of the growing political, economic and military showdown between these two old Cold Warriors, especially once withholding penalties on pass-through payments begin to hit European and American banks.

Translated below is the Vedomosti.ru article dated March 31, 2014 entitled: “США могут отказаться подписывать с Россией соглашение о FATCA” :

U.S. may refuse to sign an agreement with Russia on FATCA
Russia is ready to join the U.S. law on the exchange of tax information. But the U.S. may refuse as a punishment for Crimea.
Margarita Papchenkova
Vedomosti.ru
31.03.2014

Last week, the Finance Ministry sent the government a draft directive on signing the agreement with the U.S. on the exchange of information, said two federal officials. Such an order was given to the Ministry of Finance at a meeting with First Deputy Prime Minister Igor Shuvalov said his representative, after the approval of the government will give directives to the Ministry sanctioned the negotiations with the U.S. . There are only technical obstacles, such as transfer agreements, says official familiar with the position of the Ministry of Finance. A ministry spokesman declined to comment.

In fact, we are talking about Russia’s accession to U.S. law FATCA (Foreign Account Tax Compliance Act). Requiring banks and financial institutions of all countries by March 31, 2015 to supply the U.S. Internal Revenue Service (IRS) information on operations of U.S. customers. If the bank does not attach to the system before July 1 this year, it faces sanctions: a payment to its address of any passive income from U.S. assets will be deducted 30 % tax (currently tax at source in the U.S. – 10% on dividends and 0% for percent). And in 2017 – with the proceeds from the sale of shares or bonds of U.S. companies, as well as ” transit fees “.

But the foreign bank can transmit information not directly but through the local tax authorities. To do this, the government should sign an agreement with the United States. This option was chosen, for example, by the UK and Germany.

Russia was going to conclude an agreement last summer but negotiations dragged on. It was decided not to sign an agreement on FATCA but a mutual exchange of information ( i.e., the United States is committed to providing information on Russian taxpayers). Draft agreement reproduces almost U.S. law, although FATCA it is not explicitly mentioned.

But now there may be a new unknown obstacle, which will determine whether the United States to sign an agreement, says an official involved in the discussion of the project: “As long as the signals from the United States have been reported, neither good nor bad .” Washington could delay the signing, the Ministry of Finance officials previously feared: it can become an informal sanction for the Crimea annexation.

Damage to the financial system can be overwhelming. 30% tax on payments to Russian banks and financial companies should hold not only American, but also any banks that joined the FATCA, including European. Also there is a danger that banks will close correspondent accounts of those who have not joined the FATCA, then may lock dollar payments feared Russian banker.

U.S. Treasury refused to comment on the talks. Last week, Finance Minister Anton Siluanov reassured: the worsening of relations does not lead to the transfer agreement not being signed – but officials will do everything so that banks can provide information to IRS.

The government is preparing a fallback really tells White House staffer – to allow banks to transfer information IRS directly. But you have to change Russian law.

By July 1, banks may have to choose: to fulfill the Russian law and incur losses or American, breaking  Russian law, laments the director ‘s compliance PSB Svetlana Yermolayeva. Legal risks arise due to retention and a 30% tax on income customers who have been recognized by the Americans, explains Yermolayeva, Russian law does not provide for retention of direct customer funds on the grounds set forth in FATCA.

Possible to meet the requirement of bank secrecy, even if not governed by law, according to the manager of another bank : finding American client to get his written consent, but better is directive for the transfer of information to the IRS. Technically it is possible, it is reassuring: system identification and interaction with clients been established in many banks.

In the performance of FATCA banks will face many other problems, warns the head of the group in the field of Compliance KPMG Dmitry Chistov. U.S. demand to disclose the accounts not only U.S. customers, but also the companies of which they are beneficiaries. At the same time under Russian law the beneficiary – the owner of not less than 25 % stake, and on FATCA – 0 or 10 % depending on the type of company, explains Chistov.

To start an independent exchange with the United States on July 1, banks should have until April 25 to register online IRS, obtain an identification code and enter into a contract with the IRS, reminds Chistov. Many from last year started to be registered at your own risk, employee knows Russian bank. “Given the political situation, it is possible that the agreement is not signed, and we can not wait that long – it is necessary to prepare for the execution of FATCA», – says the banker.”

http://www.vedomosti.ru/finance/news/24672711/nakazanie-dlya-bankov?full#cut

 

I thought for old times sake we were overdue for a repost of US President Obama’s official announcement of support for FATCA in 2009. I know many newcomers have not yet seen this video so I thought this might be a good time to re-post

It starts at around just the 16:00 minute mark. I am currently working on trying to get a video clip of just Obama notwithstanding the earlier part of the video with John Richardson’s great presentation.

https://www.youtube.com/watch?v=xZhcsiuyDuc

Deb says:

…while I wanted to actually mention Harper and the Conservatives, I agree with Chears that that would probably be hard to get submitted.
So I made the ad as generic as I could while still getting the gist. At least I hope so.
The layout is like the one Chears ran and is intended as a starting point. Input from everyone is welcome and appreciated.

There is other advertisement discussion at https://isaacbrocksociety.ca/2014/03/28/breaking-news-tories-hide-fatca-law-in-budget-act/comment-page-2/#comment-1318170.

(Note:  I’m just putting this in one place in case people want to discuss options of what they’d like to do.  I am not the coordinator for this effort, just the poster.)

Deb’s NEW VERSIONS:

[ Click on image for larger / clearer look. ]

****************************************

REPLACEMENT OF FINAL VERSION of ad from Chears:

Newer ad from Chears, the first being the “final” / the final FINAL above:

Original ad from Chears:

This is the way I see the immediate future.

1. Continue our lobbying and support for the Charter Challenge;

2. Get our personal situations in order regarding the $50,000 thresholds and plans to cross or not cross the border — many solutions are possible;

3. Clarifying the Credit Union story [if they are indeed excluded because of the 2% rule this is a great chance to move the equity agenda forward and nail the banks]; and

4. Sit back and wait to see the storm that arises when 1,000,000 Canadian citizens — most of which are still probably oblivious to all this — are thrown under the bus.

May 2 2014 ACA-Sponsored Toronto Forum/Debate on Citizenship-Based Taxation vs. Residence-Based Taxation (cross-post from Maple Sandbox.ca)

The American Citizens Abroad Global Foundation has just launched its educational program with a forum/debate on the merits of Citizenship-based taxation vs. Residence-based taxation.

This is a full day event, sponsored and organized by the ACA, that will be held at the University of Toronto on May 2. Registration and Information

UPDATE re booking accommodations:

My understanding is that the speakers will be staying at the Holiday Inn 280 Bloor Street West in Toronto phone 416-968-0010.

At the moment all rooms at this hotel are booked up at the central reservation service for May 1, but I called the hotel and arranged for a University rate of about C$130 night plus tax. There are 20 or so rooms still available at that May 1 date (many more for May 2). The rooms cannot be held for us but you can book now until all are taken.

To book a room you email cn312res@whg.com and request a $130 room for the RBT vs. CBT conference. You also have to provide a code. I asked the conference person to choose between RBT vs. CBT and she came up with the correct answer RBT (!) which will be your code.

If you are interested in coming to the conference I would book right away.

To my knowledge, this is the first public debate — worldwide — devoted to this important topic.

The speakers will include academic tax specialists Bernard Schneider and Michael Kirsh, who have different approaches to the taxation of US citizens abroad, with the program moderated by Toronto lawyer John Richardson.

Dr. Stephen Kish, who co-authored with Mr. Richardson a submission to the U.S. Senate Finance Committee (see below), will be the academic host.

Bernard Schneider:

The End of Taxation Without End: A New Tax Regime for U.S. Expatriates, Virginia Tax Review, Vol. 32, No. 1, 2012, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2186076

Michael Kirsch:

Revisiting the Tax Treatment of Citizens Abroad: Reconciling Principle and Practice, October 23, 2013, Florida Tax Review, (Forthcoming), Notre Dame Legal Studies Paper No. 1457, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2346458

Richardson/Kish:

John Richardson, Willard Yates, Stephen Kish, Request for Tax Rules Changes for U.S. Citizens Overseas: Submission to the Senate Finance Committee, January 2014, http://citizenshipsolutions.ca/wp-content/uploads/2014/01/RichardsonYatesKishJan232014SFCSubmission.pdf

Keynote Speakers
Prof. Michael S. Kirsch, Professor of Law, Notre Dame Law School

Dr. Bernard Schneider, Teaching Fellow, Centre for Commercial Law Studies, Queen Mary University of London School of Law

Phil D.W. Hodgen, International Tax Attorney, Hodgen Law Group PC, Pasadena, CA

David Kuenzi, Certified Financial Planner,® Founder, Thun Financial Advisors, Madison, WI

Charles W. Cullen III, Certified Financial Planner, ® RBC Dominion Securities, Inc., Halifax, NS

Neil Sinclair, Chapter Chair, Amcham Canada – Ontario Region

Closing comments: Jackie Bugnion, American Citizens Abroad, Inc., Director of Tax Team

As some have predicted, the IGA legislation has been buried in the Budget Implementation Act.

Little likelihood for free vote now. One source tells us that final reading of the bill in the House may happen by end of May/June.

Posted by Blaze on Sandbox:

The Cons continue their sneaky games. They have hidden the law to enable FATCA and the IGA in the 375 page omnibus Budget Implementation Act 2014.

http://www.scribd.com/doc/215070578/2014-Budget-Implementation-Bill

The enabling law begins on page 72 (Clause 99). The IGA begins on page 313.

A source tells me it is possible the FATCA legislation could pass by late May or June.

So, now we know what Finance Canada did with all of our submissions. Nothing.

http://maplesandbox.ca/2014/breaking-news-cons-hiding-fatca-law-in-budget-act/

March 29 Update on Joe Arvay Legal Opinion:

Just to let everyone know that Lynne Swanson and I contacted Joe Arvay today (Saturday, March 29) for an update.

He tells us that he is on track to provide the legal opinion on the FATCA IGA legal challenge in April — but that there is a possibility that it might take longer because not all can be predicted. Mr. Arvay wants to get this right.

I know all of us want the answer today, but please be patient.

Stephen Kish