We’ll be getting together for lunch Saturday, 12 November, at 2:00 pm at Montana’s BBQ Restaurant, 1750 Ogilvie Road, Ottawa. Plenty of free parking on site, also accessible by city bus.
We’re currently expecting 10 people — hope you can come, too! Please rsvp by posting a comment here or e-mail me at pacifica at isaacbrocksociety dot ca
A Brocker from Switzerland sent me this – the Ambassador there sent a letter in September to the Swiss banks concerning the ongoing problem of closed accounts.
The original (German) from Handelszeitung is here
Perhaps one of our German-speaking Brockers could translate/paraphrase from the comments section.
An explanation (English) regarding the Ambassador’s acts & the situation is here
Excerpts:
The top U.S. representative in Switzerland deplored the fact that Swiss banks closed the accounts of U.S. citizens and turned away new clients. LeVine wrote that she had received numerous letters from fellow Americans complaining that they didn’t have access to basic banking services in Switzerland.
…..Unfortunate Timing
The letter was sent to numerous banks, for instance Migros Bank and at least to one bank that still awaits a fine in connection with the tax dispute in the U.S., according to the «Handelszeitung» report. The timing of the letter thus appears a little unfortunate and will have caused some irritation.
A string of Swiss banks this year still were occupied with closing the tax dispute with the U.S., with fines the normal outcome of the U.S. investigations. The institutes not just had to plead guilty to violating U.S. laws in conjunction with their business with U.S. clients, but also had to promise to remain on a righteous path in the future – at least in respect to the U.S.
…The criticism leveled at Swiss bank by LeVine isn’t just tough to take because of the timing, but also because of what it implies. Some banks were ruthless in closing the dossiers of U.S. citizens, no doubt. But today’s reluctance to have any dealings with U.S. clients has more to do with hard business facts.
Banking for the Rich
Banking in compliance with U.S. regulation is so expensive that business with the normal, moderately wealthy expat doesn’t pay off. And given the unpredictable behavior of the U.S. authorities in tax issues, the risks and costs far outweigh the potential benefit of offering services to the 20,000 U.S. expats.
Swiss banks of course still do business with U.S. clients. About 40 companies have specifically licensed unit for that purpose. But of course: those services are restricted to the very rich, making it worthwhile. Several asset managers are also working on their onshore services in the U.S.
Swiss banking is still interested in U.S. customers. But not exactly in the way U.S. Ambassador LeVine had hoped for.
The letter is here: Letter from Susie
[Many readers living outside the U.S. who are not IRS compliant, have sought advice from tax attorneys on whether they should or should not enter into a lifetime of IRS compliance, and what would be the “cost”. Maybe your tax attorney living in Canada etc. is also an Enrolled Agent of the U.S. IRS, possibly affecting the nature of the interaction between attorney and you the client. What were the options suggested and especially disclosures made to you by your attorney? Attorneys must adhere to the professional and ethical standards of their law societies. See discussion below:]
In a recent post I mentioned the situation of a “Caroline” who seeks advice from a Canadian tax attorney (let’s say in B.C.) regarding a question of (IRS) tax compliance with a country foreign to Canada.
How should the Canadian tax attorney advise this frightened Canadian citizen– specifically, regarding the disclosure of relevant options she (or any Canadian) should consider before entering, or not entering, into tax compliance with United States Internal Revenue Service?
What information should (must) the attorney disclose to the Canadian to comply with professional standards and ethical obligations of an attorney?
USCitizenAbroad suggests that the Canadian tax attorney needs to disclose two relevant facts:
cross posted from citizenshipsolutions.ca
Relinquishing US citizenship: South African Apartheid, the Accidental Taxpayer and the exit tax https://t.co/rU39vNoar0 via @ExpatriationLaw
— John Richardson – Counsellor for US persons abroad (@ExpatriationLaw) October 13, 2016
The above tweet references a “guest post” written by Dominic Ferszt of Cape Town South Africa. The post demonstrates how the “dual citizen from birth” exemption to the S. 877A “Exit Tax” relies on the citizenship laws of other nations. In some cases those laws of other nations are arbitrary and unjust. If these laws were U.S. laws, they might violate the equal protection and/or due process guarantees found in the United States constitution. For example, Mr. Ferszt describes how the “dual citizenship exemption” to the “Ext Tax” is dependent on South African “Apartheid Laws”. He describes a situation where a “black” U.S. citizen from birth is denied the benefits of the dual citizen exemption to the Exit Tax, which are available to a “white” dual citizen from birth.
(During the “Apartheid Era” Blacks were not entitled to South African citizenship.)
So, what’s the S. 877A “Exit Tax” dual citizen exemption and how does it work?
The dual citizen exemption, which I have discussed in previous posts, is found in Internal Revenue Code S. 877A(g)(1)(B) and reads:
(B) Exceptions An individual shall not be treated as meeting the requirements of subparagraph (A) or (B) of section 877(a)(2) if—
(i) the individual—
(I) became at birth a citizen of the United States and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country, and
(II) has been a resident of the United States (as defined in section
7701(b)(1)(A)(ii)) for not more than 10 taxable years during the 15-taxable year period ending with the taxable year during which the expatriation date occurs, or
Entitlement to the “dual citizen exemption” depends entirely on the citizenship laws of other countries …
Relinquishing US Citizenship – Exception for A Dual
National at Birthhttps://t.co/0SutFVcyj1Exception not well thought through! pic.twitter.com/fpChVLhh7m
— V. La Torre Jeker JD (@VLJeker) October 1, 2016
Very good work being done by those at the Accidental Americans FB group. Fabien Lehagre posted this today.
Good Afternoon –
Please find below the links to the final report (original in French and a rough translation in English) from the French Ministry of Foreign Affairs of the French Commission on US Extraterritorial Overreach which includes FATCA (Foreign Account Tax Compliance Act) and the US practice of Citizenship Based Taxation and the adverse effects on French citizens who are Accidental Americans and French/American nationals which was published today. I have also added the link for the video presentation of the report (in French).
I have also attached a summary both in French and in English of the French Commission’s findings.
ROUGH ENGLISH TRANSLATION
INTRODUCTION 9
I. EXTRATERRITORIAL: EXTERNAL PERCEPTION OF “NO PROBLEM” THE AMERICAN PERSPECTIVE
A. EXTRATERRITORIALITY, VIEWPOINT QUESTION
B. DESIGN SOME OF THE ROLE OF LAW
C. CONFLICTS OF AGGRAVATED BY BLOCKING CURRENT POLITICAL SYSTEM
II. ISSUES OF CERTAIN EXTRATERRITORIALITY US LAWS
A. THE ECONOMIC AND FINANCIAL ISSUES
B. ISSUES POLITICAL AND DIPLOMATIC: THE DANGER OF COUNTER-PRODUCTIVE, INCLUDING THE AMERICAN PERSPECTIVE
III. ANALYSIS OF LEGAL EXTRATERRITORIAL LAWS OF US
A. GENERAL FOUNDATIONS OF LAWS TO REACH EXTRATERRITORIAL
B. PRACTICE: KEY “INPUTS” US LAWS OF EXTRATERRITORIAL
C. AMERICAN PRACTICES OF ACTION IS BASED ON UNCERTAIN CRITERIA, METHODS OF INTRUSIVE, OR ABUSIVE
IV. A POLITICAL AND LEGAL IN FRANCE AND EUROPE DO NOT POSING LIMITS extraterritoriality AMERICAN LAW
A. NO POLICY “CONVINCING” REPRESSION OF INTERNATIONAL CORRUPTION MAY LIMIT THE INTRUSION EXTRATERRITORIAL AMERICAN
B. RECOGNITION OF THE APPLICATION OF FRENCH FATCA TO ADVERSE SIDE EFFECTS: THE PROBLEM OF “AMERICAN INCIDENTAL»
C. THE EMBARGO AND INTERNATIONAL SANCTIONS APPLIED BUT MAINLY EUROPEAN AND SANCTIONED NATIONWIDE
V. RECOMMENDATIONS OF THE MISSION: WEAPONS EQUAL TO PLAY
A. DEMAND RECIPROCITY AND EQUAL TO ACQUIRE WEAPONS TO FORCE POLICY CO-
B. THE EMBARGO AND ECONOMIC SANCTIONS: STRENGTHENING OF EUROPEAN MEDIA AND CLARIFICATION REQUIRED WITH DIPLOMATIC THE UNITED STATES
C. THE NECESSARY TOOLS TO ACQUIRE THE MEANS TO BE “WEAPONS TO EQUAL”
D. ANOTHER TRACK COOPERATION: INTERNATIONAL NEGOTIATIONS IN PARTICULAR THAT OF THE TRANSATLANTIC PARTNERSHIP, THE OFFER THEY FORWARD OPPORTUNITIES?
CONCLUSION
SUMMARY OF PROPOSALS
CONTRIBUTION OF JACQUES MYARD
WORK OF THE COMMISSION
APPENDIX 1: LIST OF PERSONS INTERVIEWED BY THE MISSION
APPENDIX 2: LETTER UNAI
VIDEO PRESENTATION OF THE REPORT (FRENCH)
See also:
Read below the sorry situation “Caroline” finds herself in.
The tax attorney Max Reed suggests three options: 1) Obtain a CLN; 2) Do nothing; OR 3) Catch up on U.S. tax returns and renounce (i.e., NOT relinquish) citizenship. How do you suggest a tax attorney should advise Caroline?
Tax attorney Max Reed opines and three attorneys (John Richardson, Virginia La Torre Jeker, Michael Miller), PLUS Shovel AND USCitizenAbroad comment on whether a foreign (U.S.) “tax-citizenship” law that might or might not impact on Canadian Caroline is retroactive.
The case of “Caroline”:
In advisor.ca there is an article by Max Reed with commentaries about whether a foreign U.S. (At present, the U.S. is considered by the United Nations to be a country foreign to Canada) tax-citizenship law should be applied retroactively to a Canadian. Read the entire article and commentary on an issue that has often been discussed on Brock.
Max Reed cites the example of a “Caroline”, a Canadian who relinquished U.S. citizenship in 1978 and has no CLN (Certificate of Loss of Nationality). Her bank sends her a FATCA letter and says that it will report her to the IRS unless she comes up with a CLN.
“In September 2016, she goes to the U.S. State Department to get a CLN to document her loss of U.S. citizenship in 1978 [good idea?]. But what is the exact date of Caroline’s loss of U.S. citizenship for both U.S. tax and immigration purposes?”
Max Reed provides a “common sense” view in the article and also, below, what he feels is a “literal reading” of a 2008 U.S. law:
“The literal approach is based on a strict reading of the law. Since 2008, U.S. tax law has set the date that a person loses U.S. citizenship as the earlier of the date that he applies for a CLN at the Department of State or the date the CLN is issued… Under the literal approach, because Caroline never obtained a CLN, she remains a U.S. citizen until her State Department visit in September 2016. This means she would have had tax obligations to the U.S. government for the previous 38 years – despite losing her citizenship for immigration purposes in 1978…”
Virginia La Torre Jeker comments:
“The collective view of several distinguished US tax professionals is that the current version of the expatriation provisions as spelled out in Internal Revenue Code Sections 877A and 7701(a)(50) as enacted by the HEART Act must have prospective application only… If a later Congress had intended the “surprising result” of retroactivity when passing the 2008 expatriation laws, it would no doubt have spelt this out very clearly….
John Richardson:
“1. What you describe as the “literal” approach is based on reading the exact words of Internal Revenue Coce S. 877A. S. 877A(g)(4)in its opening language addresses those who are “citizens”. Not past citizens. It reads: “A citizen shall be treated as relinquishing his United States citizenship on the earliest of—”
What it means to be a U.S. “citizen” is not defined in the Internal Revenue Code. It is defined only in the Immigration and Nationality Act. Internal Revenue Code S. 877A came into force in June of 2008. Therefore, it seems reasonable to assume that if one was not a U.S. “citizen” under the Immigration and Nationality Act in June of 2008, then S. 877A(g)(4) should not apply to that person. To put it another way: the “literal approach” would/should lead to the conclusion that Caroline, who became a Canadian citizen in 1978, was not a U.S. “citizen” for tax purposes in June 2008.
2. Prior to 2004 there was no provision in the Internal Revenue Code that allowed for one to be a “tax citizen”, if one had relinquished U.S. citizenship under the nationality laws. In other words, if NOT a citizen under the nationality laws then NOT a taxpayer. This means that those who relinquished U.S. citizenship prior to 2004 under the nationality laws, were not subject to taxation under the Internal Revenue Code. The 2004 law (that created the “tax citizen”) specifically stated that the creation of the “tax citizen” under the Internal Revenue Code was prospective only. It seems unlikely that the enactment of S. 877A in 2008 would have changed what was clearly a prospective concept to a retroactive application.
Therefore, whether one takes the “literal approach” or the “common sense” approach, the notion that Caroline, who relinquished U.S. citizenship in 1978, owes U.S. taxes, is hard to justify under the law.”
Michael Miller:
Yes, with FATCA, my government has forced itself deep into my most private financial affairs. Little had I realized, that the government had also forced previously itself deep into the smallest crevasses of my fingers.
My Government Demands my Fingerprints: #FATCA isn’t the first American Imperialist Intrusion into #EU and other countries
So, what happened was that I innocently went down to get my EU passport renewed. This is not a place where I expect conflict. But it turns out that they fingerprinted me as if it was just part of the process.
What process?
Well, it turns out that my country required fingerprints on passports as of 2012.
But why the hull did EU require fingerprints in their passports?
The same article states the U.S. Visa Waiver Program. Following legislative amendments in 2002, this program required the inclusion of biometric identifiers into selected countries’ passports by October 26, 2004 in order to allow for the continuation of visa-free travel to the United States.”
And then, yes, EU did it:“As it is not possible for legal reasons to harmonise the passport format, the Commission has set out with Regulation (EC) 2252/2004 common security standards including biometric identifiers.” “The Commission adopted on 28 February 2005 the first part of the technical specifications which relate to the storage of the facial image of the holder on a contactless chip in the passport. The protection of this image is ensured by “Basic Access Control” which needs the reading of the machine readable zone in the passport for opening the chip. This Commission decision triggered the implementation time frame so that all Member States have to implement the facial image requirement at the latest on 28th August 2006. As a consequence all Member States will also fulfil the US requirements for the Visa Waiver countries to issue biometrically enabled passports by October 2006. “
For the lesser-polite version, read here
https://bancdelasteroideb612.wordpress.com/2016/09/29/biometrics-train-with-a-fatca-caboose/
*UPDATED TO REFLECT CORRECT CREDIT UNION
For those of you who’ve sought refuge from FATCA at YNCU, you may be interested to know (if you don’t already) that the Ontario-based credit union has grown after a recent merger with First Ontario Credit Union Community First Credit Union.
Total assets for YNCU now total about $1.5 billion which greatly exceeds. Looks like things were finalized in April, 2016.
I’ve seen no recent updates on FATCA reporting at YNCU, nor about LCB registration.
If you know something about the credit union’s status – please advise in the comments.
And if you know of a “failsafe” (or something close to it in FATCA terms) credit union that’s not named “My Bedroom Mattress” feel free to share.
As a solution to the problems caused by FATCA, American Citizens Abroad (ACA) proposes that FATCA be tweaked by imposing on “US citizens” abroad a “Same Country Exemption with mandatory IRS compliance” (SCEWMIC). SCEWMIC is likely to make the unjust FATCA law even more harmful.
Go to the links below for info and also read: “Why ACA supports Same Country Exemption (SCE) rather than repeal of FATCA, and why SCE will work to correct banking lockout by Foreign Financial Institutions.”
If you don’t like SCEWMIC then tell ACA exactly what you think in an email.
E-mail Mr. Charles Bruce, ACA Legal Counsel, at info@americansabroad.org
You can ALSO comment at ACA’s FB site: https://www.facebook.com/americancitizensabroad
[OF COURSE, you can argue that an email to Mr. Bruce, or to ACA, will not change their minds on SCE, but are you really so certain that when an organization claiming to represent “YOU” makes a bad proposal that will cause you harm — the best way to proceed is to remain silent and not confront that organization? Those who feel that all U.S. laws are irrelevant should not read further.]
So… here’s what you would have to do to make the SCEWMIC election:
“…An individual would complete the election on a 1-page, front and back, IRS form providing the individual’s name, address, Taxpayer Identification Number [Everyone has one?], and country of residence, and listing the “Same Country” accounts (name and address of bank and name, number and type of account, i.e., depository, custodian, etc.). The individual would certify that this information is correct. Also, the individual would state that he or she is a resident of X foreign country and the bank(s) are licensed and regulated under the laws of X country of residence (the same country where the individual is a resident). One copy of the election would be given to the bank; a second would be attached to the individual’s federal income tax return; a third would be retained by the taxpayer [NOTE TRANSITION IN PARAGRAPH FROM “INDIVIDUAL” TO “TAXPAYER”]. Instructions would be included on the form. Taxpayers would be warned that filing the election does not excuse them from having to report any income on the account on their tax return or from having to file an FBAR, provided in both instances they meet the applicable thresholds…”
Mr. Bruce explains to Bob Stack at Treasury why the ACA proposal is a really good deal for the IRS:
“In addition to benefiting American citizens abroad and foreign banks, the “Same Country” exemption will benefit the IRS. Americans abroad, in order to get the benefit of greater access to banking services, will need to come forward and file their US tax return, with the “Same Country” election attached. This will help address the nagging problem of noncompliance.”
Read Mr. Bruce’s letter to Treasury and ACA’s SCEWMIC HERE and HERE.
— and take a few minutes to email your thoughts to Mr. Bruce…
Here are two responses just received from ACA regarding SCE concerns:
For those of us trying to make sense of FATCA and GATCA — the OECD CRS, this is a good read …
OECD CRS (Common Reporting Standard)
FURTHER GUIDANCE
|
Bloomberg BNA – September 26, 2016 “Finish Line Unclear for Some FATCA Pacts as Banks Worry”
Sept. 23 — A bumpy path may lie ahead for crucial agreements to ease the process for foreign banks to report their U.S.-owned accounts under a controversial law—even as IRS pressure grows for countries to get their pacts in force quickly.
Some countries face legal challenges to agreements under the Foreign Account Tax Compliance Act, while others may not be moving quickly. The lack of agreements in force is raising big concerns among global banks with operations in some jurisdictions that have fully functioning pacts and some that don’t.
…
The alternative—directly reporting individual accounts to the U.S. or potentially facing a 30 percent withholding tax—is a major concern for cross-border financial institutions as difficulties continue in countries that haven’t managed to get an IGA in legal force. According to Sept. 23 Treasury Department data, 113 countries have agreements, but 49 still need to reach the finish line.
…
Tax attorneys said the Organization for Economic Cooperation and Development’s common reporting standard may be draining energy and legislative resources in some jurisdictions. The CRS is a separate multinational system designed to allow financial information exchange across many borders.
More than 100 countries have signed on for that exchange. The U.S. can’t fully adopt the CRS because of legal challenges. Some of those 100 countries have implemented CRS statutes before finalizing FATCA agreements.
…
Even if banks want to register for direct reporting, in many cases they still face the legal prohibitions that led to the creation of IGAs, she said. In another challenge, financial institutions that have already made huge efforts to document all their U.S. accounts under their agreements would have to redocument them to comply with FATCA, said Ferris, now a financial services principal with Ernst & Young LLP.
etc.
Related:
