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FATCA update
Old 01-30-2012, 04:28 PM   #1
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FATCA update

There are a number of forum members that live outside the US and have been monitoring the implementation of FATCA. FYI, apparently the US Treasury is considering softening a bit some of the requirements. There are few details available but apparently pressure from European countries had led to a reconsideration of some provisions. Here is one link with some info. Treasury calls for FATCA exemptions on eve of proposals
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Old 01-30-2012, 04:47 PM   #2
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Very interesting - thanks for posting it.
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Old 01-30-2012, 08:25 PM   #3
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Unfortunately this doesn't "soften the requirements" from a US citizen's tax filing perspective. It might stop UK financial institutions from discriminating against US citizens, but the FATCA requirements for US citizens seem unchanged. Now if the IRS would do something to exempt accounts in countries with tax treaties and strong regulations like Canada and the EU etc, that would be something.
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Old 01-30-2012, 08:45 PM   #4
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Quote:
Originally Posted by nun View Post
Unfortunately this doesn't "soften the requirements" from a US citizen's tax filing perspective. It might stop UK financial institutions from discriminating against US citizens, but the FATCA requirements for US citizens seem unchanged. Now if the IRS would do something to exempt accounts in countries with tax treaties and strong regulations like Canada and the EU etc, that would be something.
We don't know yet. I have seen, here and elsewhere, concerns raised about property, mortgages, pensions, and it seems the Treasury is at least acknowledging the degree of concern. This was just an FYI.
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Old 01-30-2012, 10:13 PM   #5
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FWIW, out here in HK (which has a meaningful number of US expats), most (?) non-US banks will not take US persons as customers - actually, I'm not aware of any that will. Policies have, if anything, become more rigid with non-US banks tightening their procedures to make sure no US persons slip through the net.
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Old 01-31-2012, 07:02 AM   #6
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Originally Posted by traineeinvestor View Post
FWIW, out here in HK (which has a meaningful number of US expats), most (?) non-US banks will not take US persons as customers - actually, I'm not aware of any that will. Policies have, if anything, become more rigid with non-US banks tightening their procedures to make sure no US persons slip through the net.
FATCA is another example of US hubris and over reach. The ideas of "the shining city on the hill" and "American Exceptionalism" are actively dangerous when expressed in these extra-territorial laws. It's ironic that law abiding expat US citizens are the ones that this law will hurt the most.
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Old 01-31-2012, 07:24 AM   #7
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Originally Posted by nun

FATCA is another example of US hubris and over reach. The ideas of "the shining city on the hill" and "American Exceptionalism" are actively dangerous when expressed in these extra-territorial laws. It's ironic that law abiding expat US citizens are the ones that this law will hurt the most.
I have only seen interpretations that are "worst case" scenarios but no real implementation details. Given this, along with the Treasury announcement that it is negotiating changes, overreach may be the case, but this is nothing new. Laws designed to prevent fraud often restrict liberties and those that abide usually pay the greatest price. The Treasury is well aware of the inconvenience this causes, so the amount of fraud and evasion it is targeting must also be quite high.

As for hubris or dangerous expressions, well, I'll just disagree.
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Old 01-31-2012, 08:46 AM   #8
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I have only seen interpretations that are "worst case" scenarios but no real implementation details. Given this, along with the Treasury announcement that it is negotiating changes, overreach may be the case, but this is nothing new. Laws designed to prevent fraud often restrict liberties and those that abide usually pay the greatest price. The Treasury is well aware of the inconvenience this causes, so the amount of fraud and evasion it is targeting must also be quite high.

As for hubris or dangerous expressions, well, I'll just disagree.
Just to clarify things a bit, the "Treasury" referred to in the article is HM Treasury that is lobbying the US government on behalf of UK financial institutions. If UK banks etc can be exempted from the 30% withholding under FATCA it will save them a lot of compliance costs. It might also stop them from refusing to deal with citizens.
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Old 01-31-2012, 08:57 AM   #9
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Just to clarify my posts, I was referring to reports the US Treasury is considering changes. See another info bit here Treasury aims to make FATCA more user-friendly | Tax Break

Quote:
Proposed regulations to implement a new law to fight offshore tax evasion may not be as burdensome as many have feared.

That’s the word from a U.S. Treasury Department official on soon-to-be released regulations affecting thousands of banks and brokers worldwide subject to the Foreign Account Tax Compliance Act (FATCA), signed into law in 2010.
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Old 01-31-2012, 09:34 AM   #10
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Ok. :-)

The FACTA issue for expat US citizens is two fold; how it changes their IRS tax filing and how it changes their relationship with local (ie foreign) financial institutions. I don't see the IRS relaxing the reporting regime for US citizens, but it might clarify it a bit. The big deal here is if the FFI's can get some relief from FATCA. They are obviously doing it for selfish reasons to avoid the 30% withholding without spending the compliance money, but it will have benefits for the US expat if it allows them to keep dealing with FFI as they did before FATCA came along.
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Old 01-31-2012, 10:52 AM   #11
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Originally Posted by MichaelB View Post
I have only seen interpretations that are "worst case" scenarios but no real implementation details. Given this, along with the Treasury announcement that it is negotiating changes, overreach may be the case, but this is nothing new. Laws designed to prevent fraud often restrict liberties and those that abide usually pay the greatest price. The Treasury is well aware of the inconvenience this causes, so the amount of fraud and evasion it is targeting must also be quite high.
Are portions of the inconvenience caused, and the perceived high amount of fraud and evasion, a result of a self inflicted stance by the US, mainly taxing on citizenship, not residence? And yes, I concede the law is the law. There must be a temptation to look at 6 million Americans abroad and conclude "they're all at it!".

To expand successful detection abroad, the US has attempted to compel the rest of the world to activily assit in it's internal efforts concerning it's own citizens, without reciprical actions, and damn those 'foreigners' that won't assit. That's quite a different strategy from other tax authorities throughout the world that are quietly developing agreements between themselves to solve tax evasion (for example, the UK/Swiss agreement). Although there may be reconsiderations, politically, Congress will not want to be seen as 'backing down'. No surprises there. So far, publicly, the only compromises have been with dates of implementation and a rogue statement that foreign financial institutions won't have to do person by person nationality checks on every one of its customers, at least not in the beginning. The above article (in post #9) talks about circumventing privacy laws. That's not a compromise, that's finding a different way to do the same thing.

Nonetheless, I'm sure many of the world's tax authorities are looking to the US effort with amazement, and envious eyes.

And, many thanks for the update. It's appreciated.
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Old 01-31-2012, 12:16 PM   #12
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Originally Posted by theOAP

Are portions of the inconvenience caused, and the perceived high amount of fraud and evasion, a result of a self inflicted stance by the US, mainly taxing on citizenship, not residence? And yes, I concede the law is the law. There must be a temptation to look at 6 million Americans abroad and conclude "they're all at it!".

To expand successful detection abroad, the US has attempted to compel the rest of the world to activily assit in it's internal efforts concerning it's own citizens, without reciprical actions, and damn those 'foreigners' that won't assit. That's quite a different strategy from other tax authorities throughout the world that are quietly developing agreements between themselves to solve tax evasion (for example, the UK/Swiss agreement). Although there may be reconsiderations, politically, Congress will not want to be seen as 'backing down'. No surprises there. So far, publicly, the only compromises have been with dates of implementation and a rogue statement that foreign financial institutions won't have to do person by person nationality checks on every one of its customers, at least not in the beginning. The above article (in post #9) talks about circumventing privacy laws. That's not a compromise, that's finding a different way to do the same thing.

Nonetheless, I'm sure many of the world's tax authorities are looking to the US effort with amazement, and envious eyes.

And, many thanks for the update. It's appreciated.
The second article was not about privacy, it was about the US Treasury looking to modify FATCA regulations. It used privacy as an example because no details are available. In fact, implementation guidelines have also not been released, so the public debate on this is largely speculative.

Taxpayers abroad will be inconvenienced, but all taxpayers paying their mandated share, domestic and foreign based, are inconvenienced now as they see individuals and businesses unlawfully exploit an absence of auditing tools to evade taxes. I suspect the political will behind this is in part due to the knowledge that many of the same institutions that are now complaining actively assisted tax evasion in the recent past.

I am anxious to see guidelines, to see how they affect me, but also to help ground the public discussion, and will continue to post updates as I see them.
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Old 01-31-2012, 12:41 PM   #13
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Originally Posted by MichaelB View Post

Taxpayers abroad will be inconvenienced, but all taxpayers paying their mandated share, domestic and foreign based, are inconvenienced now as they see individuals and businesses unlawfully exploit an absence of auditing tools to evade taxes. I suspect the political will behind this is in part due to the knowledge that many of the same institutions that are now complaining actively assisted tax evasion in the recent past.
If US expats are denied services by FFI it could be a lot more than inconvenient. US citizens must comply with US tax law and I support FATCA as it relates to the IRS/US tax payer, the problem I have is the attempt to impose regulations on foreign entities and how that impacts their relationship to the US citizen.
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