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October 21, 2014 / 27 Tishri, 5775
At a Glance

Posts Tagged ‘FACTA’

FACTA Hurts Everyone, Especially Americans

Friday, March 15th, 2013

What could be wrong with Congress trying to catch the bad guys, in this case, folks who use offshore tax havens to avoid paying their fair share of taxes?

It seems as if the legislation meant to catch tax evaders caught a lot of other folks in its net, too.

While it seems like a law designed to catch tax cheaters is a good idea, it’s implementation is making life difficult for the tens of thousands tax-abiding Americans residing abroad (including Israel) who now are facing difficulties at banks and foreign investment houses.

The Foreign Account Tax Compliance Act of 2010 (FATCA), imposed upon foreign banks and financial institutions the obligation to identify American account holders or face a 30% tax penalty.

Backdrop to FATCA

The U.S. government needed to raise revenues, and thought it had a good target: levying taxes on money hidden in accounts in foreign banks and financial institutions.

In order to go after these concealed assets, America needed to go after the banks and financial institutions that help hide them. Who would have thought it possible that America could flex its muscles overseas and force foreign banks to report their customers to a foreign government? Apparently the threat of extracting taxes and fines on the foreign institutions itself was a great motivator and Uncle Sam managed to remove the veil of secrecy on Swiss accounts when it successfully negotiated a settlement with UBS. In order to avoid criminal prosecution by the Justice Department, UBS paid a large fine and disclosed details about thousands of the bank’s American depositors.

The FATCA Legislation

FATCA imposes an obligation on foreign financial institutions to register with the IRS if they have depositors or conduct financial transactions with U.S. citizens or businesses. Registration includes an agreement to identify and report information about American-held accounts directly to the IRS.

Critics of the legislation, and particularly the foreign financial institutions, view it as an improper extension of the enforcement powers of the IRS into foreign countries. However, France, Germany, Italy, Spain, and Great Britain were the first nations to lend legitimacy to FATCA by agreeing to comply with the legislation’s mandates.

Impact of FATCA on Americans Living Abroad

Foreign banks are concerned about the additional costs to them associated with complying with FATCA disclosure rules. Rather than incur these expenses, foreign financial institutions are closing their doors to Americans living abroad.

As a result, it’s difficult for many American expatriates to find a bank or financial institution that is willing to do business with them. Americans living in foreign countries for legitimate reasons are being lumped with tax evaders and tax cheats by foreign banks that are wary of subjecting their institution to FATCA disclosure requirements. These Americans are being treated as criminals by foreign banks seeking to avoid FATCA.

In the end, the law-abiding American expats and foreign financial institutions are the biggest losers from the FATCA legislation, since the bad guys will probably find a way around the system anyway.

American expatriates (olim included) are being subjected to many new regulatory requirements by Uncle Sam. My new book, The Expatriates Guide to Handling Money and Taxes, discusses how expats can become compliant with the IRS and gives strategies for dealing with common financial problems faced by expats. Jewish Press readers can get the book at a discount by using the discount code JPRESS.

Israel, US to Exchange Tax Information, Banking Secrecy Disregarded

Thursday, December 13th, 2012

Globes cites sources claiming that the Ministry of Finance is working to sign an agreement with the U.S. Department of the Treasury on the transfer of information regarding bank accounts belonging to foreign nationals in both countries.

According to Globes, Israel Tax Authority director general Doron Arbeli last week met Internal Revenue Service (IRS) acting commissioner Steven Miller to advance this effort. Should an agreement be signed, Israel will establish an organization to monitor and enable the transfer of the necessary information to the U.S., and the IRS will send to Israel details of bank accounts belonging to Israeli residents in the U.S.

The initiative was born by an effort of the Ministry of Finance to help Israeli banks deal with draconian U.S. regulations under the Foreign Account Tax Compliance Act (FATCA), which applies to US citizens residing overseas.

Under FATCA, banks in foreign countries—including Israeli banks—must provide the IRS with lists and details of accounts belonging to U.S. citizens, including declarations from said citizens that they have paid the required taxes back in America.

The IRS has been known to impose sanctions against a bank which knowingly permitted customers to violate FACTA rules.

According to Globes, banks around the world have sharply criticized FACTA’s hard nosed policies, but one way of dealing with the law’s requirements is signing an agreement of cooperation between the foreign country and the U.S. the agreement allows local banks to send bank account details to their own government, which then passes them on to U.S. authorities.

Banking secrecy? We don’t need no stinking banking secrecy…

Globes cited a U.S. Department of the Treasury document published in November, which states that the U.S. administration was in talks with Israel’s Ministry of Finance to draw up an agreement, under which the US authorities would also provide the Israeli authorities with information about the bank accounts of Israeli citizens residing in the U.S.

Uncle Sam is in similar talks with Argentina, Hungary, New Zealand, and South Korea.

The agreement will not be symmetrical. The U.S. will be required to transfer less information than the Israelis will be doing, but Globes suggests that even partial information could help the Israeli government fight tax evasion by Israelis in the U.S.

Printed from: http://www.jewishpress.com/news/breaking-news/israel-us-to-exchange-tax-information-banking-secrecy-disregarded/2012/12/13/

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