The impending launch of the Foreign Account Tax Compliance Act (FATCA) on the 1st July American expatriates around the world are once again looking at their investments and bank accounts abroad to see if more tax efficient choices can be made. Whilst FATCA applies to all US citizens whether they’re expatriates or not the estimated 7.2 million US expatriates may face additional difficulties.
Additional reporting requirements are causing even more expatriates to go through the sometimes costly expense of using a specialist tax advisor. Some are also having the deal with the issues being caused by FATCA across the financial industry with some foreign financial institutions refusing to serve US clients, placing additional costs on US held accounts or forcing existing clients to close their accounts so they can try to reduce what they say are the onerous costs and reporting rules that FATCA compliance enforces.
FATCA is being bought in by the US government as a tool to counteract tax evasion with all foreign institutions being required to report any US citizen’s account that has a value exceeding $50,000 USD. It came about in 2010 after admissions made by banks in Switzerland that they had been helping US citizens hide accounts from the Internal Revenue Service (IRS) and therefore evade US taxes.
At the moment roughly 25 countries have made an intergovernmental agreement (IGA) with the US government though not all have had parliamentary approval yet with Hong Kong signing in the last week. Currently talks with Russia are said to be on hold about coming to an IGA regarding the sharing of financial information.
It is recommended that US expatriates who may be impacted by the rollout of FATCA should seek financial advise and try and plan ahead in advance to make the most of the FATCA compliant options available such as creating a supplementary overseas pension contract.