Is anything secret? Very little, it seems. And now, taxes, bank accounts, and identities will be shared in a groundbreaking tax deal between 51 nations. A cornucopia of countries will automatically swap tax information. The tax data free-for-all doesn’t begin until 2017. Still, in our FATCA and IRS centric world, this is a big development.
The first signatories will prepare their tax departments to exchange a wide range of information on off-shore accounts, balances and ownership. Who signed? Most European Union nations, tax havens like Liechtenstein, the British Virgin Islands and the Cayman Islands, and more. The U.S. and Canada aren’t yet signatories, but it’s clear that the U.S. will share your data as part of the bilateral deals under FATCA.
FATCA was quietly enacted in 2010, and after a four-year ramp up, is in effect. Never before has an American tax law attempted such an astounding reach. FATCA requires foreign banks to reveal Americans with accounts over $50,000.
Non-compliant institutions could be frozen out of U.S. markets, so everyone is complying. FATCA grew out of a controversial rule. America taxes its citizens—and even permanent residents—on their worldwide income regardless of where they live.
FATCA was enacted to cut off companies from access to critical U.S. financial markets if they didn’t pass along American data. More than 80 nations agreed to the law, as have 77,000 financial institutions. Tax havens have joined up, China did too, and even Vladimir Putin signed a law to satisfy the U.S. Treasury. The FATCA – Archive lists participating countries and a searchable list of financial institutions is: FFI List Search and Download Tool and a User Guide.
Foreign financial institutions (FFIs) must withhold a 30% tax if the recipient isn’t providing information about U.S. account holders. FFIs must report account numbers, balances, names, addresses, and U.S. identification numbers.
FBARs predate FATCA, which adds to new burdens, including Form 8938. All these forms are serious, and so are the criminal and civil penalties. FBAR failures can mean fines up to $500,000 and prison up to ten years. The numbers add up fast. See Court Upholds Record FBAR Penalties, Exceeding Offshore Account Balance.
U.S. account holders who are not compliant have limited time to get to the IRS. The IRS Offshore Voluntary Disclosure Program or Streamlined Program should be considered, particularly when amending taxes and filing FBARs in a “quiet disclosure” could bring civil FBAR penalties or even prosecution. Caution is clearly in order.
America taxes its citizens and permanent residents on their worldwide income regardless of where they live. In 2009, the IRS and Department of Justice sliced through the Gordian knot of bank secrecy, netting account holder names and a $780 million penalty from UBS. Many other Swiss banks have fallen into line. A few closed their doors, and the rest now say Swiss bank secrecy really didn’t mean what you thought it meant.
via The Tax Lawyer http://ift.tt/1rUdZCV