The Hiring Incentives to Restore Employment (HIRE) act was enacted March 18, 2010 with the goal of increasing employment in the US. It also included the Foreign Account Tax Compliance Act (FATCA) that has some onerous taxes and regulations on foreign banks and US citizens who have foreign accounts.
- A Foreign Financial Institution (FFI) must enter an agreement with the US Internal Revenue Service (IRS) otherwise any income they receive from US investments will be taxed at 30%.
- This agreement between the FFI and the IRS will include the requirement that the FFI must disclose information about any accounts owned by US entities – companies or citizens. The information:
(1) Name of the account holder or the US persons with holdings in companies and trusts Address, TIN (taxpayer identification number) and (in indirect relationships) those of intermediary companies
(2) Account and custody numbers
(3) Account balance and custody holdings
(4) Gross receipts and gross withdrawls
(5) Further information as requested by the IRS (follow-up requests)
- The FFI must obtain a waiver for each US account holder (which must include the above information) so that the 30% withholding tax can be waived. If there are laws in the FFI’s home country that prevent the disclosure of the required information then the FFI is required to close the account or face the 30% withholding tax on any of its holding of US investments.
- The disclosure requirements are not required for citizens who have under $50,000 in foreign accounts.
The following are exempt from FATCA:
- any foreign government, any political subdivision of a foreign government, or any wholly owned agency or instrumentality of any one or more of the foregoing
- any international organization or any wholly owned agency or instrumentality thereof,
- any foreign central bank of issue,
- any other class of persons identified by the Secretary for purposes of this subsection as posing a low risk of tax evasion. (This is my favorite. The US continues its tyrannical march towards being a nation of men instead of a nation of laws as evidenced by the Secretary of the Treasury having the power to decide who this law applies to.)
ZeroHedge believes this is the beginning of more restrictive capital controls to prevent US citizens from moving their assets off shore and out of the reach of an ever increasing bankrupt and desperate US government. I tend to agree.
So: should I only have $50,000 in non US banks due to FATCA?