Not a typical post from Financial Pages in
but it’s for English-speaking expats and there are lots of US citizens in Spain, as well as the UK
and most of Europe!
What is FATCA?
A piece of
called Foreign Account Tax Compliance Act which the Americans hope will crack
down on tax avoidance, using offshore accounts, implemented throughout the
world. It came into force on 1st
July 2014. US
How does it affect US expats?
US citizens abroad must report their overseas earnings and investment profits, annually to the Internal Revenue Service (IRS) which generates an annual tax bill. To be fair, many face only a small tax charge or even nil, but the cost of complying can be very high. However the cost of non-compliance will be even higher!
Most declarations do generate a large tax bill as most Americans living and working abroad earn large salaries and many have large investments.
Perhaps the most important factor, and the individuals who are affected will already know, is that the majority of Americans abroad make no declaration at all. FATCA is coming to get you.
How will FATCA work?
In preparation for FATCA, the US Government has signed, around the world a series of InterGovernmental Agreements (IGA’s) with the IRS which offered special arrangements, relaxed deadlines and simplified reporting. ALL European Governments have signed IGA’s with the
who finally ‘surrendered’ to the pressure! Switzerland
With immediate effect, all Foreign (looking from an American perspective) Financial Institutions (FFI’s) will need to disclose all US related information for both new and existing clients. Failure to report to the IRS will lead to a 30% withholding tax.
Who will be affected?
I have seen an estimate that, currently, around 7.3 million Americans live and work abroad, yet only 565,000 comply with IRS reporting requirements. The US Government and IRS are targeting those who don’t report and don’t pay US Taxes.
Many of those who don’t comply will be directly affected by the disclosure requirements placed upon FFI’s by the IGA’s!
Is there a cost effective solution?
You could renounce your American citizenship! That, of course, would be the ultimate and for the vast majority, an unacceptable step.
I am aware of one structure which has all the elements necessary to comply with FATCA, minimise tax charges and simplify IRS reporting requirements. This arrangement is not a one-size-fits-all plan and will not suit everyone but I have tried to simplify who might benefit.
- Do you earn $100,000 or more each year?
It sounds a high figure to Europeans (about €75,000) or British (circa £60,000) but if you are American working abroad it possibly includes you.
If you earn less than $100,000 you may seek exemption to the retrospective element of FATCA using a voluntary arrangement allowed by the IRS. This is called OVDP (Overseas Voluntary Disclosure Program) which allows amendment to previous returns without penalty.
- Do you have non-US investments?
Without correct advice there is potentially a ‘double-whammy’
· Many FFI’s will stop taking investments from US citizens to avoid the disclosure requirements
· If you haven’t reported investments in the past, your FFI will start reporting them now.
You can bring them together in one IRS compliant structure but only if your circumstances allow.
- Are you currently Non-Compliant with IRS tax reporting requirements?
This structure is probably the one you need as long as you fit
- and / or 2. above
Even if you currently are compliant the structure may be suitable as it is FATCA compliant.
Please register your interest in the arrangement, without any obligation. Please email with an outline of your circumstances. It would also be helpful if you could give your contact number and a best time to call.
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