Tag: FATCA

German Foreign Minister Calls for an Independent EU “SWIFT” System

Update 27 August 2018

For anyone interested in more details about this development please see: here
and here
Hat tip to Tim Smyth

interesting: One of the factors irritating to the EU is the “repatriations of billions of dollars in profit from Europe by U.S. based tech giants” (Bloomberg) an outcome of course, from recent U.S. tax reform (TTFC)

*******

I have become fascinated by an ongoing development in Europe stemming from Trump’s actions against Iran. First, there is the United States pulling out of the Joint Comprehensive Plan of Action
JCPOA, (aka the Iran nuclear deal in which Iran promised to stop development of its nuclear program in return for a lessening of sanctions and increased trade relations). After the withdrawal, Trump issued harsh sanctions against Iran.

Over the last couple days, a number of expats have tweeted/posted a
condensed version of this story. I was curious know more about it.

On August 21, German Foreign Minister Heiko Maas wrote an editorial for the German paper, the Handsblatt. He called for a “balanced partnership” as counterweight to the US actions regarding Iran.

At first, this might seem completely unrelated to our situation however, one aspect of this “Balanced Partnership” may include an option for trading outside of the U.S. SWIFT system.

Maas said Europe needs a to set up EU payment systems independent of the United States if it wants to save the nuclear deal.
 

“That’s why it is indispensable that we strengthen European autonomy by creating payment channels that are independent of the United States, a European Monetary Fund and an independent SWIFT system,” Maas wrote. “Every day the deal is alive is better than the highly explosive crisis that would otherwise threaten the Middle East.”

One might wonder if anyone in the U.S. has bothered to realize what the effects of pulling out of the Iran deal are. For those who are not fortunate enough to have the Atlantic Ocean as a shield, the ramifications of uncontrolled Iranian development of a nuclear arsenal are dangerous and potentially life-threatening. Perhaps those who remember WWII or those engaged in recent Middle East conflicts can appreciate this. Doubtful for those in America, given the impenetrable shell of mind-numbing exceptionalism.
.

Further, the EU Foreign Affairs Minister, Federica Mogherini, has taken the bold step of encouraging companies to disregard Trump’s threats should they continue to do business with Iran. She said:

“it’s up to Europeans to decide who they trade with.”

How refreshing! The development of a spine against what is nothing less than another massive example of U.S. economic imperialism.

The EU has created a new law to protect European companies from the punitive measures the U.S. will take against those who dare to defy its will.

With the new rules European companies are granted the right to challenge US sanctions in European courts and seek
compensation from the U.S. government or American companies. In practice, this path promises to be cumbersome and
costly and even the Commission acknowledged that there is no precedent in such cases.

The blocking statute has never been implemented, although one was issued for the first time in 1996 in connection to economic
sanctions against Cuba and Iran. Back then, the threat was enough to persuade the US to suspend secondary sanctions.

“The threat was enough to persuade….” reminds one of how the world responded to #FATCA, no?

This development could be incredibly helpful to us in at least two ways. First, the oft-discussed demise of the US dollar as the world’s reserve currency would clearly aid governments in divesting themselves from #FATCA. While not a direct hit at #CBT, such a move would take the “sting” out of what has come about since the H.I.R.E. Act ( 2011 for most of us). At the very least, it might stop the ongoing damage Europeans with “U.S. taint” are experiencing with the closure of bank accounts, mortgages etc. While Canadians are not currently experiencing this, a blow to #FATCA would enable them to:

  • decide to remain under the radar far more comfortably
  • put a huge dent into the screaming scare-tactic commentary of the tax compliance
    community and hopefully, their outrageous fees as well

Secondly, such a move might empower these governments, to support the requests of their own #Americansabroad citizens whether they be accidentals, dual citizens of other countries with residence in those countries as well as those who have yet to file I-407 for their greencards.

This would also encourage more effort from earlier efforts in various countries as well as the newer ones.

Here is a comparision for BRICs-US. Can you imagine the combined effect of the BRICs & the EU’s financial independence from the U.S.? Don’t you wish these countries could have thought of this BEFORE the U.S. stuffed #FATCA down the world’s throat?

I’ve been reading a book called “What We Say Goes – Conversations on U.S. Power in a Changing World,” by Noam Chomsky (2007). Chapter 6 – Invasions and Evasions – took place in Cambridge Massachusetts on February 2, 2007. In spite of the fact this Q & A predates FATCA and uses health reform and media reform as examples, I was struck by how well section this applies to what is happening to us now. So many are dissatisfied with R.O.’s TTFI proposal. People seem to expect a one-size-fits-all solution. At the beginning of our involvement with this, the phrase “It’s a marathon, not a sprint” was a sort of mantra. Part of that marathon is accepting that it will likely take a combination of a number of different solutions before it’s over.

Q. “I want to ask you about tinkerers versus overhaulers, reforms- cosmetic improvements and adjustments to the system – versus substantive structural change.”

A. “…..Tinkering, to borrow your word, is a preliminary to large-scale change. There can’t be large-scale structural change unless a very substantial part of the population is deeply committed to it. It’s going to have to come from the organized efforts of a dedicated population. That won’t happen and shouldn’t happen, unless people perceive that the reform efforts, the tinkering, are running into barriers that cannot be overcome without institutional change. Then you get pressure for institutional change. But short of that realization, there is no reason why people should take the risks, make the effort, or face the uncertainty and and the punishment that’s involved in serious change. That’s why every serious revolutionary is a reformist. If you’re a serious revolutionary, you don’t want a coup. You want changes to come from below, from the organized population.”

What is needed is support from our entire population for each and every effort that will contribute to the end of this miserable situation. I cannot imagine any of us saying to the Accidentals – “I’m sorry, but since your proposal won’t solve my specific problem, I will not help.” Or an accidental being indifferent to specifics involving duals. There may need to be more lawsuits and stronger movements within individual countries. We all have to be on board as a solid, unified group adjusting and adapting as the process moves on.

The U.S.government is already a huge, disorganized, dysfunctional mess.

We cannot afford to be the same. We have to be better than that.

So, you have received bank letter asking about your tax residence for CRS or FATCA – A @taxresidency primer – Part 4 -Conclusion

cross-posted from citizenshipsolutions.ca

Part F – A “U.S. citizen” cannot use a “tax treaty tie breaker” to break U.S. “tax residence”. How then does a “U.S. citizen” cease to be a “U.S. tax resident”?

Q. I am a U.S. citizen. I do not live in the United States. I live in Canada. I am a Canadian citizen. How do I stop being subject to the all of the FBAR and other reporting rules, tax rules (including PFIC), life restrictions and inability to effectively invest and plan for retirement imposed by the Internal Revenue Code?

A. You relinquish U.S. citizenship. Please note that a “renunciation” is one form of “relinquishment”. In general, the date of relinquishment of U.S. citizenship is more important than the form of relinquishment of U.S. citizenship. A Certificate of Loss of Nationality (“CLN”) may or may not (depending on the date of relinquishment) be necessary to cease to be subject to U.S. taxation.

Q. In simple terms, where do I get information about the process of renouncing U.S. citizenship?

A. You can start here.

Q. What are the tax consequences of relinquishing or renouncing U.S. citizenship?

A. The Internal Revenue Code describes the tax consequences of relinquishing/renouncing U.S. citizenship. See Internal Revenue Code S. 877A (the “Exit Tax” rules).

Part G – How a “permanent resident” of the U.S. – AKA “Green Card Holder” – ceases to be a U.S. tax resident

Q. I understand that IF I am a U.S. “tax resident” then I may be able to use a “tax treaty tie breaker” to NOT be treated as a U.S. “tax resident”. But, how do I cease being a U.S. tax resident period?

A. The definition of “residence” for tax purposes is NOT the same as the definition of “residence” for immigration purposes. In fact it is possible to have lost the right to live permanently in the United States, but still be treated as a “resident for tax purposes.” “Residence for tax purposes” is defined in Sec. 7701(b) of the Internal Revenue Code and is discussed in the Topsnik case. Most “lawful permanent residents of the United States” cease to be “tax residents” of the United States by either (1) Filing Form I-407 or (2) Filing a “tax treaty election”. You are advised to seek professional advice on the best way to proceed.

ATTENTION!! A permanent resident of the United Sates AKA “Green Card Holder” does NOT cease to be a U.S. “tax resident” by simply moving from the United States to another country. One must take specific steps to sever “tax residency” with the United States.

Part H – Are you, or have you ever been a U.S. citizen or Green card holder? Sometimes it’s not what it seems.

Q. Are you a “U.S. Person” for FATCA purposes?

A. See the articles referenced in the following two tweets.

Conclusion …

The receipt of a FATCA or “CRS” letter is a frightening thing. Take a deep breath. Deal with it rationally and logically. If you are NOT a U.S. citizen you are probably NOT a “tax resident” of more than one country. On the other hand, if you are a “U.S. citizen” …

How would you go about “Solving this problem of U.S. citizenship”?

or maybe this

(For an interesting article on the “Possible Meghan Markle U.S. Tax Chronicles” by Helen Burggraf read here).

I am available on a “consultation basis” to help you sort out your “Tax Residency” in a FATCA and CRS world.

John Richardson

So, you have received bank letter asking about your tax residence for CRS or FATCA – A @taxresidency primer – Part 3

cross-posted from citizenshipsolutions.ca

Part D – Different definitions of “tax residence” – Not all countries define “tax residence” in the same way

Q. What is the criteria that different countries use to define who is a “tax resident” of the country?

A. The circumstances that constitute “tax residence” will differ from country to country. Generally speaking “tax residence” is based on definitions of (1) “residency” (deemed and actual), (2) “domicile” and (3) (in the case of the United States and Eritrea) “citizenship”. Note that different countries may define “tax residency” differently.

Q. How can I learn the definition of “tax resident” for the OECD countries?

A. In an earlier post about “OECD tax residency” I referenced the following chart which summarizes the definitions of “tax residency” in OECD countries. (I suggest that you use these definitions as a “start” to your research and not as the “last word”.)

Q. What is the significance of the “OECD” and why does “OECD tax residency” matter?

A. About the “CRS”: “OECD” tax residency matters because the “OECD” has implemented what is called the “Common Reporting Standard” (“CRS”). The purpose of the “CRS” is to require members to exchange information about the existence of financial accounts, owned by individuals in countries where they do NOT have “tax residence”. For example, if a “tax resident” of Germany had a bank account in Canada, then the German Government would want to know about it! Ultimately this is to ensure that all “individuals” pay their “fair share” of taxes. (By the way, the salaries of OECD employees are generally tax exempt. See an interesting post by Dan Mitchell on the OECD. Seems pretty clear that if OECD employees do not pay tax, that they are not paying their “fair share”.)

Q. About FATCA: Tell me more about the requirements to be a “tax resident of the United States”.

A. The United States has a system of “deemed tax residency”. In other words, the rules are very clear. At a minimum both U.S. citizens and “permanent residents” of the United States (“Green Card Holders”) are U.S. “tax residents” (Note that unless you are a U.S. citizen or “permanent resident” – a physical presence in the United States is necessary make one a U.S. “tax resident”. Here is a post I wrote describing what it means to be a “tax resident of the United States“.

Q. Tell me more about the requirements to be a “tax resident” of Canada.

A. The definition of “tax resident” in Canada includes both “deemed tax residency” and “tax residency based on facts and circumstances”. Here is a post I wrote describing what it means to be a “tax resident of Canada“.

Q. What about South Africa? The way that South Africa imposes taxation on its expats has been in the news lately. Can you tell me about the definitions of “tax residency” for South Africa? Is it true that South Africa is considering “citizenship-based taxation” just like the United States has?

A. No, South Africa has NOT considered “citizenship-based taxation”. But, it doesn’t require much to meet the test of “residence” for tax purposes in South Africa. To understand the “South Africa issue”, see:

Part 1: South Africa is NOT attempting to compete with the USA by enacting “citizenship-based taxation”; and

Part 2: The problem is NOT “worldwide taxation”. The problem is imposing “worldwide taxation” on people who don’t live in the South Africa or the USA and are “tax residents’ of other countries

Part E – Oh My God! I think I might be a “tax resident” of two countries – What is a “tax treaty tie breaker”? How does a “tax treaty” tie breaker work?

Q. I am a U.S. citizen and a “tax resident” of Canada who actually lives in Canada and not the United States. Can I use the “tax treaty” to become a “tax resident” of only Canada?

A. Absolutely, positively NOT. U.S. citizens CANNOT use a tax treaty to break “tax residence” with the United States. The reason is that almost all U.S. tax treaties includes what is called a “savings clause“. The purpose of the “savings clause” is two-fold:

First, to ensure that U.S. citizens can never (without relinquishment or renunciation) cease to be U.S. tax residents; and

Second, to force other countries to agree that the U.S. can impose U.S. taxation (according to U.S. tax rules) on people who are actual residents of those other countries (because those residents are deemed to be U.S. citizens). To understand how this impacts the lives of U.S. citizens living outside the United States see: “How to live outside the United Staes in an FBAR and FATCA world“.

Q. I am a U.S. “permanent resident” (Green Card Holder) and a “tax resident” of Canada who actually lives in Canada and not the United States. Can I use the “tax treaty” to become a “tax resident” of only Canada?

A. Yes, the “savings clause” does NOT apply to Green Card holders. A “Green Card holder” is a “tax resident” of the United States. Therefore, a “Green Card” holder who actually lives in Canada and is a “tax resident” of Canada, may use a “tax treaty tie breaker” to cease to be a U.S. tax resident. But, this decision must be made VERY CAREFULLY because the use of the “tax treaty tie breaker” by a Green Card Holder “may” have the following NEGATIVE implications:

On the other hand, there are many reasons why a Green Card Holder might want to use a “tax treaty tie breaker” to cease to be a “tax resident” of the United States. These reasons include (but are not limited to):

Note: If you are a Green Card holder, the decision to use a “tax treaty tie breaker” should be made only after consultation with an appropriate advisor! I am not kidding! The fallout from making this election can be enormous!

Q. I am a “tax resident” of Canada. I am not a U.S. citizen. I am a pure Canadian! Can I use a “tax treaty tie breaker” to break “tax residence” with another country!

A. Thankfully (as long as you are a “Tax resident” of both Canada and that other country), the answer is YES! Canada (apparently) has more than 90 tax treaties that include a “tax treaty” tie breaker provision. Here is a post that describes how the “tax treaty tax tie breaker” can be used to break “tax residence” with another country.

John Richardson

So, you have received bank letter asking about your tax residence for CRS or FATCA – A @taxresidency primer Part 2

cross-posted from citizenshipsolutions.ca

Part B – The Combined FATCA/CRS Letter

This letter is particularly worrisome for Canadian residents (whether Canadian citizens or not) who were either born in the United States or are (otherwise) U.S. citizens or U.S. permanent residents (AKA Green Card Holders). Could this mean that they would be required to apply for a U.S. Social Security number?

What follows is a sample letter …

Dear Valued Customer:

We appreciate our relationship with you and we are committed to informing you about matters that affect you. We are writing today to inform you that changes have been made to the Canadian Income Tax Act (Part XVIII and Part XXIX), requiring TD to provide information about customers who have a tax residence in other countries to the Canada Revenue Agency (CRA). The CRA may then share information with other countries through existing provisions and safeguards under the Tax Convention.

To comply with this legislation, we have reviewed our records (eg. address) in order to identify customers who may be residents of other countries for tax purposes.”

Part C – “Tax Residency 101”: It’s about where you should be paying your taxes

Some Question and Answer …

Q. I don’t want to listen to the above interview. What is meant by “tax residence” or “tax residency”?

A. At the risk of oversimplification, your “tax residence” AKA country of “tax residency” is usually (with the exception of the United States which also imposes taxation based on citizenship) the country where you live or have another type of connection. It’s the country that has the right to impose taxation on your “worldwide income” BECAUSE you live in or have a sufficient other connection to the country. For example, if you live in Canada, sleep in Canada, work in Canada, raise your family in Canada, have a Canadian drivers license in Canada, etc. – you are a ““tax resident” of Canada“. For most people, “tax residency” is a “common sense” concept. It’s like this:

“I am subject to taxation on my “worldwide income”* in Canada because I live in Canada”.

or

“I am subject to taxation on my “worldwide income”* in ________ because I live in _______”

(*Most countries impose taxation on the “worldwide income” of their “tax residents”. A small number of countries impose “territorial taxation” on their “tax residents”. “Territorial taxation” is where a country imposes tax on ONLY the income sourced in the country of residence.)

Q. Does this mean that ONLY my country of “tax residence” can impose taxation on me?

A. No. Every country has the primary right to impose taxation on income sourced in that country. Maybe you receive income which is “sourced” in another country. Maybe you own property in another country. In these cases you might be subject to tax in the countries where you own the property or receive the income. In general, if you are not a “tax resident”, you would be taxed in another country ONLY on the income sourced in that other country. On the other hand, your country of “tax residence” would impose taxation on ALL of your income wherever its source.

Q. Is it possible that I could actually meet the conditions to be a “tax resident” of more than one country?

A. Absolutely yes! Different countries have different rules for determining tax residency. There is no reason why a person could not meet the definition of “tax resident” in more than one country. In fact, it is very possible that one could be a “tax resident” of more than country. (This is the reason for the existence of “tax treaty tie breaker” provisions.)

Q. If I meet the conditions to be a “tax resident” of more than one country, will I really be treated as a “tax resident” of more than one country?

A. Yes. Although it is possible to meet the definition of “tax resident” for more than one country, most countries have tax treaties that (1) identify those “instances” where an individual is a “tax resident” of more than country and (2) use the tax treaty to deem the individual to be a “tax resident” of only one country. It wouldn’t be fair for an individual to be treated as a “tax resident” of more than one country, would it? (U.S. citizens living outside the United States are always tax residents of the United States even if they are also “tax residents” of another country.)

Q. What do you mean by “unless you are a U.S. citizen”? As a “U.S. citizen” am I a “tax resident of more than one country?

A. Well, if you are a “U.S. citizen” (or Green Card holder) you are ALWAYS a “tax resident” of the United States. It doesn’t matter whether you actually live there or not. As long as you are a U.S. citizen, you are subject to the full force of the Internal Revenue Code. This includes a variety of “Taxes, Forms and Penalties”. It includes a number of very specific reporting requirements including (but not limited to): FBAR, Form 8938, Form 3520 and Form 5471. For this reason, it is very difficult for a U.S. citizen to move from the United States, become a “tax resident” of that other country and engage in effective financial and retirement planning. See for example:

The biggest cost of being a “dual Canada/U.S. tax filer” is the “lost opportunity” available to pure Canadians

“How To Live Outside The United States In An FBAR And FATCA World”


Q. I understand that as a “U.S. citizen” I am always a “tax resident” of the United States. But, if I move to Canada, does that mean that I am a “tax resident” of Canada too?

A. Absolutely YES!!! You are an American. “To whom much is given, much is expected.” U.S. citizens living in Canada (who meet the definitions of Canadian “tax residency”) are ALSO “tax residents” of Canada (or any other country where they may live). In other words, U.S. citizens living abroad are generally “tax residents” of at least two countries! How cool is that?

John Richardson

So, you have received bank letter asking about your tax residence for CRS or FATCA – A @taxresidency primer – Part 1

cross-posted from citizenshipsolutions.ca

So, you have received bank letter asking about your tax residence for CRS or FATCA – A @taxresidency primer

Introduction – So, what’s this “tax residence” stuff about? What does “tax residence” mean?

In 2014, as people started to receive “FATCA letters” I wrote a lengthy post describing “What to do if you receive a FATCA letter“. Information exchange under the Common Reporting Standard “CRS” has begun in 2018. As a result, I am writing this post which is to explain what the CRS is and how it relates to the FATCA letter. It is important to understand that the “CRS letter is actually a combined “CRS/FATCA” letter which is more likely to be received than the original FATCA letter. I urge that those who have received a letter of this type to read this post PRIOR to seeking professional advice!!!

You are reading this post because you have received a letter from your bank that is asking you to identify the countries where you are a “tax resident” and/or whether you are a “U.S. Person”.

The purpose of this post is to help you understand:

– why you are receiving the letter
– what the letter means
– what is the meaning of “tax resident”, “tax residence” and “tax residency” (terms which are used interchangeably)
– why “tax residency” is important to you
– the significance of being a U.S. citizen or Green Card holder
– how to identify where you may be a “tax resident”

Why are you receiving this letter?

The letter is intended to fulfill the bank’s due diligence obligations under both the OECD Common Reporting Standard (all countries of “tax residence” except the United States) and FATCA (whether you are a “tax resident” of the United States).

In other words, the letter is for the purpose of satisfying bank “due diligence” under two separate reporting regimes – FATCA and the OECD Common Reporting Standard “CRS”

This is long post which is broken into the following parts:

Part A – How does FATCA differ from the “CRS”?
Part B – The Combined FATCA/CRS Letter
Part C – “Tax Residency 101”: It’s about where you should be paying your taxes
Part D – Different definitions of “tax residence” – Not all countries define “tax residence” in the same way
Part E – Oh My God! I think I might be a “tax resident” of two countries – What is a “tax treaty tie breaker”? How does a “tax treaty” tie breaker work?
Part F – A “U.S. citizen” cannot use a “tax treaty tie breaker” to break U.S. “tax residence”. How then does a “U.S. citizen” cease to be a “U.S. tax resident”?
Part G – How a “permanent resident” of the U.S. – AKA “Green Card Holder” – ceases to be a U.S. tax resident
Part H – Are you, or have you ever been a U.S. citizen or Green card holder? Sometimes it’s not what it seems.
Continue reading “So, you have received bank letter asking about your tax residence for CRS or FATCA – A @taxresidency primer – Part 1”

If you Decide to Comply, DON’T choose a Homelander Tax Compliance Professional

I was very surprised to receive the following email on Friday evening. I cannot recall ever getting anything like this before. I will not identify the author because it is not proper to publicly share an email without the permission of the sender. It is not anyone I have ever heard of before and I doubt any of you have either. It took me a while to decide if I would answer or not. I tried to put my reaction aside after all, why be surprised that a tax compliance professional would demonstrate so little awareness outside of his/her experience. In the end, I simply could not ignore how I felt. I replied and have decided to publish the email without naming its author and my response.

I wish I had pointed out to this person that technically, due to the Canadian IGA (or likely any Model I agreement), that there are no harsh penalties that have been implemented. A professional who is truly conversant with this situation should have stated this better. Does such a statement show a conscious attempt to confuse the expat, assuming penalties from FBAR, OVDP etc will come to mind? Could it be a reference to the idea that Form 8938 is a harsh penalty all on it’s own? (As a matter of torture, most definitely….) Or is the practitioner just sloppy? (Maybe we could get this person to rule on all the “plain language” misapplications we hear of….retroactive 877A, anyone?).

I also wish I had challenged the statement that “the program is working.” There is nothing to suggest that the majority of non-resident (or resident, for that matter) Americans have become compliant. The numbers quoted in the statistics for the OVDP are nowhere near 9 million and we know some of those who came forward are Homelanders. For some interesting figures regarding compliance please see Professor William Byrnes’ “Is FATCA Much Ado About Nothing“? . Prof. Byrnes states “The IRS War on the FBAR is simply not working.” (“The IRS received 807,040 FUBARS FBARs in 2012; compliance with FBAR filing appears to be declining.”) Every tax compliance professional should be required to read this report. It would go a long way in curtailing the inflammatory language we experience, intended to confuse & frighten and assumes we are all idiots.

I also should have challenged the nonsense about ICE not allowing visas of former citizens being allowed to enter the U.S. This amounts to the usual threat of the Reed Amendment. Does ICE have the power to override the State Department?

I am simply astonished at the arrogance of this person. What to say of the obvious limited exposure of such an “expert.” (I have never heard anyone suggest that there are bank problems in Canada). Mentioning OVDP and not Streamlined. Who on earth does this person think he/she is?

My USC/resident-CPA sister strongly suggests I complain to the appropriate accountancy board.

And the unmitigated gall of implying I should send clients………good gawd………

*******

(emphases are mine)

If this is the Patricia Moon who has given up her US citizenship because of FATCA, then this is for you. I have seen your “protests” regarding FATCA and filing US tax returns. You stated that you were delinquent in your filings, and that you caught yourself up and then renounced your citizenship.

You are one of the very reasons that FATCA with its harsh penalties was implemented. I have been practicing in the international tax area, specializing in US expatriates, for over 31 years. I am the chairman of a state CPA Society’s International Tax Committee, and have an international reputation in this area. Over my 31 years’ time I have prepared and/or reviewed several thousand tax return. I have seen dozens of people such as yourself , people who are American citizens, and enjoy the benefits of being an American citizen, while failing to fulfill the obligations that come with citizenship – namely filing a US tax return and paying any tax due. One cannot enjoy the benefits of American citizenship without complying with the responsibilities.

Since FATCA has been implemented, there have been citizens such as yourself who have renounced their citizenship. I understand from a couple of US Customs & Immigration attorneys that I work with that ICE often won’t allow visas to come back to the US, sometimes even for vacations, to former US citizens. However, a much larger number of persons have come forward and are now filing tax returns and complying with the responsibilities of being a US citizen.

So the law has worked. It is accomplishing its intended goals. I personally have worked with several formerly noncompliant individuals to “get them legal” through the Offshore Voluntary Disclosure Program.

Staying legal is not a difficult process. It requires filing a US tax return every year. Often there is no tax due from it, as the foreign tax credits and the foreign earned income exclusion will reduce or eliminate the tax on all but US-sourced income.

Giving up citizenship is a drastic step when compliance is so easy. It is like amputating your arm because you have a hang nail.

And, from my experience, most larger banks WILL continue to work with Americans abroad. Very few are closing American accounts. In Canada, for example, I know that BMO Harris actually promotes accounts for Americans. I have several clients in Canada who bank with them. RBS Bank, Banque Scotia, TD Mortgage Corporation, Canadian Imperial Bank of Commerce, and many others.

Just my thoughts. Feel free to give my name to any individual who wants to become legal, but does not want to go to the extreme that you did.

Thank you.

*******

My response:

Your email is extremely offensive and demonstrates that you understand this situation from one point of view and one only.

Perhaps you are unaware of the fact that the large majority of expats living outside the US for decades were simply unaware of any requirement to file taxes and information returns. The U.S. made no attempts to educate or notify people of these requirements. Surely you have known people who were “non-willful.” I certainly hope you did not put any persons such as these in the OVDP/OVDI.

Your comment “You are one of the very reasons that FATCA with its harsh penalties was implemented” is curious, given I did not owe any tax. I was a stay-at-home mother with an annual income that never exceeded $11,000 CAD from doing the books for my husband’s company. An annuity inherited from my parents was transferred at a later time and I most certainly paid the tax that was due.

As to “I have seen dozens of people such as yourself, people who are American citizens, and enjoy the benefits of being an American citizen….”

  • I had not lived in the United States for thirty years and was/am a law-abiding, tax compliant citizen/resident of Canada
  • I was not “enjoying the benefits of being an American citizen”
  • If you are referring to having the right of return, there is nothing particularly unique there; the majority of countries on earth allow their citizens to return
  • And I certainly am in no need of the Marines coming to save me in Canada (a “benefit” that one would have to pay for, were it even relevant to those living in first-world countries).

If by “benefit” you mean having access to “the greatest country on earth” I will tell you that a component of renouncing involved my observations about Abu Gharib, Guantanamo, the assassination of American citizens by drone without due process and other actions that frankly made me ashamed to have ever been an American citizen. In other words, your assertion that my renunciation was “like amputating your arm because you have a hang nail” simply does not cover all that was involved. Not the least of which, was my Canadian family and how they felt about the effect of U.S. policy on their lives. My husband resented any account information being turned over to FINCEN (given the fact it was his money)and it was a huge issue in the marriage.

I have remained active in this movement having renounced over 6 years ago. I don’t gain anything personally by volunteering a huge portion of my life to this. I am fully conversant with what is required regarding compliance. It is not always simple and it is very expensive. You fail to mention facts such as:

  • the U.S. would expect capital gains tax on the sale of our personal residence for a gain greater than $250k
  • the U.S. treatment of Canadian mutual funds as PFICs is particularly punitive and would require 8621 every year
  • the U.S. insistence that my country’s tax-deferred vehicles designed to help save for education, disability and non-RRSP uses are foreign trusts requiring 3520 and 3520A every year; all of these plans mirror similar programs in the US (529s, ABLE and Roth IRAs)
  • had I been signed on my husband’s company (I wasn’t) we could have found ourselves subject to an annual 5471 and the particularly abusive Transition Tax

I personally have no desire whatsoever to go to the United States. I don’t care what CBP and ICE do. It doesn’t frighten me at all. A Canadian does not need a visa to visit the U.S. anyway.

None of us have ever claimed that obtaining bank accounts or mortgages is difficult in Canada. This is a situation that primarily affects Europeans and it is very, very real. I know many people who have been severely impacted by it. It was perversely disingenuous for Judge Rose claim in the Bopp FATCA ruling, that this was not due to FATCA but to independent action of the banks.

Over the years I have encountered many people such as yourself, who seem to think they are entitled to inflict their opinions and judgments about character based upon presumptions made about U.S. expectations. I wonder if it could ever occur to you that there are other places and people in the world who do not base the value of their existence upon opinions such as you have expressed. I find it difficult to believe you would end asking me to send you clients. I trust this will be the end of any communication.

Regards,

Patricia Moon
Secretary-Treasurer
xxx-xxx-xxxx
Alliance for the Defence of Canadian Sovereignty &
Alliance for the Defeat of Citizenship Taxation

Comment on “Think You Can Leave U.S. – Think Again”

 


 

Recently an excellent article Think you can leave the US? Think again!
appeared on the Thom Hartmann site.

Written by an expat laurainparis , it is one of the best summaries/sources of information available. This post is based on a comment to the article.
 

by John Richardson

*******
 
Laura, this is one of the very best articles I have seen about the reality of this situation.

At the outset, I would like to explain that what most people call U.S. “citizenship-based taxation” (sounds kind of patriotic) is the U.S. policy of “imposing worldwide taxtion on the “tax residents” of other countries who do NOT live in the United States” (which is what it really is). In other words, let’s call it like it really is. It is NOT restricted to “so called Americans abroad”. The vast majority of people impacted by this are the citizen/residents of other countries.

You explain what it means when the United States claims the right to impose “worldwide taxation” on the residents of other countries. This of course means (as you know first hand) that a resident of France must pay U.S. tax on his/her French income. In addition (as you point out) the penalty regime imposed on assets that are local to the resident of France but “foreign” to the USA are draconian and completely idiotic.

I would also like to point out that although this discussion is frequently framed in terms of “taxation”, what this is really about is the United States exporting the Internal Revenue Code to other countries. This exports certain U.S. cultural values, reporting requirements and penalties on those who “commit personal finance outside the United States”. In other words, this is about much more than taxation.

There was an attempt to effect change, but it failed

The previous comment above by “PetLover” outlined and reinforced many of your points. PetLover also commented on the efforts made by various groups to effect legislative change. These efforts failed.

I would like to comment on why (I believe) these efforts failed and suggest what should be done on a “going forward” basis.

Why the efforts on the part of Americans abroad failed

On an organizational level the efforts were led by “Republicans Overseas” and “Americans Citizens Abroad – ACA”.

On an “individual level”, hundreds of individuals affected by this wrote to the House Ways and Means Committee in 2013 and the Senate Finance Committee in 2015. I mean 100s!! In fact the largest number (by far) of submissions on International Tax Reform came from Americans abroad. These submissions were acknowledged but basically ignored.

Tax “reform” (if you want to call it that) came to fruition on December 22, 2017. It included benefits for corporations, a few temporary benefits for U.S. resident individuals, no effort to improve the situation for Americans abroad and a possible worsening of the situation for Americans abroad who are self-employed.

There is a suggestion that the new “transition tax” applies to the small businesses owned by indivdual Americans abroad. If this is true, the U.S government would (if you believe the compliance community) confiscate approximately 20% of the retained earnings of small businesses owned by certain Americans abroad. If this is true (and I do NOT agree with the prevailing sentiment in the tax compliance community), it would mean that NOT only did Congress NOT assist Americans abroad but they made it even worse for them! In my view, the possible applicability of the “transition tax” is the final straw and those who can afford to renounce U.S. citizenship need to renounce “quick time”. But, back to the question, why did the efforts fail?

1. It’ s about the message – After all this time, most people do NOT make the distinction between FATCA and “citizenship-based taxation” (which is the U.S. tax policiy of taxing residents of other countries). Some were urging the repeal of FATCA. Some were urging a change in U.S tax policies. FATCA and tax policies are not the same thing. In fact, if the U.S were to change its policy of imposing taxation on the “tax residents” of other countries, FATCA would be far less of a problem. This is becaue those who resided in other countries would cease to be U.S. “tax residents”.

FATCA is a law that essentially “hunts” for people who are U.S. “tax residents”. It is U.S. tax law that imposes “worldwide taxation” on the tax residents of other countries. The former is an extreme irritation. It’s the latter that makes life untenable for “tax residents” of other countries.

The focus should have been on changing the U.S. tax policies and less on the repeal of FATCA. But, this requires that people NOT treat “FATCA” and U.S. tax laws as being the same.

So, the message needed to be: Stop imposing U.S. “worldwide taxation” on the “tax residents” of other countriese who do NOT live in the United States!

2. Partisanship – The inability of Americans abroad to behave in a non-partisan way. FATCA may be a partisan issue. But, the U.S. policy of imposing “worldwide taxation” on the “tax residents” of other countries is NOT partisan at all. It’s been around since the 1800s (as the article points out).

3. If you don’t ask for what you want, you won’t get what you want: Neither of the primary organizations (Republicans Overseas nor ACA) made the simple and understandable request that:

“The United States stop imposing “worldwide taxation” on the “tax residents” of other countries who do NOT live in the United States.”

How the organizations framed the issue:

Republicans Overseas: Did not focus on the issue of “tax residency”. It did NOT ask that the United States stop imposing taxation on the residents of other countries. Rather, it asked that the United States stop imposing taxation on certain kinds of income earned regardless of residence (asking for territorial taxation for individuals). Republicans Overseas asked that income earned outside the United States be exempt from U.S. taxation. The focus was NOT on “who” was subject to U.S. taxation, but rather on “what” income was subject to U.S. taxation.

American Citizens Abroad- ACA: Did not ask that the United States stop imposing taxation on the “tax residents” of other countries. Rather it asked that certain individuals, under certain circumstances should be exempted from “worldwide taxation” imposed on “nonresidents”. (Keep “citizenship-based taxation” with a carve out for certain people.)

Don’t get me wrong. I DO applaud the efforts of both organizations. It’s just that neither organization asked specifically for the only acceptable solution. What is that solution?

“The United States MUST stop imposing “worldwide taxation” on the “tax residents” of other countries” who do NOT live in the United States!”

Going forward …

I believe that the world (organizations, individuals, foreign governments, etc.) MUST unite behind this SIMPLE principle. No “carve outs”. No exceptions. No confusing the issues. No suggestions that change is complicated. This is the only solution that makes sense. Furthermore, by framing the issue in this way, the real issue is being discussed. It’s direct. It’s clear. It’s honest. It demonstrates how outrageous the situation is. It’s non-partisan. There is NOT a single individual, organization or foreign government that would disagree with this. Because the issue becomes non-partisan, the partisan fighting should stop. There will be no “divide and conquer”. The message will be clear.
 
Individuals must commit to the overall principle even if they are not individually impacted by all of the aspects of the Internal Revenue Code

For example:

– individuals who do NOT have mutual funds should not say: I don’t have mutual funds. This does not specifically affect me, therefore it is not a problem;

– individuals who have not had to pay capital gains taxes on the sale of their homes should not say: This does not specifically affect me, therefore this is not a problem.

– individuals who do not have small business corporations, should not say: This does not specifically affect me, therefore this is not a problem.
– those individuals who identify strongly as U.S. citizens living abroad, should recognize the impact that U.S. tax policies have on their country of residence. They should not say, this doesn’t affect me, therefore this is not a problem.

– those individuals who are not impacted by the S. 877A “Exit Tax” should not say: If I renounce citizenship, I will not have to pay an “Exit Tax”. They should not say, I don’t have to pay the “Exit Tax” and because it doesn’t affect me, it is not a problem.

Until individuals impacted by outrageous and unjust U.S. policies, unite and support the principle, regardless of how these policies affect them individually, there will be no united voice (only isolated pockets of discontent).

Finally, U.S. citizens living outside the United States are going to have to do some “soul searching” and ask themselves a simple question:

Are they “free” individuals that are entitled to a level of dignity and human rights that individuals in other first world democracies are entitled to? Or are they satisfied to be Americans – essentially the property of the United States government. In other words, are they satisfied to have the lower level of human rights and dignity that are allowed to Americans. Sorry, in the 21st century, the United States is NOT a leader in human rights. Other countries have long since passed the USA in that regard.

The author of this superb article asks:

Q. Why should U.S. residents care? The answer is simple.

A. Because all U.S. residents need to understand their future is to see how the U.S. Government treats its fellow citizens abroad. Their only crime is to have pursued a life (often attempting to sell U.S. products) outside the United States!

 

Treasury Department Responds, so to speak, to Rep Bill Posey’s #FATCA letter

 
Rep Bill Posey

Last September, due to the efforts of Suzanne Herman,
Representative Bill Posey (R-FL) sent an
excellent letter to Treasury Secretary Mnuchin,
asking him to deal with #FATCA.
 
 
This post included the text of the letter and some 60+ comments from Brockers. What Rep. Posey received is a stark contrast to the expectation expressed in this comment:

Bubblebustin says
October 16, 2017 at 2:12 pm

@plaxy

According to RO on its FB page:

“At Republicans Overseas’ request, RNC Co-Chairman Bob Paduchik personally delivered Rep. Mark Meadows’ and Sen. Rand Paul’s joint letter on the Foreign Account Tax Compliance Act to Treasury Secretary Steven Mnuchin’s office. Secretary Mnuchin is fully aware that 9 million overseas Americans have been suffering under FATCA tyranny.

As a result, FATCA is included in the 2nd Report to the President on Identifying and Reducing Tax Regulatory Burdens by the Treasury (https://www.treasury.gov/press-center/press-releases/Documents/2018-03004_Tax_EO_report.pdf).

In the report to the President recommending actions to eliminate or mitigate burdens imposed on taxpayers by eight specific tax regulations, the Treasury indicated that it is considering possible reforms of regulations issued pursuant to FATCA. Thank you Co-Chairman Bob-Paduchick.”

This is the response Rep. Posey received from the Treasury Department:
 
 
clean letterhead treasury
 
November 8, 2017

The Honorable Bill Posey
U.S. House of Representatives Washington, DC 20515

Dear Representative Posey:

Thank you for your letter regarding the Foreign Account Tax Compliance Act (FATCA). As you are aware, Congress passed FATCA legislation in 2010 to strengthen the integrity of the U.S. voluntary tax compliance system and to combat the use of foreign financial accounts and foreign entities to facilitate tax evasion. FATCA provides the IRS with information about U.S. taxpayers’ use of foreign financial accounts and certain higher-risk foreign entities, so that these foreign accounts and investments are subject to disclosure to the IRS, similar to the disclosures for accounts and investments held or made inside the United States that the IRS already receives.
Continue reading “Treasury Department Responds, so to speak, to Rep Bill Posey’s #FATCA letter”

Support the Paul Amendment to Repeal FATCA!

 

repealFATCA

This Is an Urgent Campaign to Repeal FATCA ALERT!

Support the Paul Amendment to Repeal FATCA!
 
 
 

November 29, 2017

This week the Senate version of the tax reform bill will come to the Senate
floor. The Campaign to Repeal FATCA has learned that Senator Rand Paul
(R-Kentucky) plans to offer as a floor amendment his bill S. 869 to repeal
the so-called “Foreign Account Tax Compliance Act (FATCA).

The Campaign to Repeal FATCA is asking everyone immediately to contact your
Senators with this simple message:

“Support the Paul Amendment to Repeal FATCA!”

You can find the contact information for your state’s two Senators
here. Given the partisan divide
in the Senate, it is especially important to contact Republican Senators. If
your state has one from each party, contact the Republican first!

Here is a suggested draft message you can use via the email contact. (NOTE:
If you are contacting a Democratic Senator, please delete the sentence in
red referring to the Platform.):

Dear Senator [Name]:

As your constituent, I strongly urge you to support the floor amendment to
be offered by Senator Rand Paul to repeal the so-called Foreign Account Tax
Compliance Act, or FATCA. Despite the claims of its sponsors when it was
passed in 2010, FATCA is a failure in its supposed aim to recover offshore
tax assets hidden by “fat cats.” Instead, it has imposed massive costs on
middle class Americans, violated Americans’ privacy without probable cause,
and led to a huge increase in U.S. citizenship renunciations. The 2016 GOP
Platform called for the repeal of this wrongheaded Obama-era law – and the
Republican Party should keep its promises! Please support the Paul Amendment
to repeal FATCA!

[Name, location]

In addition, if you represent an organization, please issue a statement in
support of the Paul Amendment to repeal FATCA and send it to Senate offices
and distribute via social media.

Time is of the essence. Thank you for your help at this critical moment!

Nigel Green and Jim Jatras

Co-Leaders, Campaign to Repeal FATCA

www.RepealFATCA.com

Further information points on why FATCA must be repealed follow:

The GOP called for repeal in its 2016 Platform. “The Foreign Account Tax
Compliance Act (FATCA) and the Foreign Bank and Asset Reporting Requirements
result in government’s warrantless seizure of personal financial information
without reasonable suspicion or probable cause. Americans overseas should
enjoy the same rights as Americans residing in the United States, whose
private financial information is not subject to disclosure to the government
except as to interest earned. The requirement for all banks around the world
to provide detailed information to the IRS about American account holders
outside the United States has resulted in banks refusing service to them.
Thus, FATCA not only allows ‘unreasonable search and seizures’ but also
threatens the ability of overseas Americans to lead normal lives. We call
for its repeal and for a change to residency-based taxation for U.S.
citizens overseas.”

FATCA fails in its stated purpose of recovering tax revenues. On enactment
in 2010, FATCA was scored as raising about $800M per year. According to
Texas A&M law professor William Byrnes, actual recoveries are closer to
$100-200M per year and falling. FATCA will soon cost more than it brings in.

FATCA is an indiscriminate violation of privacy. FATCA data reporting
requires no probable cause or even suspicion. Unlike domestic 1099s and W2s,
no taxable event is required. Compliance burdens fall disproportionately
upon people of moderate means, few of whom are engaged in evasion or owe any
tax. Foreign banks’ denying services to Americans leads to increased U.S
citizenship renunciations.

FATCA is costly. Estimates of global compliance spending rely on aggregation
of per-institution costs: millions for each small bank, hundreds of millions
for a big one. One projection puts cumulative cost at $58 to $170 billion.
This is an order of magnitude greater than any recoveries from FATCA.

FATCA relies on Obama-era Executive overreach. Because of other countries’
privacy laws, FATCA is unenforceable without so-called “intergovernmental
agreements” (IGAs) invented by Tim Geithner’s Treasury Department. The IGAs
are not authorized by statute or submitted to the U.S. Senate as treaties.

FATCA threatens our domestic financial industry. Reciprocal “Model 1” IGAs
promise “reciprocity” from U.S. domestic banks. This threatens massive
FATCA-like costs on U.S. banks and consumers.

Keeping FATCA on the books risks future harm. The OECD, which for years has
sought to extinguish personal financial privacy and create a worldwide
financial data fishbowl, has praised the IGAs as a “catalyst” to that end.
If FATCA remains on the books, the next Democrat Administration and Congress
may press reciprocity on domestic American financial firms to create a
global FATCA – or “GATCA.” This is the opposite of what the GOP Platform
promised.

Transparency is when citizens monitor government.

When government monitors citizens, that’s tyranny.