Andrew Prince, Financial Planner for Acuma Independent Financial Advice delivers his third and final instalment on how non-resident Americans must pay attention to the Foreign Account Tax Compliance Act (FATCA) — legislation enacted in March 2010 by the US Government:
July 4, Independence Day for Americans, the day in 1776 when America signed a declaration of independence from England. But turn the calendar forward some 238 years … By the time you read this article, you’ll have already enjoyed tucking into the BBQ and family get together, blissfully unaware that a few days earlier FATCA came into effect.
For those that have read my previous articles, you will, hopefully, have made your own enquiries into the impact it will have on you personally. Many attendees at our FATCA seminars have expressed surprise at how far reaching this piece of legislation is and the consequences for them. But what is the connection to sunny old England?
England, or more precisely the UK now, along with the other G8 leaders acknowledged the central role of tax information exchange, stating in their June 2013 communiqué: “A critical tool in the fight against tax evasion is the exchange of information between jurisdictions, and urging that tax authorities across the world should automatically share information to fight the scourge of tax evasion.”
What this means in practice, is greater cooperation between the governments around the world via Intergovernmental Agreements (IGA). We may be different countries; however when it comes to collecting tax revenue we appear to be joined at the hip.
Intergovernmental Agreements (IGA) have been signed by almost 100 countries around the world to date, including previously discrete jurisdictions such as Switzerland and Luxembourg. The United Arab Emirates signed a Model 1 IGA with the United States and is considered to be “in effect” from May 23 this year.
The famous American bounty hunter Duane “Dog” Chapman summed it up very clearly in the title of his book “You can run, but you can’t hide”; whatever your nationality and wherever you chose to work or hold your money, the clear exchange of information is going to impact you. There is nowhere to hide.
Liechtenstein, for example, signed an agreement with the US to assist with the implementation of FATCA. The intergovernmental agreement (IGA) was signed in Vaduz by Liechtenstein prime minister, Adrian Haslet and the United States chargé d’affaires to Liechtenstein, Jeffrey R Cellars.
The agreement assures that financial institutions in Liechtenstein have access to the US capital market once FATA has been implemented.
Hasler said: “The unhampered access to US capital markets, which has been ensured by the agreement, is essential for Liechtenstein providers of financial services.” The Liechtenstein Government said the agreement was made in the “best interests” of the Government.
The government of Gibraltar — the British overseas territory — said the signing followed “consultation with the industry” and a review of the views of a working group set up specifically to consider FATCA and its impact on the financial services sector. It said the agreement aims to improve international tax compliance through mutual assistance in tax matters based on an “effective infrastructure for the automatic exchange of information”.
But not everyone has been so good.
In May, Credit Suisse pleaded guilty to “conspiracy to assist US customers in presenting false income tax returns” and has paid a settlement to the US Government of $2.8bn. The guilty plea was entered at a Virginia courtroom, marking the end of a four-year investigation into advice given to some US clients of Credit Suisse’s Swiss banking entity, Credit Suisse AG.
Company chief executive Brady Dougan said: “We deeply regret the past misconduct that led to this settlement. The US cross-border matter represented the most significant and long-standing regulatory and litigation issue for Credit Suisse. Having this matter fully resolved is an important step forward for us.”
Please remember, tax avoidance is perfectly legitimate and your professional advisers will be happy to assist. Tax evasion is illegal and not only you, but anyone who “aids or assists” you is likely to be severely dealt with. Let me be clear, this includes imprisonment for all involved and not just a fine or slap on the wrist. Never has it been more critical to take sound professional advice.
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