Yesterday was July 1, 2014- the day the United States government insisted foreign financial institutions begin complying with the requirements of the Foreign Account Tax Compliance Act, or FATCA. Michael Cohn reported on the website of Accounting Today:
FATCA was enacted as part of the HIRE Act of 2010 to target noncompliance by U.S. citizens of tax obligations using foreign accounts. Since that time, the Treasury noted that FATCA has gained broad support among the U.S.’s international partners, including many of the world’s largest financial centers, and is poised for a strong start. Tuesday, July 1, was the date when foreign financial institutions that have not taken steps to comply with the law’s requirements run the risk of tax withholding penalties of up to 30 percent on their U.S. source income…
(Editor’s note: Bold added for emphasis)
In case any readers aren’t familiar with FATCA, from the Internal Revenue Service website:
Foreign Account Tax Compliance Act
The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.
FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts
FATCA focuses on reporting:
-By U.S. taxpayers about certain foreign financial accounts and offshore assets
-By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which
-U.S. taxpayers hold a substantial ownership interest
-The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.
So what does FATCA “kicking in” have to do with offshore safe deposit boxes?
While already increasingly difficult for U.S. citizens to open an account with an offshore bank- and by extension, obtain a safe deposit box from the same institution- yesterday was basically the deadline for foreign financial institutions to decide whether or not to service new and existing American customers.
That decision would be reflected in their being listed on the FATCA Foreign Financial Institution List on the IRS website.
For those looking to rent a safe deposit box at an overseas bank, it’s important to check a prospective FFI against the most recent version of this list. If the bank’s name appears on the list, it’s possible Americans are still welcome to open an account there. And by extension, a safe deposit box- if the option is provided.
You can visit the FATCA Foreign Financial Institution (FFI) List Search and Download Tool here on the IRS website.
By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)
Source:
Cohn, Michael. “IRS Updates FATCA Foreign Financial Institution List.” Accounting Today. 1 July 2014. (http://www.accountingtoday.com/news/irs_watch/irs-updates-fatca-foreign-financial-institution-list-71208-1.html). 2 July 2014.