What’s the FATCA story?
Expat adults with US citizenship must file an annual tax return with the IRS no matter what their ties are to the USA. Even those with dual-citizenship who were born on US soil but have lived elsewhere for almost their entire lives are liable for IRS scrutiny.
FATCA is a reciprocal data sharing agreement between jurisdictions which compels foreign tax authorities to provide financial information to the US about American citizens living within their jurisdiction. Failure to comply with FATCA can lead to heavy fines and sanctions and, potentially, disruptions to trade with the US.
According to the US treasury, 113 jurisdictions have signed up to FATCA Model 1 or Model 2 agreements (some jurisdictions are agreed in substance).
The agreements are in place to allow the IRS to cross-check tax returns with the data received from foreign jurisdictions. The IRS then ensures US citizens are paying the correct tax on overseas assets, bank accounts and investments. Reciprocal data is shared by the IRS to foreign tax authorities regarding their nationals who have financial ties, such as bank accounts and investments, in the US.
Even Tory MP Boris Johnson, who was born in New York, has fallen foul of FATCA. He was obliged to pay tax on the sale of a property in London in 2015. Mr Johnson formally renounced his US citizenship in 2016.
France Takes Issue with FATCA
In May 2019, Bloomberg reported that a cross-party group of French politicians were calling for France to pull out of the FATCA agreement.* Written by a deputy from President Macron’s party and a member of the center-right opposition, a report suggested French and US tax laws need realignment to avoid double taxation and that FATCA should only be applied above certain income levels.
US Accountability Report Reveals FATCA Failings
A Government Accountability Office report released in April 2019** revealed a number of issues with the foreign asset reporting act, not least the apparent effect it has had on the number of US citizenship renunciations – up almost 178% from 2011 to 2016.
Among the recommendations made by the report was that “The Secretary of State, in coordination with the Secretary of the Treasury and Commissioner of Social Security, should establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U.S. persons living abroad encounter from implementation of FATCA reporting requirements.” (Recommendation 6)**
Blacktower in the US for Citizens Abroad
As well as assisting UK expats with their wealth management and retirement planning in the US, Blacktower (US) LLC provides services to US nationals overseas.
If you are living abroad or planning to make the move, contact Blacktower in the US today so that we can help you make the most of the financial opportunities open to you and to ensure IRS and FATCA compliance.
* https://www.bloomberg.com/news/articles/2019-05-15/france-should-consider-abandoning-fatca-lawmakers-report-says Accessed 07-06-19
** https://www.gao.gov/products/GAO-19-180 PDF available to download here – Accessed 07-06-19
Disclaimer: Blacktower (US) LLC is not a tax adviser and independent tax advice should be sought. The above does not constitute advice. This publication is intended to provide general information regarding the subject matter covered, and is not intended to serve as legal, tax or other financial advice related to individual situations.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.