Last week the US House of Representatives passed a bill that contained the “Foreign Account Tax Compliance Act”. This act was passed without a hearing or without any chance for opposition to be heard. You can view the entire bill here. Below are the highlights of the bill:
- Impose a 30% withholding tax on payments to foreign financial institutions and other entities unless they acknowledge the existence of offshore accounts to the IRS and disclose relevant information including account ownership, balances and amounts moving in and out of the accounts.
- Require individuals and entities to report offshore accounts with values of USD50,000 or more on their tax returns.
- Extend the statute of limitations to six years when offshore accounts are unreported or misreported (the current statute of limitations on tax audits is three years).
- Require advisors who help set up offshore accounts to disclose their activities or pay a penalty.
- Require electronic filing of information reports about withholding on transfers to foreign accounts to enable the IRS to better match reports to tax returns.
- Strengthen rules and penalties with regard to foreign trusts, including rules to determine whether distributions from foreign trusts are going to U.S. beneficiaries and reporting requirements on U.S. transfers to foreign trusts.
- Clarify the definition of outgoing U.S. dividend payments that are received by foreign persons so they cannot be disguised as other types of distributions in an effort to avoid U.S. taxes.
What does this mean to you, you may ask. The bill does not change anything about the legality of US citizens doing business offshore. You can still bank, invest, and operate your business outside of the US. But it can limit your strategic planning for asset protection.
But what it does do is make it much more difficult for financial institutions to do business with US citizens. If this bill becomes law, it will mostly likely eliminate, or at least severly limit, the ability for US persons to do businessess offshore. The offshore banks just will not deal the the hassles of IRS reporting requirements. There are plenty of other people around the world for them to target as customers whose country doesn’t think you are a criminal for having a bank account outside of the US.
But ultimately, what this means is the US government is growing its power base and taking away your freedoms. Every citizen should have the freedom to move, work, invest, and travel as he sees fit and this can put a limitation on some people’s lives.
Already there has been a lot of offshore banks who now refuse US customers. Fortunately we have a solution for clients wishing to bank and do business offshore. For those interested in offshore asset protection strategies, contact us today for your free 30 minute consultation.