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Foreign Life Insurance Policies – FBAR Reporting

Foreign Life Insurance Policies are very popular around the world, especially in India, Germany and France (Assurance Vie accounts). Yet, very few U.S. taxpayers (especially H-1B holders and U.S. permanent residents) are aware of the fact that these policies may be subject to numerous and complex IRS tax reporting requirements in the United States. In this article, I would like to generally discuss the FBAR requirements applicable to foreign life insurance policies.

I will not be discussing here the requirements for a qualified foreign life insurance policy, because it is mostly irrelevant since the great majority of foreign life insurance policies would not be qualified policies.

Types of Foreign Life Insurance Policies

Before we start exploring which foreign life insurance policies (also known as Life Assurance Policies) are subject to the FBAR requirement, it is important to distinguish three general categories of foreign life insurance policies.

In the order of rising complexity, the first category of foreign life insurance policies consists of simple, straightforward life insurance policies with no cash surrender value, no income payments and no income accumulations. The taxpayer simply makes the required premium payments and he expects a fixed-amount payout at death.

The second category of foreign life insurance policies has a cash-surrender value, but no income. The taxpayer pays a premium and expects a certain payout when the policy is surrendered or matures. The cash surrender value grows over time mostly through premiums and bonuses which would be paid out when the policy is surrendered. There is also a potential death benefit.

Finally, the third category of foreign life insurance policies has a cash-surrender value with investments and/or income. There is a large variety of investment life insurance policies. The most common arrangement, though, is where the taxpayer pays a relatively large initial premium which is invested in foreign mutual funds; the growth in mutual funds will usually determine the cash-surrender value. Oftentimes, the cash-surrender value in these policies is tax-free if certain requirements are met (for example, Assurance Vie policies in France or certain life insurance policies in India).

In some cases (for example, in Malaysia), an investment foreign health insurance policy may be tied into a life insurance policy.

FBAR – FinCEN Form 114

FinCEN Form 114 – Report of Foreign Bank and Financial Accounts (commonly known as FBAR) is the most important US tax information return. FBAR must be filed by a US tax resident if the aggregate value of foreign financial accounts (in which this US person has financial interest and/or over which this US person has signatory authority) exceeds $10,000 at any time during the calendar year. The 2015 FBAR must be received by the IRS by June 30, 2016 without any extension possible; however, starting the reporting for the calendar year 2016 (i.e. 2016 FBAR) the FBARs are due on April 15 with an extension possible.

The importance of FBAR stems from the draconian FBAR penalties. Unlike many other information returns, FBAR imposes penalty not only on the willful non-filing, but also on the non-willful failure to file the FBAR. The willful FBAR penalties range from criminal penalties with up to 5 years in prison to up to $100,000 penalty per account per year. The FBAR statute of limitations is six years, which means that up to six years maybe subject to a penalty (though, usually it would be 2-4 years).

Foreign Life Insurance Policies and FBAR Reporting

Foreign life insurance policies must be reported on the FBAR if they have a cash-surrender value. Therefore, foreign life insurance policies that fall into categories two and three described above are always reportable. Investment foreign life insurance policies promoted by national governments (such as Assurance Vie accounts in France) are reportable even if they are considered to be held by a foreign trust (such as Superannuation Accounts in Australia).

The first category of foreign life insurance policies I listed above (i.e. life insurance policies without any cash-surrender value) are not likely to be reportable, but there are exceptions.

The determination of whether your foreign life insurance policies are reportable on the FBAR should be made by an international tax attorney; I strongly discourage any attempt by US taxpayers to make this determination without legal assistance.

Foreign Life Insurance Policies and Other Reporting Requirements

It is important to note that other US reporting requirements may apply to foreign life insurance policies. Examples include FATCA Form 8938, PFIC compliance, foreign trust reporting, et cetera.

Contact Sherayzen Law Office for Help With Foreign Life Insurance Policies

If you have foreign life insurance policies, contact Sherayzen Law Office for assistance as soon as possible. Foreign life insurance policies can be extremely complex and the US reporting requirements associated with them vary from country to country. Sherayzen Law Office has accumulated tremendous experience in dealing with foreign life insurance policies from Australia, Canada, New Zealand, Europe and Asia. We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

Treasury 2014 FBAR Currency Conversion Rates of December 31, 2014

According to the June 2014 FBAR currency conversion rates instructions published by FinCEN, in order to determine the maximum value of a foreign bank account, the Treasury’s Financial Management Service (still called so even though Financial Management Service was consolidated into the Bureau of the Fiscal Service within the Treasury Department) rates must be used. In particular, the 2014 FBAR currency conversion rates instructions state:

In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury’s Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.

The 2014 FBAR Currency Conversion rates are highly important for any international tax attorney who deals with FBARs.  For your convenience, Sherayzen Law Office provides a table of the official Treasury FBAR currency conversion rates below (keep in mind, you still need to refer to the official website for any updates):

Country – Currency Foreign Currency to $1.00
AFGHANISTAN – AFGHANI 57.9000
ALBANIA – LEK 115.1000
ALGERIA – DINAR 87.8100
ANGOLA – KWANZA 104.0000
ANTIGUA – BARBUDA – E. CARIBBEAN DOLLAR 2.7000
ARGENTINA-PESO 8.3730
ARMENIA – DRAM 470.0000
AUSTRALIA – DOLLAR 1.2190
AUSTRIA – EURO 0.8220
AZERBAIJAN – NEW MANAT 0.8000
BAHAMAS – DOLLAR 1.0000
BAHRAIN – DINAR 0.3770
BANGLADESH – TAKA 79.0000
BARBADOS – DOLLAR 2.0200
BELARUS – RUBLE 13779.0000
BELGIUM-EURO 0.8220
BELIZE – DOLLAR 2.0000
BENIN – CFA FRANC 538.7000
BERMUDA – DOLLAR 1.0000
BOLIVIA – BOLIVIANO 6.8600
BOSNIA-HERCEGOVINA MARKA 1.6080
BOTSWANA – PULA 9.4970
BRAZIL – REAL 2.6570
BRUNEI – DOLLAR 1.2540
BULGARIA – LEV 1.6090
BURKINA FASO – CFA FRANC 538.7000
BURMA – KYAT 1028.0000
BURUNDI – FRANC 1550.0000
CAMBODIA (KHMER) – RIEL 4103.0000
CAMEROON – CFA FRANC 538.8200
CANADA – DOLLAR 1.1580
CAPE VERDE – ESCUDO 87.8710
CAYMAN ISLANDS – DOLLAR 0.8200
CENTRAL AFRICAN REPUBLIC – CFA FRANC 538.8200
CHAD – CFA FRANC 538.8200
CHILE – PESO 607.1600
CHINA – RENMINBI 6.2050
COLOMBIA – PESO 2372.6000
COMOROS – FRANC 361.3500
CONGO – CFA FRANC 538.8200
CONGO, DEM. REP – CONGOLESE FRANC 920.0000
COSTA RICA – COLON 533.2500
COTE D’IVOIRE – CFA FRANC 538.7000
CROATIA – KUNA 6.1500
CUBA-PESO 1.0000
CYPRUS-EURO 0.8220
CZECH – KORUNA 22.3260
DENMARK – KRONE 6.1240
DJIBOUTI – FRANC 177.0000
DOMINICAN REPUBLIC – PESO 44.1300
ECAUDOR-DOLARES 1.0000
EGYPT – POUND 7.1500
EL SALVADOR-DOLARES 1.0000
EQUATORIAL GUINEA – CFA FRANC 538.8200
ERITREA – NAKFA 15.0000
ESTONIA-EURO 0.8220
ETHIOPIA – BIRR 20.0900
EURO ZONE – EURO 0.82200
FIJI – DOLLAR 1.9580
FINLAND-EURO 0.8220
FRANCE-EURO 0.8220
GABON – CFA FRANC 538.8200
GAMBIA – DALASI 45.0000
GEORGIA-LARI 1.8700
GERMANY FRG-EURO 0.8220
GHANA – CEDI 3.2100
GREECE-EURO 0.8220
GRENADA – EAST CARIBBEAN DOLLAR 2.7000
GUATEMALA – QUENTZAL 7.5970
GUINEA – FRANC 7136.0000
GUINEA BISSAU – CFA FRANC 538.7000
GUYANA – DOLLAR 202.0000
HAITI – GOURDE 46.7500
HONDURAS – LEMPIRA 21.2700
HONG KONG – DOLLAR 7.7560
HUNGARY – FORINT 259.4400
ICELAND – KRONA 126.7500
INDIA – RUPEE 63.2000
INDONESIA – RUPIAH 12350.0000
IRAN – RIAL 8229.0000
IRAQ – DINAR 1166.0000
IRELAND-EURO 0.8220
ISRAEL-SHEKEL 3.8810
ITALY-EURO 0.8220
JAMAICA – DOLLAR 113.9000
JAPAN – YEN 119.4500
JERUSALEM-SHEKEL 3.8810
JORDAN – DINAR 0.7080
KAZAKHSTAN – TENGE 182.4000
KENYA – SHILLING 90.6500
KOREA – WON 1086.8700
KUWAIT – DINAR 0.2930
KYRGYZSTAN – SOM 58.7000
LAOS – KIP 8078.0000
LATVIA – LATS 0.8220
LEBANON – POUND 1500.0000
LESOTHO – SOUTH AFRICAN RAND 11.5660
LIBERIA – U.S. DOLLAR 82.0000
LIBYA-DINAR 1.1950
LITHUANIA – LITAS 2.8390
LUXEMBOURG-EURO 0.8220
MACAO – MOP 8.0000
MACEDONIA FYROM – DENAR 49.2000
MADAGASCAR-ARIA 2596.7300
MALAWI – KWACHA 505.0000
MALAYSIA – RINGGIT 3.4950
MALI – CFA FRANC 538.7000
MALTA-EURO 0.8220
MARSHALLS ISLANDS – DOLLAR 1.0000
MARTINIQUE-EURO 0.82200
MAURITANIA – OUGUIYA 305.0000
MAURITIUS – RUPEE 31.7000
MEXICO – NEW PESO 14.7020
MICRONESIA – DOLLAR 1.0000
MOLDOVA – LEU 15.5520
MONGOLIA – TUGRIK 1885.6000
MONTENEGRO-EURO 0.8220
MOROCCO – DIRHAM 9.0240
MOZAMBIQUE – METICAL 33.0500
NAMIBIA-DOLLAR 11.5660
NEPAL – RUPEE 101.4000
NETHERLANDS-EURO 0.8220
NETHERLANDS ANTILLES – GUILDER 1.7800
NEW ZEALAND – DOLLAR 1.2750
NICARAGUA – CORDOBA 26.6000
NIGER – CFA FRANC 538.7000
NIGERIA – NAIRA 182.9000
NORWAY – KRONE 7.3900
OMAN – RIAL 0.3850
PAKISTAN – RUPEE 100.9000
PALAU-DOLLAR 1.0000
PANAMA – BALBOA 1.0000
PAPUA NEW GUINEA – KINA 2.5440
PARAGUAY – GUARANI 4629.3000
PERU – NUEVO SOL 2.9000
PHILIPPINES – PESO 44.77500
POLAND – ZLOTY 3.5130
PORTUGAL-EURO 0.8220
QATAR – RIYAL 3.6420
ROMANIA – LEU 3.6850
RUSSIA – RUBLE 58.6760
RWANDA – FRANC 689.1900
SAO TOME & PRINCIPE – DOBRAS 20087.7110
SAUDI ARABIA – RIYAL 3.7500
SENEGAL – CFA FRANC 538.7000
SERBIA-DINAR 99.4600
SEYCHELLES – RUPEE 12.9800
SIERRA LEONE – LEONE 4990.0000
SINGAPORE – DOLLAR 1.3210
SLOVAK REPUBLIC – EURO 0.8220
SLOVENIA – EURO 0.8220
SOLOMON ISLANDS – DOLLAR 7.3100
SOUTH AFRICA – RAND 11.5660
SOUTH SUDANESE – POUND 3.0000
SPAIN – EURO 0.8220
SRI LANKA – RUPEE 131.1500
ST LUCIA – EC DOLLAR 2.7000
SUDAN – SUDANESE POUND 6.4000
SURINAME – GUILDER 3.3500
SWAZILAND – LILANGENI 11.5660
SWEDEN – KRONA 7.7130
SWITZERLAND – FRANC 0.9890
SYRIA – POUND 179.2000
TAIWAN – DOLLAR 31.6400
TAJIKISTAN – SOMONI 5.3000
TANZANIA – SHILLING 1730.0000
THAILAND – BAHT 32.9200
TIMOR – LESTE DILI 1.0000
TOGO – CFA FRANC 538.7000
TONGA – PA’ANGA 1.8700
TRINIDAD & TOBAGO – DOLLAR 6.3560
TUNISIA – DINAR 1.8590
TURKEY – LIRA 2.3270
TURKMENISTAN – MANAT 2.8400
UGANDA – SHILLING 2770.0000
UKRAINE – HRYVNIA 15.7680
UNITED ARAB EMIRATES – DIRHAM 3.6700
UNITED KINGDOM – POUND STERLING 0.6420
URUGUAY – PESO 23.9600
UZBEKISTAN – SOM 2461.0000
VANUATU – VATU 99.9300
VENEZUELA – BOLIVAR 6.3000
VIETNAM – DONG 21400.0000
WESTERN SAMOA – TALA 2.3530
YEMEN – RIAL 214.5000
ZAMBIA – KWACHA (NEW) 6.3750
ZAMBIA – KWACHA (OLD) 5455.0000
ZIMBABWE – DOLLAR 1.0000

1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM – former Yugoslav Republic of Macedonia.
4. Latvia’s Lats converted to the Euro on January 1, 2014. This means that the Euro 2014 FBAR Currency Conversion rate may also need to used for the determination of the highest balance of accounts in Latvia. Contact Sherayzen Law Office for more details.

FBAR Extension for Certain Individuals: FinCEN Notices 2011-1 and 2011-2

On May 31, 2011, and June 17, 2011, in FinCEN Notices 2011-1 and 2011-2, the Internal Revenue Service and the Financial Crimes Enforcement Network (FinCEN) announced that a small subset of individuals, who are required to file the Report of Foreign Bank and Financial Accounts (FBAR), will receive a one-year extension beyond the recent filing date of June 30, 2011.

FinCEN Notices 2011-1 and 2011-2 concern only individuals with signature authority and apply to the following narrow categories of filers:

1). An employee or officer of a covered entity (see 31 C.F.R. § 1010.350(f)(2)(i)-(v)) who has signature or other authority over and no financial interest in a foreign financial account of another entity more than 50 percent owned, directly or indirectly, by the entity (a “controlled person”).
2). An employee or officer of a controlled person of a covered entity (see 31 C.F.R. § 1010.350(f)(2)(i)-(v)) who has signature or other authority over and no financial interest in a foreign financial account of the entity or another controlled person of the entity.
3). An employee or officer of an investment advisor registered with the Securities and Exchange Commission who has signature or other authority over and no financial interest in a foreign financial account of persons that are not investment companies registered under the Investment Company Act of 1940.

Notice that categories 1 and 2 do not apply to companies that are not publicly traded or not SEC-registrants.

The new extended filing deadline for the categories of individuals above is June 30, 2012. The deadline applies to FBARs for 2010, 2009 and earlier years.

Unless another relief notice applies, all other U.S. persons required to file an FBAR this year are required to meet the June 30, 2011 filing date. Unlike with federal income tax returns, extensions of time to file are not available.

Contact Sherayzen Law Office for FBAR Guidance

If you have any questions with respect to FinCEN Notices 2011-1 and 2011-2 or if you are looking for FBAR guidance, contact Sherayzen Law Office NOW! Eugene Sherayzen an experienced tax attorney will explain to you the current FBAR requirements and devise the appropriate FBAR compliance strategy for you.