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BCGE FATCA Letter

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In a previous article, I started the discussion of various FATCA letters issued by banks around the world by concentrating on the HSBC FATCA letter. In this article, I would like to shift focus to a different part of the world and discuss the Swiss format with BCGE FATCA Letter.

BCGE FATCA Letter: General Format

BCGE (Banque Cantonale de Geneve) is determined to comply with FATCA. For this purpose, it developed its own format of a FATCA letter which closely follows the format adopted by most Swiss banks.

BCGE FATCA Letter follows what I call “comprehensive format” (as opposed to the “reference format” followed by HSBC). This means that BCGE FATCA Letter contains all of the main questions within the body of the letter and references only supplementary US forms (like W8BEN and W9). Thus, BCGE FATCA Letter allows BCGE to collect all of the information necessary for its own FATCA compliance in one place and without the need to create any other specialized forms.

It should be noted that the description of the format so far concentrated on the most common BCGE FATCA Letter for individuals, but there are variations in the form for trusts and corporations. Furthermore, there is a variation for the form for certain other circumstances. Since most US account holders who receive a BCGE FATCA are individuals, I will concentrate on the most common format only.

Let’s review each part of the common BCGE FATCA Letter.

BCGE FATCA Letter: Personal Information

The BCGE FATCA Letter commences with the confirmation of the identity and personal information (including place of residence) of the account holder. This section also commences the examination of the account holder’s US tax status by requiring the account holder to list all of his nationalities and the country of birth.

BCGE FATCA Letter: “Per Se” US Status

This is the most critical part of BCGE FATCA Letter because it focuses on the main designations of US person. In particular, this part of BCGE FATCA Letter asks whether the account holder has US national, is a US tax resident (which is asked in two different ways which mean the same thing – lawful permanent resident and the “green card” test), and whether the substantial presence test is satisfied. Definition for the later is provided in a footnote.

If there is at least one affirmative answer to these first four questions, BCGE will automatically classify the account holder as a US person subject to FATCA reporting. Once this determination is made, BCGE FATCA Letter requires the account holder to submit Form W-9 and a special BCGE Form 6387 “Consent to the disclosure of data according to FATCA”. Failure to complete Form 6387 may result in the BCGE designation of the account under FATCA as belonging to a “recalcitrant account holder”.

Please, note that once a status of US person is established, BCGE is very likely to close any securities accounts of a US account holder.

BCGE FATCA Letter Questions 1.5-1.8 on Potential US Status

If the account holder negatively answered the first four questions, the next part of the BCGE FATCA Letter asks a series of questions to see if the account holder if a US person in some other way. Most of these questions also require a submission of Form W-8BEN (with a non-US passport) or W-9.

BCGE FATCA Letter usually contains the following questions. First, whether the account holder was born in the USA or in a US territory (a definition is provided for this term). If the answer is “yes”, but the account holder believes that he is still not a US person, then he must submit Form W-8BEN, a non-US passport or a similar document, and a copy of the certificate of loss of US nationality. If the certificate cannot be produced, BCGE FATCA Letter automatically classifies the account holder as a US person and requires him to submit Form W-9 and a Consent to the disclosure of data under FATCA.

Second, BCGE FATCA Letter asks whether the account holder is a US taxpayer for any other reason – this a “catch all” question to make sure that BCGE does not miss a potential FATCA requirement. BCGE FATCA Letter lists a number of possibilities of how one becomes a US person : joint tax status with a US spouse, in the process of renouncing US nationality or green card, effectively connected income and owner of a US property. Again, supporting documentation or Form W-9 with the Disclosure Consent under FATCA are required.

Finally, BCGE FATCA Letter addresses the remaining potential for the account holder to be a US taxpayer such as US mailing address, care-of address, postbox, and fixed or mobile telephone number. If the account holder has any of these items, then BCGE FATCA Letter asks him to provide Form W-8BEN with a non-US passport (or similar documentation).

BCGE FATCA letter: Confirmation of Beneficial Ownership Status

By signing BCGE FATCA Letter, the account holder affirms that he is the beneficial owner of the bank account.

BCGE FATCA Letter: Treaty Relief Considerations

If it is established that the account holder is NOT a US person, BCGE FATCA Letter contains a fairly unique aspect – discussion of the possibility of claiming a favorable tax status with respect to investments into US Securities. Most other banks usually discuss this important issue in a separate letter, but BCGE FATCA Letter actually incorporates this issue within its body. Form W-8BEN is required to proceed.

BCGE FATCA Letter: Notice and Reimbursement Requirements Imposed on Account Holder

Finally, a BCGE FATCA Letter usually contains another interesting topic – the shift of risk to the account holder through imposition of notice requirements. Since this is a tactic which is adopted increasingly by foreign banks, it is useful to explore this requirement with specificity.

BCGE FATCA Letter states that, by signing the Letter, the account holder “undertakes to inform the Bank of any changes in circumstances resulting in a change of tax status, as the one indicated below and transmit the necessary documents or forms within 30 days after the change in circumstances.” BCGE FATCA Letter sets forth three such changes: change of residence, change of nationality and amendment of the account holder’s tax status (such as receipt of green card, substantial presence in the United States, et cetera).

BCGE FATCA Letter goes on to state that if the declarations made by the account holder in the Letter become invalid for some reason (such as belated discovery of U.S. status), the account holder must transmit to BCGE a new declaration of status with a Form W-9 and FATCA waiver.

The key phrase, however, is with respect to what happens if the information submitted by the account holder within the BCGE FATCA Letter turns out to be incorrect or incomplete. In such a case, the account holder “undertakes to indemnify the Bank for all damages it may suffer” as a result of relying on the incorrect declarations made in the BCGE FATCA Letter. It is unclear whether failure to comply with the Notice requirement is equally subject to this reimbursement requirements, but it seems to be the case.

Thus, it appears that BCGE FATCA Letter decisively shifts all risk of an incorrect declaration (even if non-willful due to belated discovery) from BCGE to the account holder. This is why it is important for the account holder’s attorney to carefully review this document and negotiate the necessary changes.

Contact Sherayzen Law Office for Help With FATCA Compliance

If you received a FATCA letter regarding an undisclosed personal or business account, contact Sherayzen Law Office for professional help. Our team of international experts will thoroughly review your case, analyze your current FBAR and FATCA exposure, recommend the proper voluntary disclosure plan and help you implement it (including preparation of all necessary legal documents and tax forms).

Contact Us to Schedule Your Confidential Consultation Now!

FATCA Tax Lawyers: Six More Agreements to Implement FATCA

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On December 19, 2013, the U.S. Department of the Treasury announced that the United States has signed bilateral agreements with six additional jurisdictions to implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). The six jurisdictions are: Malta, the Netherlands, The Islands of Bermuda, and three UK Crown Dependencies – Jersey, Guernsey, and the Isle of Man.

Enacted by Congress in 2010, these provisions target non-compliance by U.S. taxpayers using foreign accounts. With these most recent agreements, the United States has signed 18 FATCA intergovernmental agreements (IGAs), has 11 agreements in substance, and is engaged in related discussions with many other jurisdictions.

In general, FATCA seeks to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of certain payments made to foreign financial institutions (FFIs) who do not agree to identify and report information on U.S. account holders. Governments have the option of permitting their FFIs to enter into agreements directly with the IRS to comply with FATCA under U.S. Treasury Regulations or to implement FATCA by entering into one of two alternative Model IGAs with the United States.

FATCA Tax Lawyers: Model 1 IGAs Signed by Fix Jurisdictions

Malta, the Netherlands, Jersey, Guernsey, and the Isle of Man signed Model 1 IGAs. Under these agreements, FFIs will report the information required under FATCA about U.S. accounts to their home governments, which in turn will report the information to the IRS. These agreements are reciprocal, meaning that the United States will also provide similar tax information to these governments regarding individuals and entities from their jurisdictions with accounts in the United States.

In addition to these FATCA agreements, protocols to the existing tax information exchange agreements with Jersey, Guernsey, and the Isle of Man were also signed.

FATCA Tax Lawyers: Bermuda Signs Model 2 IGA

Unlike the other jurisdictions, Bermuda signed Model 2 IGA meaning that Bermuda will direct and legally enable FFIs in Bermuda to register with the IRS and report the information required by FATCA about consenting U.S. accounts directly to the IRS. This requirement is supplemented by government-to-government exchange of information regarding certain pre-existing non-consenting accounts on request.

FATCA Tax Lawyers: Tax Shelters Are No Longer Information Shelters

The fact that Bermuda, Jersey, Guernsey, and the Isle of Man (all of which are considered to be offshore havens) signed FATCA is a fact that is indicative of a general trend that I have emphasized since the appearance of FATCA – there are no reasonable safe havens for non-compliant U.S. taxpayers outside of few important jurisdictions, such as China. Even Russia has declared its intention to sign FATCA. More importantly, the jurisdictions that are generally regarded as tax shelter or low-tax jurisdictions are likely to allow the IRS to impose its will on their banks.

“FATCA continues to gather momentum as we work with partners worldwide to combat offshore tax evasion,” said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. “This large number of signings in one week alone sends a strong signal to tax evaders everywhere: international support for FATCA is growing.”

FATCA Tax Lawyers: Implications of Recent Agreements for Non-Compliant US Taxpayers

These developments continue to support the argument that non-compliant U.S. taxpayers worldwide need to urgently consider their options with respect to the voluntary disclosure of their foreign financial accounts and other foreign assets. Each new jurisdiction that signs FATCA is going to turn over the information about the non-compliant accounts to the IRS in one way or another. In such circumstances, procrastination with a voluntary disclosure may result in a dramatic reduction of available disclosure options and increase the chances of a criminal prosecution by the IRS.

Contact Sherayzen Law Office for Help with Your Voluntary Disclosure of Offshore Assets

If you have undisclosed foreign financial accounts or any other assets subject to U.S. reporting, contact Sherayzen Law Office. Our experienced international tax law firm will thoroughly analyze your case, review the available options and implement a customized plan of your voluntary disclosure (including the preparation of any required legal documents and tax forms).

FATCA Switzerland: Swiss Senate Approves FATCA

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FATCA Switzerland: FATCA Legislation Approved

On September 23, 2013, Swiss Senate voted to approve the implementation of Foreign Account Tax Compliance Act (FATCA). This event came barely a few weeks after the Swiss House of Representative approved the same legislation.

At this point, Swiss Banks have a clear way to cooperate with the IRS and US Department of Justice in turning over the required information regarding U.S. accountholders in Switzerland.

At the same time, on August 29, 2013, the DOJ announced the creation of the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”) – a voluntary disclosure program for Swiss Banks.

FATCA Switzerland: What is Driving Swiss Acceptance?

While there may have been strong reasons to oppose the bill, it appears that the driving force behind the acceptance of FATCA by Switzerland has been the fear that Swiss banks would be effectively excluded from the US capital markets if they did not accept FATCA. Most representatives acknowledged that FATCA is a reality, whether Switzerland likes it or not.

FATCA Switzerland: Model 2 Treaty

Unlike most European countries currently engaged in FATCA negotiations, Switzerland opted for the “model two” FATCA implementation treaty. Swiss banks will have to report accounts belonging to US taxpayers with more than $50,000, but client data will only be exchanged once the US authorities have requested administrative assistance (there are exceptions, especially under the Program).

Most European Union countries have accepted another type of FATCA implementation treaty, in which information is exchanged automatically, the so-called “model one”.

FATCA Switzerland: Impact on U.S. Taxpayers With Undeclared Financial Accounts

The FATCA bill will be implemented in Switzerland in stages starting in July 2014. In the meantime, however, the Program will be the main event with respect to FATCA compliance.

The impact on the U.S. taxpayers with undeclared financial accounts is likely to be a dramatic one, though not unexpected. We can already observe a rise in the OVDP (the IRS Offshore Voluntary Disclosure Program now closed) participation and the expectation is that 2014 will reflect a major participation of US non-compliant taxpayers in the program.

From the IRS perspective, starting the second half of 2014 and especially 2015, we also expect to see a large increase in criminal prosecutions and investigations of U.S. persons with undeclared financial accounts. This is because, through OVDP and the Program, the IRS will accumulate a massive amount of information allowing it to target non-compliant taxpayers with terrifying precision.

Contact Sherayzen Law Office For Help With Undeclared Foreign Accounts

If you are a U.S. taxpayer with undeclared foreign accounts, you should contact Sherayzen Law Office as soon as possible. Our firm consists of a team of highly intelligent and experienced tax professionals dedicated to helping U.S. taxpayers to bring themselves into compliance with U.S. tax law in a reasonable ethical manner. Not only will we be able to advise you on your voluntary disclosure options, but we will also be able to prepare all of the required tax forms and legal documents for you under the protection of the Attorney-Client Privilege.

FATCA: Increased Foreign Asset Disclosure Requirements for U.S. Persons

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The Foreign Accounts Tax Compliance Act (FATCA) was enacted as part of the Hiring Incentives to Restore Employment Act of 2010 (“HIRE Act” or “Act”). In addition to specific requirements and a withholding tax, FATCA imposed a new foreign asset disclosure requirements on U.S. persons.

This article will give a general summary about FATCA disclosure requirements, penalties and its statute of limitations

Disclosure Requirements

In general, under IRC section 6038D, disclosure is required if the aggregate value of all “specified foreign financial assets” as defined in the statute, exceeds $50,000 (compare this threshold to the FBAR requirement of $10,000). This information must be attached to the current year tax returns. The provision of FATCA is effective as of tax year 2011.

Covered individuals or entities must disclose the maximum value of the asset(s) during the year, as well as other pertinent information regarding the account, stock, financial instrument, contract, interest, or related items. It should be noted that FATCA disclosure is likely to be broader than the reporting requirements under the FBAR.

Penalties

IRC section 6038D imposes a penalty of $10,000 on U.S. persons (i.e., individuals, corporations, partnerships, trusts or LLC’s) who do not meet the required disclosure requirement. If the required disclosure information is not provided within 90 days of notice and demand by the IRS, penalties will increase by $10,000 each 30 days following the notification, up to a maximum penalty of $50,000. A reasonable cause exception to the penalty may apply in certain circumstances. An international tax attorney should determine whether exception applies to your particular situation.

Furthermore, FATCA amended IRC section 6662 (substantial understatement penalty provision) to double the penalty on any underpayment attributable to an undisclosed foreign financial asset (which means any asset that should have been reported under IRC sections 6038, 6038B, 6038D, 6046A, or 6048) to a draconian 40% penalty. This provision is effective for tax years beginning after the enactment of the Act on March 18, 2010 – i.e. tax year 2011.

State of Limitations Provisions

In addition to other provisions expanding the powers of the IRS under FATCA, the Act also has an increased statute of limitations for an IRS audit. Under Section 513 of the Act, the statute of limitations is extended to six years after a return is filed when a taxpayer makes an omission of income attributable to one or more assets required to be reported under section 6038D in excess of $5,000. This is an extension of the general statute of limitations of three years from the filing of a return.

The Section 513 statute of limitations applies to returns filed after March 18, 2010. The extended statute of limitations may also apply to returns filed on or before this date if the general statute of limitation period (under IRC section 6501) has not yet expired.

Contact Sherayzen Law Office to Help You

Do you have questions relating to FATCA reporting issues, or concerns that you may be neglecting to report information that can lead to substantial penalties? Sherayzen Law Office is here to assist you with all of your U.S. tax compliance tax issues. Contact us by email: [email protected] to discuss your tax situation with an experienced international tax lawyer.