Foreign Bank Account Reporting Requirement (FBAR)
Any U.S. person having an interest in a foreign bank account or other foreign financial account during the year may be required to report that interest on Form TD F90-22.1.
This form is used to report any foreign financial accounts (this include bank accounts, brokerage accounts, mutual funds, unit trust, and other typed of financial accounts) with which you have a financial interest or have signature authority. If the aggregate balance of these accounts does not exceed $10,000 at any time during the year no report needs to be filed. If the aggregate balance does exceed $10,000 at any time during the year, this form must be completed and filed by June 30 of the following year. This is merely a reporting requirement and will not result in any type of tax liability. However, the penalties that can be imposed for failing to file this particular form can be very severe (including potential jail time), so compliance with this requirement is imperative.
FATCA US Taxes Law
- What is the Foreign Account Tax Compliance Act (FATCA)? FATCA is a US law which requires all financial institutions (FIs) outside of the US (also known as Foreign Financial Institutions, or FFIs) to regularly submit information on financial accounts held by US persons to the US Internal Revenue Service (US IRS). The US’ intent of FATCA is to deter and detect US tax evasion through the use of foreign financial accounts. Failure to comply with the reporting obligations under FATCA will result in the US Government imposing a 30% withholding tax on certain gross payments made from the US to non-compliant FFIs. More information on FATCA can be found on the IRS FATCA webpage.
- Who is affected by FATCA?
The reporting obligations under FATCA primarily affect FFIs, which can include banks, insurance companies, investment managers and custodians. Under US FATCA Regulations, a FFI refers to any non-US entity that:
(a) Accepts deposits in the ordinary course of a banking or similar business;
(b) As a substantial portion of its business, holds financial assets for the account of others;
(c) Conducts as a business (or is managed by an entity that conducts as a business) one or more of the following activities or operations for or on behalf of a customer: (i) trading in money market instruments (cheques, bills, certificates of deposit, derivatives, etc); foreign currency; foreign exchange, interest rate and index instruments; transferable securities; or commodity futures; (ii) individual or collective portfolio management; or (iii) otherwise investing, administering, or managing funds, money or financial assets on behalf of other persons; or
(d) Is an insurance company (or the holding company of an insurance company) that issues, or is obligated to make payments with respect to, a Cash Value Insurance Contract or an Annuity Contract.
- Who is considered as a US Person? For the purpose of FATCA, a US Person means:
(a) A citizen or lawful permanent resident (including US green card holder) of the US; or
(b) A partnership or corporation organized in the US or under the laws of the US or any State thereof, or a trust if: (i) a court within the US would have authority under the applicable law to render orders or judgments concerning substantially all issues regarding the administration of the trust; and (ii) one or more US persons have the 2 authority to control all substantial decisions of the trust, or an estate of a decedent that is a citizen or resident of the US. The definitions above are to be interpreted in accordance with the provisions of the US Internal Revenue Code.