The Additional Consequences of FATCA
The U.S. Foreign Account Tax Compliance Act aimed to stop Americans from putting money in foreign banks in order to evade taxes. But FATCA is having some far-reaching consequences on the number of foreign banks now willing to do business with American customers.
According to the New York Times, the Act requires foreign banks to disclose data on American clients with accounts containing at least $50,000. Or the bank can withhold 30 percent of the interest, dividend and other payments due those clients and send those funds to the IRS. Foreign banks failing to do this would be subject to significant fines.
Due to the difficulty and work involved with complying with this law which is set to take effect on June 30, 2014, some foreign banks are instead turning away American customers.
“Many banks have taken the decision to tell U.S. customers to go away,” says Gerard Laures, a financial services tax division partner at KPMG. Rather than facing a fine for missing a pension fund or basic savings account, they are turning away customers altogether.
Deutsche Bank, UniCredit, Raiffeisen, Bank of Singapore, and HSBC are among the dozens of banks that are turning away customers.
This is also having an effect on Americans who live overseas, many of whom are giving up their U.S. citizenship rather than facing the new, complicated tax filings. The new law requires any U.S. taxpayer to reveal the foreign-held assets to the IRS, or face substantial penalties.