The deadline for reporting United States account holders with foreign financial institutions is almost upon us.
Although FATCA was enacted in 2010 as part of the HIRE act, we are only now on the cusp of its ramifications.
New Zealand and the United States signed an agreement, called the Agreement between the Government of New Zealand and the Government of the United States of America to Improve International Tax Compliance and to implement FATCA, on 12 June 2014.
This critical document empowers both countries to swap information about its residents’ financial accounts, annually on an automatic basis.
The deadline for this to occur is, for New Zealand, and all other Model 1 IGA jurisdictions, 30 September 2015.
Exchange of information
New Zealand and the United States have had the ability to exchange information through the tax information exchange agreement which is contained within the income tax treaty between the two countries.
This has been in force since 1983.
That provision has been, until now, a sleeping giant. Now, financial institutions must provide information pertaining to ‘reportable accounts’ as defined, to the United States government by 30 September 2015.
There has, however, been an indication of leniency to be granted by the IRS in Notice 2015-66, released last week.
The notice states:
Many partner jurisdictions that have signed IGAs or reached an agreement in substance on the text of an IGA continue to work through their internal procedures to bring the IGA into force. Pursuant to its authority…. and consistent with Announcement 2014-38, for Model 1 IGAs that have not yet entered into force on September 30, 2015 Treasury intends to continue to treat FFIs covered by the IGA as complying with, and not subject to withholding under FATCA, so long as the partner jurisdiction continues to demonstrate firm resolve to bring the IGA into force and any information that would have been reportable under the IGA on September 30, 2015, is exchanged by September 30, 2016, together with any information that is reportable under the IGA on September 30, 2016 (source: Notice 2015-66).
What it means for individuals
If you’ve received a letter from your financial institution asking you to confirm the citizenships that you hold, you have already been touched by FATCA.
This is the financial institution’s procedure for identifying its account holders for FATCA purposes.
Things are set to get a whole lot more serious for those account holders identifying themselves as United States citizens, should they not have met their United States filing obligations.
If you are in ANY doubt, don’t hesitate to seek professional advice immediately, because 30 September 2015 is just around the corner.