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By by Mike Godfrey, Tax-News.com, Washington
15 August, 2016
American Citizens Abroad (ACA) has advocated the inclusion of a "Same Country Exemption" (SCE) in the final Foreign Account Tax Compliance Act (FATCA) regulations, soon to be issued by the US Treasury Department.
In a letter to Robert B. Stack, Deputy Assistant Secretary for International Tax Affairs, ACA urged Treasury to exempt Americans residing in a foreign country from the rules requiring foreign financial institutions (FFIs) to report on US account holders' accounts.
FATCA, which was enacted by the US Congress in 2010 and which took effect on July 1, 2014, is intended to ensure that the Internal Revenue Service obtains information on financial accounts held at FFIs by US persons. Failure by an FFI to disclose information on their US clients would result in a requirement to withhold 30 percent tax on payments of US-sourced income.
However, where a US person truly resides in a foreign country and has a normal financial account at a bank or similar institution in the same country, ACA is recommending the FFI should treat it as if it belonged to someone who is not a US taxpayer, and the latter would not have to list the account when returning Form 8938, Statement of Specified Foreign Financial Assets.
In its letter, ACA wrote that the provision in the final versions of the FATCA regulations "could be surprisingly simple. The accompanying form to be provided to the FFI and the IRS by the individual 'electing in' could be mercifully short and to the point."
There is no doubt, it added, that a "lockout" effect exists against American customers from FFIs in foreign jurisdictions, but that a Same Country Exemption would make a difference in that it addresses the key concerns of FFIs relating to FATCA.
ACA concluded: "The Same Country Exemption will benefit the administration of the US voluntary compliance system. Americans abroad, in order to obtain the benefit of greater access to banking services, will want to timely file their US tax return, with the Same Country election attached. This will help with the persistent problem of noncompliance."
Tags: Individuals | Expatriates | Compliance | Foreign Account Tax Compliance Act (FATCA) | Tax | Tax Compliance | FATCA | Law | Banking | United States | Regulation | Services | Compliance | Expats | Tax
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