Requirement of US Tax Laws
On ground scenario
FATCA & FBAR – effective tools to check evasion of taxes on income outside of US
FBAR (Report of Foreign Bank and Financial Accounts) :
United States Persons are required to File Form 114 if :
The United States person had a Financial Interest in or signature authority over at least one financial account located outside the United States
and
The aggregate value of all foreign financial accounts exceeded US $ 10000 at any time during the calendar year reported.
FATCA (Foreign Account Tax Compliance Act) :
- FATCA targets tax non – compliance by US tax payers with Foreign Accounts.
- FATCA requires US Tax payers to file Form 8938 on Foreign Financial Assets.
- FATCA requires Foreign Financial Institutions (FFI’s) to report to the I.R.S; information about financial accounts held by US tax payers.
FATCA Compliance by Indian (FFI’s) :
- Determination date for FATCA : 30th June, 2014.
- All new accounts opened after the determination date.
- Pre existing accounts electronic search of information in the system.
- High value accounts (US$ 1 mn +) paper record search + inquiry of Relationship Manager, additional requirement.
- Closed accounts also subject to the above process.
| FATCA | FBAR | |
|---|---|---|
| Reporting Threshold (Total Value of Assets) | Form 8938, Statement of Specified Foreign Financial Assets | FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) |
| $50,000 on the last day of the tax year or $75,000 at any time during the tax year. (if you are unmarried and lived in U.S.)
$100000 on last day of the tax year or & $150000 at any time during the tax year. (if you are married and lived in U.S.) $200000 on last day of the year or $300000 at any time during the year. (if you are unmarried and lived abroad.) $400000 on last day the year or $600000 at any time during the year. (if you are married and lived abroad.) | $10,000 at any time during the calendar year. This is a cumulative balance, meaning if you have 2 accounts with a combined account balance (individually or jointly) greater than $10,000 at any one time, both accounts would have to be reported. | |
| What is Reported? | Specified foreign financial assets, and certain other foreign non-account investment assets. | Financial interest: you are the owner of record or holder of legal title. Signature authority: you have authority to control the disposition of the assets. |
| Where to File? | File with income tax return pursuant to instructions for filing the return | File electronically through FinCENs BSA E-Filing System. The FBAR is not filed with a federal tax return. |
Types of Foreign Assets and Whether They are Reportable
| FATCA | FBAR | |
|---|---|---|
| Financial (deposit and custodial) accounts held at foreign financial institutions | Yes | Yes |
| Foreign stock or securities held in a financial account at a foreign financial institution | The account itself is subject to reporting, but the contents of the account do not have to be separately reported | The account itself is subject to reporting, but the contents of the account do not have to be separately reported |
| Foreign partnership interests | Yes | No |
| Foreign mutual funds | Yes | Yes |
| Foreign-issued life insurance or annuity contract with a cash-value | Yes | Yes |
| Foreign real estate held directly | No | No |
| Foreign real estate held through a foreign entity | No, but the foreign entity itself is a specified foreign financial asset and its maximum value includes the value of the real estate | No |
| Foreign currency held directly | No | No |
| Precious Metals held directly | No | No |
| Personal property, held directly, such as art, antiques, jewellery, cars and other collectibles | No | No |
