Lots of American expats have been having trouble establishing bank accounts and getting financial services, all because of something called the Foreign Account Tax Compliance Act, or FATCA.
We covered the ins-and-outs of FATCA last summer in our article, “FACTA Impacts American Expat Local Banking.” But we just received an update from American Citizens Abroad (ACA), a non-profit volunteer association that represents the interests of Americans living abroad.
ACA has been lobbying the U.S. congress to change the way the U.S. taxes its citizens overseas for years.
First, let’s refresh our memories. The Foreign Account Tax Compliance Act or FATCA was passed in 2010 and implemented in 2013. FATCA requires non-U.S. banks, investment funds and other financial institutions to report to the IRS on accounts held by Americans with more than $50,000.
For American taxpayers living overseas, FATCA requires a report on accounts with more than $200,000. Foreign financial Institutions that do not comply with FATCA reporting rules could have a 30 percent tax imposed on all their U.S.-based transactions and also those of their U.S. clients.
ACA told us it is proposing a new Residence Based Taxation (RBT) system, the same system that has been proposed for U.S. corporations. If you go to their site, you can download the PDF with all the details.
ACA also says expats are favoring its call for “Same-Country Exception,” which would alleviate, to a degree, the problem of Americans being locked out of banking relationships, primarily due to reactions from banks to FATCA regulations. You can download the position paper PDF from the ACA website.
The organization appears to be making most of its headway with Republican politicians, citing that last August the Republican National Committee voted to end citizenship-based taxation in favor of residence-based taxation for Americans living and working abroad.
ACA says the Republican staff of the Senate Finance Committee also supports this initiative.
The Democrats Abroad organization is also tuned into the FATCA problem. It conducted a survey last year and found solid expat support for changes to FATCA.
Since FATCA directly affects your pocketbook and ability to have financial services where you live abroad, we’ll keep you up to date on any updates we get from ACA or other sources.
