FATCA: a nuisance or an opportunity?

 

Since the U.S. government enacted the Foreign Account Tax Compliance Act in 2010, an additional layer of challenges was added to personal financial planning for millions of Americans and U.S. connected persons across the globe.

Financial institutions all over the world have since been required to report to the Internal Revenue Service about any financial resources and assets Americans and U.S. connected persons possess overseas. In addition, U.S. citizens and U.S. connected individuals have to report taxes in the U.S. even though they are currently not residing or have left the country years ago.

As a result, a large number of Americans have renounced their U.S. citizenship over the past five years. In 2017 however, for the first time since FATCA this number has decreased according to U.S. Government Reports. The main drop in renunciations was noticeable in the fourth quarter, when buzz began to build around a tax cut, resulting in 5,133 renunciations in 2017 (compared to 5,411 in 2016 and 4,279 in 2015). Renunciation is – in nearly all cases – irrevocable, and even though people think FATCA is unfair and gives them a headache, renouncing U.S. citizenship should not be taken lightly.

With the IRS warning for serious penalties for those not reporting their financial assets, it is important for American citizens to educate themselves about the implications of FATCA and to seek financial advice from both a U.S. as well as a European advisor to help with their U.S. and local tax returns.

As the United States know a citizen-based taxation system (citizens are taxed no matter where in the world they love or have earned their income), double taxation cannot always be avoided, even though foreign tax credits can reduce the tax burden. Make sure to get professional advice regarding your own personal situation.

Beacon Financial Education hosts – at request – financial awareness seminars at American organizations across Europe (American Women’s Clubs, American Business Clubs, American Schools or companies with a large number of Americans and U.S. connected persons). Contact us to host a seminar at your organization or check out our event calendar for a seminar near you!

Read our articles about the implications of being an American expat or having a U.S. nexus, and FATCA compliance:

• What is FATCA and How Can It Affect You?
• The Do’s and Don’ts of U.S. Expat Finances
• How Do the New U.S. Tax Reforms Affect U.S. Connected Persons
• The Challenge Facing Americans Living Abroad: FATCA
• What’s New with FATCA Regulation Laws?
• Why You Need a Financial Advisor in both the U.S. and Europe?
• Reasons You Need a Financial Adviser in Europe
• How to Navigate Foreign Investing: PFICs
• The Two Tests Used to Determine If You Are a Resident of the U.S. for Tax Purposes
• Tax Benefits of U.S. Homeownership
• What is The Foreign Account Tax Compliance Act (FATCA)?