Monday, March 9, 2020

What is FATCA and Other Implications of this U.S. Law?

There is a questionable topic for former Filipinos with foreign citizenship regarding rules by Bangko Sentral ng Pilipinas and the commercial banks in the country in recent years if one have seen item's on application for new bank account or even when updating your bank account files. One will see some section concerning Foreign Account Tax Compliance Act (FATCA). FATCA is a tax law that compels U.S. citizens at home and abroad to file annual reports on any foreign account holdings. FATCA was endorsed in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act to promote transparency in the global financial services sector during former U.S. President Barack H. Obama's administration.


What Does This Law Do to U.S. Citizens?


FATCA specifically targets U.S. Citizens who are ignoring the U.S. tax laws and possibly to curb criminal elements from money laundering from other countries with very lax laws. They become haven for criminal activity that it affects the nation that does not comply with FATCA ruling set forth by U.S. authorities particularly its citizens. 

Does FATCA affect ordinary Filipinos?

For ordinary Filipinos this law does not affect us unless one has an bank account overseas or a property located in mainland United States or its outlying territories (Guam, Puerto Rico, U.S. Virgin Islands, American Samoa etc.). A non-US person can be subject to taxation by an IRS if he/she has assets in the U.S. A non-US citizen married (possibly a Permanent Resident Visa holder) to a US citizen are also subjected to current tax laws in the U.S. and are affected by this act.

Does FATCA affect Filipinos with dual citizenship as U.S. person?

Yes, they have to report this to IRS on their ownership of real estate properties and other assets outside of the U.S. which is subjected to current U.S. tax laws.

Below is Bangko Sentral ng Pilipinas memorandum circular published in 2013 posted in this article and link for your perusal.

Almost all of the financial institution are compliant with this type of law on having a Common Reporting Standards (CRS) in compliance with FATCA. On the other hand,  the CRS is a new international standard for the automatic exchange of information on “Financial Accounts” (such as bank, mutual fund and brokerage accounts, segregated fund contracts and certain annuity and insurance contracts), between CRS participating countries, which includes Canada. The CRS is very similar to FATCA, except the exchange of Financial Account information under the CRS is between countries other than the US. It was developed by the Organization for Economic Co-operation and Development (OECD), with the support of Canada and the other G20 industrialized countries, to reduce tax evasion and improve tax compliance around the world.


Sources:

Foreign Account Tax Compliance Act https://bit.ly/2MPdVbl
Hiring Incentives to Restore Employment (HIRE) Act https://bit.ly/2QBYsg5
Official Statement from BSP Memorandum Circular M2013-30 https://bit.ly/2MFlT6V
FATCA: A breach of Philippine sovereignty? https://bit.ly/367TBK6
Bureau of Internal Revenue FAQs on FATCA https://bit.ly/2Q9Gumd
Understanding how the Common Reporting Standard (CRS) and Foreign Account Tax Compliance Act (FATCA) affect you – an FAQ https://bit.ly/37TtZ45


About the Writer


CRB Benedict Baluyut is a professional real estate broker, real estate appraiser and associate of C. F. Baluyut Realty. He is currently the Vice President for External Affairs, Real Estate Brokers Association of the Philippines, Inc. (REBAP) - Pampanga Chapter. You can get in touch with him at https://www.cfbaluyutrealty.com.





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