Introducing a new American Tax: FACTA

Posted: June 26, 2014 in Uncategorized
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Very few of you that a new tax will be introduced in the US – with potential side effects.

FACTA stands Foreign Account Tax Compliance Act.

Essentially it has been legislated after UBS got caught red handed for holding a large quantity of US citizen money hidden abroad. Now institutions will have to report directly to the tax office (IRS). US ownership in a company is deemed when there is a US holder holding more than 10% of the assets. There are millions of companies that have this issue!

The legislation hits mainly American expats and wealthy American.

A side effect is that some normal non -US traders will cease to invest in the US as they will need to fill forms to show that they are non-US citizen.

The big issue is that also foreign entities can caught in the midst (it is a 30% tax!) – making it not viable to invest in the US!

The way to avoid it is to enter an IGA (Inter Government Agreement) for the foreign institution – but it is complicated.

FACTA fully enters in place the 1 July 2014. I do not know if it will have an effect or not…but it is a new element to consider (as if there were not enough).

A 2011 KPMG survey of entities with more than EUR 10 billion under management declared for 6% that it was possible they would consider a divestment of US investments due to FACTA. A whopping 25% said that it depended on FACTA implementation rules.

 

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