Tags: tax | rule | Swiss | banks

Fearing New Rule, Swiss Banks Shut Out Americans

Sunday, 21 Oct 2012 12:55 PM

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A pending U.S. regulation aimed at tracking down tax cheats is making life difficult for some Americans abroad, The Wall Street Journal reported.

Plans are to phase in the new law—which requires that foreign banks identify their U.S. clients and provide information about their accounts to the Internal Revenue Service—over the next few years.

However, the law, known as the Foreign Account Tax Compliance Act (Fatca), is already creating hassles for U.S. citizens who hold accounts in foreign banks, and potentially for those banks themselves.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

The penalties for bank errors are severe: If a foreign bank fails to report just one U.S. client, the Internal Revenue Service could levy a penalty equal to 30 percent of the bank’s U.S. income.

Predictably, some banks, especially in Switzerland, are now showing their U.S. clients the door: Swissbankers CEO Thomas Beck confirmed that his company has canceled accounts with U.S. clients because of the  administrative costs of complying with the law for the relatively small number and sizes of accounts.

"The identification of clients alone is major challenge,” a spokeswoman for the Swiss Bankers Association, a lobbyist group, told the Journal. “It often isn't immediately clear if a client is married to a U.S. citizen, has dual citizenship or if he is a green-card holder."

The group has been working closely with the European Banking Federation, Institute of International Bankers and British Bankers' Association to raise common concerns directly with the IRS and the U.S. Treasury Department. Both the IRS and Treasury Department declined to
comment.

Even though some Americans are renouncing their U.S. citizenship in favor of citizenship in the foreign country in which they now reside, they won’t be free of U.S. tax obligations until they have certified they’ve been in full compliance for the past five years. An exit tax may be required as well.

Moreover, Americans who are living and working abroad but want to remain U.S. citizens face growing difficulty in finding a foreign bank willing to do business with them.

The Commercial Observer reported that the complexity of United States tax law and the penalties associated with noncompliance can be daunting for the increasing number of foreigners eager to invest in United States real estate, according to several international tax experts.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

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