The provisions of the Foreign Account Tax Compliance Act (FATCA) became law in March 2010. The law and its associated regulations are designed to improve compliance by U.S. taxpayers in reporting and paying taxes due on foreign-based assets. In the process, the burdens placed on foreign businesses such as banks, brokerages and other financial organizations are so onerous that it is now almost impossible for an American to establish a new or maintain an existing foreign account.
Beyond the report requirements imposed on American taxpayers, the law requires that foreign financial institutions enter into an agreement with the Internal Revenue Service to disclose U.S. account holders, their taxpayer identification numbers, addresses and transactions for most kinds of accounts. As the burden of compliance is so high, most such foreign entities have aggressively closed existing accounts held by Americans and refuse to accept new American customers.
To give you an idea of how extreme FATCA is affecting non-Americans, let me share with you a struggle that a Canadian friend of mine is now having. He lives in Mexico. He is part owner of a company that has no American shareholders. No shareholders live in the United States. The company has bank accounts in several countries, but none of them in America or with foreign affiliates of American banks.
Yet, right now, one of their foreign banks has threatened to close the accounts that the company has at that particular bank. The reason – one of the company’s documents shows that the company officers and shareholders communicate over the Internet via Skype. The telephone number for this Skype connection happens to be American. For that reason alone, the bank is fearful of suffering the wrath of the IRS if it continues to keep accounts for this company.
There are other problems arising for people. The Mexican city of San Felipe on the east coast of Baja California has a permanent population of 25,000. In the winter, around 250,000 Americans and Canadians winter there. The city’s website advises visitors that commerce in the area tends to be settled with cash payments instead of checks and credit cards. Because of this, many Americans have established accounts with local banks to be able to access ATMs at lower cost. These local banks have notified American customers that their accounts are being closed because of FATCA.
I know several Canadian coin dealers who maintain bank accounts in the United States to facilitate payments and receipts. I’m not sure how FATCA will impact them when it is fully implemented.
Via Mat Holding AG, the world’s largest and highly reputable precious metals storage business with operations in Switzerland, Hong Kong, Dubai and the United States, last year canceled the accounts of Americans. Their notification letter read, “We are currently experiencing rapid and substantial changes in the general regulations within this business. The changes mainly relate to the tax structures and taxation systems of various countries. As a consequence of these changes, VIA MAT INTERNATIONAL has taken the decision to stop offering this service at its vault [sic] outside of the U.S. to private customers with potential U.S. tax liability.”
For U.S. coin dealers and collectors who engage in international transactions – possibly including foreign dealers with whom you may buy or sell at coins shows in America – you may want to check with your local financial institutions to find out if there are any special reports that will need to be submitted to the IRS because of such activity.
Because compliance is so onerous, the implementation dates for various regulations under this law have sometimes changed multiple times. Some are now effective, while many other provisions take effect on July 1. Unfortunately, I am not an expert on FATCA to give you any specific guidance. If you have any possibility of being subject to these regulations, I urge you to check with experts before you do or don’t do something that gets you in trouble.
For the latest information on this law, you can go to http://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-FATCA.
Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He owns Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Coin Week (http://www.coinweek.com and http://www.coininfo.com). He also writes a bi-monthly column on collectibles for “The Greater Lansing Business Monthly” (http://www.lansingbusinessmonthly.com/articles/department-columns).His radio show, “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).