What You Need To Know About FATCA
One of the benefits of living in Dubai is that you rarely have to think about tax. It is important but since we live in a country where the income tax rate is 0% it is easily forgotten. Unless you are American of course. Americans pay income tax to Internal Revenue Service (IRS) regardless of where they live and a new piece of legislation (Foreign Account Tax Compliance Act – FATCA) is making life even harder. If you think this does not affect you as you only hold a green card or your spouse is American and not you – think again. If you are British – think again, lots of countries are introducing legislation to collect and share data on assets owned or controlled by their citizens.
FATCA requires all financial institutions who hold assets on behalf of Americans or those residing in America to disclose certain key pieces of information, such as their Tax Identification Number (TIN) and country of residence for tax purposes.This has caused enormous problems for financial institutions around the globe as Americans are the largest wealthy nation in the world but they have client confidentially laws preventing them from disclosing any information about their clients. However after a lot of arm twisting even the Swiss agreed to supply some information. One bank, Deutsche Bank in Belgium, wrote to their American clients and asked them to close their accounts. The general consensus appears to be that the additional cost of compliance with FATCA dwarfs the additional tax revenue it may yield.
It seems barely a week goes by without a celebrity being splashed over the front page of a UK tabloid for attempting to manage his or her affairs tax efficiently usually using a fairly aggressive form of tax planning. Currently there is no intention of the UK government to tax expatriates but if you are a resident in the UK or have a correspondence address there, they do want to know: who you are; where you are and where your money is. Presumably to make sure that the correct amount of tax is paid when it is due, such as when you return to UK. If you are returning to UK, it is important to plan as early as possible, preferably in the tax year preceding your return.There are plenty of tax efficient structures provided by UK legislation to accommodate most UK expats without having to resort to aggressive tax planning.
Please let me know if you have any questions, comments or concerns.