When Scott Schmith finally got his Swiss passport last month, it was time for him to take a drastic step: hand back his American one.
Among the reasons was a pending U.S. regulation aimed at tracking down tax cheats that is making life difficult for some Americans abroad. These expatriates say that foreign banks, which have expressed concern about compliance costs and potential penalties for failing to report on their American clients, are turning away their business.
The new law, expected to be phased in over several years, requires foreign banks to identify Americans among their clients and to provide their financial information to the Internal Revenue Service. Just one person overlooked could mean a penalty equivalent to 30% of a bank's U.S. income.
The measure, known as the Foreign Account Tax Compliance Act, or Fatca, applies globally. Swiss banks are particularly nervous. The U.S. has alleged that 11 Swiss banks helped Americans avoid paying taxes.
Most banks in Switzerland have little appetite to deal with such risk and are ushering American clients out or limiting the range of products offered to them.
"It was the straw that broke the camel's back," says Mr. Schmith of the consequences of the Fatca regulation. In June, the 50-year-old photographer received a certified letter from Swissbankers Prepaid Services saying the firm was terminating the relationship because of his American citizenship. The company, which is owned by several Swiss banks, asked Mr. Schmith for an address to send his account balance.
Thomas Beck, chief executive of Swissbankers, confirms that the company 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.
"Two months later, I got my Swiss citizenship, and I decided to renounce," says Mr. Schmith. "I have nothing to hide, but my heart is here, my business is here, and my life is here." On October 9, he went to the U.S. embassy in Bern and gave back his passport.
Banks world-wide have largely accepted the inevitability of Fatca, but they remain concerned about the complexity of the new rules, the difficulties and costs associated with ensuring compliance and the fact that important details aren't clear yet even though some rules related to the law take effect next year.
To be sure, Americans aren't absolved of their tax obligations if they renounce their citizenship.
For the renunciation to become official, the taxpayer has to certify that he or she has been in full tax compliance for five years and perhaps pay an exit tax. If a taxpayer lies, the IRS can declare the expatriation invalid and proceed against him or her.
Professional photographer Scott Schmith decided to turn in his American passport after a Swiss company told him it was closing his bank account.
In Switzerland, banks are scouring their client lists and dividing clients into Americans, possible Americans and those who aren't. Those who fall into the first two categories stand a good chance of receiving a letter from their bank, asking them politely to take their business elsewhere.
A handful of banks that includes UBS AG, Vontobel Holding AG of Zurich and Geneva-based private bank Pictet & Cie are capitalizing on the plight of Americans living overseas, as they have registered subsidiaries with the U.S. Securities and Exchange Commission specifically to offer investment services to American clients who live outside the U.S., though such services are offered only to very wealthy clients.
If you have Unreported Income from Switzerland or Other Foreign Banks, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us orwww.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).
The Wall Street Journal
Not just Swiss banks, it should be noted. There are very few banks in Europe willing to accept American clients, and it is a trend which began well before FATCA. FATCA, as was said in the article, is the straw that broke the camel's back.ReplyDelete
Posted by John Sturgeon