# US Account Information Sharing



## Alltimegreat1 (Feb 25, 2015)

We're all familiar of course with FATCA and the forced compliance of foreign financial institutions to report the financial accounts of US persons to the IRS.

Although the US is not part of CRS, I've read some conflicting articles about the extent to which the US shares information about US accounts held by foreign citizens with those citizens' (or residents'?) governments.

I assumed the agreements would be reciprocal but that strangely does not seem to be the case.

Does anyone have some insight into the the information shared by the US government with foreign governments about accounts held in the US? How does this work in practice?


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## Bevdeforges (Nov 16, 2007)

Everything I've heard on the subject is that the US is (and has always been) really one-sided in these matters. They insist on all the information required by FATCA, but are not real forthcoming with information about "non-resident accounts" in the US.

This article is from 7 years ago, but as far as I know, other than a few bi-lateral agreements (which pretty much ignore the US reporting back to the other countries) nothing has changed. https://www.reuters.com/article/us-...s-eyed-in-tax-crackdown-idUSBRE91312W20130204


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## Alltimegreat1 (Feb 25, 2015)

Thanks. I just wonder how the US would explain its refusal to reciprocate.

Bev, have you ever heard of any foreign national/resident (or foreign company) being caught by the home government for holding a US financial account as a result of information shared by the US government?


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## Alltimegreat1 (Feb 25, 2015)

I ask because a German coworker annoyingly commented this morning that the United States is the world's biggest tax haven.


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## NickZ (Jun 26, 2009)

I can't imagine too many people are using the US to shelter cash.

1) You'd need to file a W8-Ben form. If you tell the truth you're telling the US which country you're a tax resident of. The US then collects taxes based on the treaty.

2) Why would you? Historically there have been many countries with banking secrecy. Stories of people driving across the border to the Swiss banks with suitcases full of cash aren't exactly rare.

Do the US banks actually offer non resident bank accounts?


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## Bevdeforges (Nov 16, 2007)

Alltimegreat1 said:


> I ask because a German coworker annoyingly commented this morning that the United States is the world's biggest tax haven.


Well, it is. Delaware (with its rather lax requirements for legal incorporation) is world renown for being a place to stash excess cash and get a huge tax break for being a corporation.



> 1) You'd need to file a W8-Ben form. If you tell the truth you're telling the US which country you're a tax resident of. The US then collects taxes based on the treaty.


Generally speaking, banks and financial institutions simply withhold 30% on all income on accounts with a foreign address - unless you can provide a W9 claiming that you are a US citizen not subject to withholding at the foreign NR rate. For a US citizen, they don't withhold anything, but rely on you to pony up with the IRS when you file your tax return.



> 2) Why would you? Historically there have been many countries with banking secrecy. Stories of people driving across the border to the Swiss banks with suitcases full of cash aren't exactly rare.


And evidently there are those who consider the US a big tax haven. https://www.forbes.com/sites/toddganos/2019/09/19/worlds-best-tax-haven-the-united-states/


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## NickZ (Jun 26, 2009)

Is that really what was implied by tax haven in the thread? Those trusts still need to be reported don't they? If your country has a wealth tax owning a trust isn't likely going to save you.


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## Alltimegreat1 (Feb 25, 2015)

I guess this boils down to what criteria the US government uses to determine what constitutes a nonresident accountholder, and then whether that information is shared with a foreign government (for example based on some non-CRS treaty).


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## Nononymous (Jul 12, 2011)

Alltimegreat1 said:


> I guess this boils down to what criteria the US government uses to determine what constitutes a nonresident accountholder, and then whether that information is shared with a foreign government (for example based on some non-CRS treaty).


Most tax treaties with the US include provisions for information sharing, but only in the context of specific investigations. There is no routine, automated transfer of bank account information from the US to other countries. Under FATCA, information flows into the US, but to reciprocate, for information to flow out, something would apparently need to be ratified in the Senate and that isn't going to happen. So yes, most of the world was bullied and/or foolishly agreed to a one-sided arrangement whereby it reports financial data to the US and gets nothing in return. And of course the US is not a signatory to CRS.

What this means in practice is that if you, as a resident of Germany, were to have a lump of money in a US bank account (purely hypothetical - let's say you inherited a substantial sum and used a family member's US address for the account) and you chose not to report it to the German authorities, they would have no way to discover it. Even if you had a German address associated with the account, there is no mechanism by which it would be reported to the Finanzamt (short of some major criminal investigation).

So your German co-worker was not annoying, but correct. (Let me adjust that comment, since I too have lived in worked in Germany: your co-worker was annoying *and* correct.)

When more money is involved, then yes, incorporating in Delaware or another low-tax state is a very effective way to hide money from the government of wherever it is one lives. This is what is meant by the US being a tax haven - and why the hypocrisy of FATCA non-reciprocity is so indefensible.

--

There was an interesting story on another forum a few years ago. I'm sure I'm getting some of the details wrong, but essentially the protagonist was an American living somewhere in Western Europe, either a dual citizen or with permanent residence via marriage. He was an independent consultant of some kind, with mostly European clients. At some point he got so fed up with limitations on services due to his bank not wanting US customers - thanks FATCA - that he essentially closed up shop and moved his business to the US: bought a cheap condo in a low-tax state to establish residence; set up a US corporation, invested in the US and so on. His clients wired payment to the US account, he lived on cash withdrawals, paid his taxes in the US (much lower) and ceased to exist for his local tax authorities. He justified this as payback for their having screwed him over by signing the IGA - fair enough - but the point is that it was totally possible for him to move his financial life to the US without anything being reported back.


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## Nononymous (Jul 12, 2011)

NickZ said:


> Is that really what was implied by tax haven in the thread? Those trusts still need to be reported don't they? If your country has a wealth tax owning a trust isn't likely going to save you.


Define "need to be reported"... The whole point of a tax haven is to not report things. 

If you live in Italy, surely you understand this?


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## Bevdeforges (Nov 16, 2007)

NickZ said:


> Is that really what was implied by tax haven in the thread? Those trusts still need to be reported don't they? If your country has a wealth tax owning a trust isn't likely going to save you.


Many countries simply don't recognize the notion of a "trust" at all (particularly a US based trust) - in part because it's largely a tax avoidance entity. But then again, if you have a trust in the US, chances are any taxes on the trust are paid there, with the trustee having to report income to the IRS.

Also, don't forget that only the US tries to tax its citizens as "residents" no matter where they live in the world. And most bank accounts and other financial institutions in the US simply withhold tax at the 30% rate (i.e. the rate for non-residents) on any and all income generated by the account by anyone who can't provide them with a W9 form.

Of course on the other side, the US/IRS considers lots of perfectly normal "foreign" investments (assurance vie, for example) to be "foreign trusts" or "Passive Foreign Investment Companies" subject to all sorts of nasty tax reporting and payment requirements.


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## Alltimegreat1 (Feb 25, 2015)

Nononymous said:


> Most tax treaties with the US include provisions for information sharing, but only in the context of specific investigations. There is no routine, automated transfer of bank account information from the US to other countries. Under FATCA, information flows into the US, but to reciprocate, for information to flow out, something would apparently need to be ratified in the Senate and that isn't going to happen. So yes, most of the world was bullied and/or foolishly agreed to a one-sided arrangement whereby it reports financial data to the US and gets nothing in return. And of course the US is not a signatory to CRS.
> 
> What this means in practice is that if you, as a resident of Germany, were to have a lump of money in a US bank account (purely hypothetical - let's say you inherited a substantial sum and used a family member's US address for the account) and you chose not to report it to the German authorities, they would have no way to discover it. Even if you had a German address associated with the account, there is no mechanism by which it would be reported to the Finanzamt (short of some major criminal investigation).



Thanks for pointing this out. The inheritance scenario could indeed be an issue for me at some point. I guess I'd just report it in Germany. It won't be that much anyway.

Theoretically though, if the inheritance was transferred to a zero-interest US checking/savings account that I previously used to wire money to my German account several times, is there some chance the Finanzamt could already have this account on their radar and submit a request to the US government for access to the account data?

In other words, is it reasonable to assume the Finanzamt could already have access to my US account info due to the transfers, and that I don't know about it since I never owed anything and they had no reason to contact me?


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## Nononymous (Jul 12, 2011)

I have no idea. But people always seem to have this paranoid notion that if they do an international bank transfer, then various governments somehow have a magical ability to see the balances of the accounts involved, in perpetuity. I imagine that is not in fact the case.


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## NickZ (Jun 26, 2009)

Nononymous said:


> Define "need to be reported"... The whole point of a tax haven is to not report things.


That's kind of my point. Setting up a legal trust transforms the assets. It doesn't hide them. 

Locally you have an obligation to report foreign assets. Similar to the Canadian 100K reporting rule.

Setting up a trust would seem to change the report. You'd report owning a trust and not directly owning the asset.


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