Overseas Assets Come Under the Scanner

Last updated on December 26, 2012

Millions of dollars of American taxpayers were found to be hidden in various Swiss banks when a Swiss banking scandal was busted. Recently, there was a protest by American taxpayers against tax havens where many corporations hide their money to evade taxes. After the busting of Swiss bank scandal, Foreign Account Tax Compliance Act (FATCA) was introduced in 2010 to increase compliance.

The U.S. has until now completed FATCA deals with the U.K., Denmark and Mexico while talks of agreement have been initiated with Switzerland and Spain. Negotiations are continuing for deals with as many as 50 other countries.

Under FATCA, foreign financial institutions are required to inform the U.S. government about financial accounts owed by American citizens. Even if foreign entities own the account(s) and American taxpayers have a substantial share in them, the financial institutions are required to share the details with the IRS. Also, American taxpayers are required to report assets to the IRS when filing taxes if they exceed a certain threshold.

FATCA has received criticism from some quoting that it is discriminatory to have American taxpayers report on pension plans, foreign bank accounts, annuities and property only because the assets are held overseas.

The new FATCA rules by the Treasury Department on offshore assets will be out in January, 2013. Multinational corporations are anxiously waiting for the new rules that will change the way they pay taxes.