On November 8, 2012 the Treasury announced that it was in the process of formalizing inter-governmental agreements with 50 countries to secure compliance with the disclosure provisions of the Foreign Account Tax Compliance Act (FATCA). A reprint of the notice is below.
The import of the announcement by Treasury is that many of the countries known for bank secrecy or tax haven status will be disclosing the existence of financial accounts controlled by U.S. taxpayers. Soon may gone are the opportunities for most U.S. taxpayers to hide financial assets and equally important avoid disclosure of existing accounts. Undisclosed asset protection plans may be revealed.
Many taxpayers will either come forward and seek the benefits of participating in the Offshore Voluntary Disclosure Program (“OVDP”) offered by the IRS, or run the risk of discovery and face severe penalties. Civil penalties for failure to file Reports of Foreign Bank Accounts (“FBAR”) can range from from $10,000 per account per year for non-willful violations to the greater of $100,000 or 50% of the account balances per year for willful violations. Criminal prosecution is also a real possibility for willful violators. As discover become more and more likely through intergovernmental cooperation, taxpayers should consider their options carefully and not wait until it is too late.
Treasury’s notice follows:
U.S. Engaging with More than 50 Jurisdictions to Curtail Offshore Tax Evasion
11/8/2012
Treasury Continues to Build International Support for Combating Offshore Tax Evasion and Facilitating FATCA Implementation.
WASHINGTON – The U.S. Department of the Treasury today announced that it is engaged with more than 50 countries and jurisdictions around the world to improve international tax compliance and implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). Enacted by Congress in 2010, these provisions target noncompliance by U.S. taxpayers using foreign accounts. Treasury’s engagement with this broad coalition of foreign governments to efficiently and effectively implement FATCA marks an important milestone in establishing a common intergovernmental approach to combating tax evasion.
“Global cooperation is critical to implementing FATCA in a way that is targeted and efficient,” said Treasury Assistant Secretary for Tax Policy Mark Mazur. “By working cooperatively with foreign governments and financial institutions, we are intensifying our ability to combat tax evasion while minimizing burdens on financial institutions.”
This summer, Treasury published a model intergovernmental agreement for implementing FATCA and announced the development of a second model agreement. These models serve as the basis for concluding bilateral agreements with interested jurisdictions.
The Treasury Department has already concluded a bilateral agreement with the United Kingdom. Additional jurisdictions with which Treasury is in the process of finalizing an intergovernmental agreement and with which Treasury hopes to conclude negotiations by year end include: France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway.
Jurisdictions with which Treasury is actively engaged in a dialogue towards concluding an intergovernmental agreement include: Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia, Hungary, Israel, Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, and Sweden. Treasury expects to be able to conclude negotiations with several of these jurisdictions by year end.
The jurisdictions with which Treasury is working to explore options for intergovernmental engagement include: Bermuda, Brazil, the British Virgin Islands, Chile, the Czech Republic, Gibraltar, India, Lebanon, Luxembourg, Romania, Russia, Seychelles, Sint Maarten, Slovenia, and South Africa.
The Treasury Department will continue its outreach to interested jurisdictions that wish to consider an intergovernmental approach to implementing FATCA, including participation in a meeting hosted by the Qatar Central Bank in early December to provide information about FATCA and the intergovernmental agreements to invited senior government officials and financial institutions in the Gulf Cooperation Council
Tags: FBAR, FBAR penalties, non-willful, Offshore Voluntary Disclosure Program, OVDP, willfulness