Wednesday, May 9

FACTA Killed My Foreign Account

FATCA is a law in the US. The long name is 'Foreign Account Tax Compliance Act'. This law is causing havoc for Americans who either want or need bank and financial accounts in other countries. This is because FACTA requires foreign banks to tell the US Government information on any accounts that may be held by Americans.
The Foreign Account Tax Compliance Act (FATCA), Subtitle A of Title V of the Hiring Incentives to Restore Employment Act (HIRE), enacts Chapter 4 of, and makes other modifications to, the Internal Revenue Code of 1986, the tax law of the United States. FATCA has a few main parts:
  1. It requires foreign banks to find any American account holders and disclose their balances, receipts, and withdrawals to the US Internal Revenue Service (IRS), or be subject to a 30% withholding tax on income from US financial assets held by the banks.
  2. Owners of these foreign-held assets must report them on a new Form 8938 along with US tax returns if they are worth more than US$50,000; a higher reporting threshold applies to overseas residents. Account holders would be subject to a 40% penalty on understatements of income in an undisclosed foreign financial asset.
  3. It closes a tax loophole that investors had used to avoid paying any taxes on dividends by converting them into dividend equivalents.
The reporting requirements are in addition to reporting of foreign financial assets to the US Treasury Department, particularly the "Report of Foreign Bank and Financial Accounts" (FBAR) for foreign financial accounts exceeding US$10,000 required under Bank Secrecy Act regulations issued by the Financial Crimes Enforcement Network (FinCEN). - Wikipedia
The stated goal of this law is to catch tax evaders. However, this law has turned thousands of law abiding Americans into victims. This is because many banks are deciding that it is better for their business to get rid of all their American customers, than it is to meet the requirements of this new law. This is an example of what Americans living in the US and abroad are receiving:

Notice of Termination – Custody Account / Account Agreement

Nordnet Bank AB Finnish Branch hereby terminates Your Custody Account / Account Agreement as of May 31, 2012 in accordance with the Nordnet Bank AB Finnish Branch’s general terms and conditions, paragraph G.12.

The termination is due to the changes in the American legislation, which means that U.S. residents or those liable to pay taxes in the U.S. will no longer have the option to remain customers at Nordnet. We regret the need to terminate Your account.

During the period of notice both parties must comply with the general terms and conditions.

The termination means that You need to transfer or sell Your securities at Nordnet and transfer Your cash balance from Nordnet to another service provider. Nordnet does not charge a fee from the transfer of securities or cash. Below You can find further information on how to proceed.

In case our information of Your U.S. residency or taxpayer status is incorrect, we kindly ask You to promptly contact us via or by phone +358 20 198 5898. Our customer service is open on weekdays 9–18.30 (Finnish time).

Best regards,

Nordnet Bank AB Finnish Branch
This 'example' is a copy of the termination notice sent to me. I have a dilemma here as the account has barely any money in it and it will probably cost more money for me to close out the account than it is worth. Hell, the biggest asset this account probably has is the potential for me to file a discrimination suit in Finland as this firms action's appears to be based solely on my nationality. I do have other accounts, but combined, they do not add up to an amount requiring me to report these foreign assets to the IRS on my tax return. That said, my other accounts are very useful for me as my wife has relatives there and we spend a good deal of time in Finland each year and having a domestic bank account makes life much easier when paying bills and renting apartments. I am concerned that those banks will also attempt to close our accounts. No matter, I will get by with or without them. As for Nordnet Bank, no grudge against them. I do not need their services. I will use another company. I used to recommend them to my Finnish friends, but now will point them elsewhere. This will however just waste time during my next visit.

There are however many Americans living overseas who simply cannot manage without a local bank account. They are the primary victims here. The US Government should be ashamed of this kind of damage it is doing to law-abiding citizens. Oddly enough, this kind of stupidity is going to result in Americans putting money in bank accounts under the names of others, in effect creating the hidden money that this law was attempting to unearth!

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1 comment:

Anonymous said...

This is outrageous, but not unexpected. There are many Canadians dealing with the effects of FATCA and the IRS offshore jihad and its OVDI/OVDP. If you want to commiserate with those of similar problems and gain new perspectives, I encourage you to come over and contribute at