This week David Cameron hosted a summit focusing on the role of banks in fighting international corruption. It comes in the wake of the Panama Papers leak of details of more than 200,000 offshore entities.
To the casual observer following the Panama Papers leak, the main focus was the number of offshore accounts held by senior world politicians and public figures. However, the knock on effect on those of us without billions of dollars to hide in offshore accounts could leave some with unexpected tax bills and at worst no bank account to store our earnings in.
The introduction and implementation of the Common Reporting Standard (GATCA) means that from 2017 the following countries will begin sharing resident’s assets and incomes:
• Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, S. Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands, United Kingdom
• Starting to report in 2018: Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Turkey, United Arab Emirates, Uruguay, Vanuatu
This latest move comes in the wake of the 2010 Foreign Account Tax Compliance Act (FATCA), a US federal law that specifies that US citizens must file yearly reports on the non-US financial accounts. Additionally, all non-US financial institutions must search and report any US assets to the US Treasury.
Since it’s introduction, US citizens living abroad and ‘accidental’ US citizens, have found themselves at the receiving end of IRS tax requests. One of the better-known recent cases was of an IRS request for part of the proceeds of London Mayor, Boris Johnson’s sale of his London home. Johnson had duel nationality, which meant that under FATCA, he was liable for US taxes on foreign investments. Understandably, Johnson chose to relinquish his US citizenship, a move that increasing numbers of US citizens with foreign residency are making.
To add to this, a number of international banks are using anti-money laundering regulations to close accounts that they believe to be suspect or economically unviable. This could be because the account appears unused or abandoned, however the banks also have the power to close accounts if the holder doesn’t comply with FATCA and GATCA regulations.
While their attempts to off board clients are admirable in the wake of the Panama Papers scandal and will make some headway in halting international money laundering and tax avoidance, they fail to consider the nomadic lifestyles of yacht and boat crews without permanent residential addresses.
The situation is further exacerbated by the additional requirement for many new account holders to provide not only a land based address, but also detailed wealth and income calculations when making banking applications. This information can then be fed back through GATCA and FATCA reporting, creating an increased chance of unexpected tax bills.
The OECD makes a number of recommendations that are pertinent to yacht crew and have created a voluntary disclosure programme. It is important to review your affairs and ensure that your residency status, accounts and tax information are up to date. Additionally, make sure that you verify what information is held on file with financial institutions and that you have identified what account balances will be reported through GATCA and FATCA.
By ensuring that your affairs are in order and that you are well informed you will, hopefully, be able to reduce difficulty and stress once the reporting process has begun. If you have concerns regarding your residency or tax status we would be happy to advise on this.
Any tax advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein.