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USA: "Foreign Investment Vehicles and the New Foreign Account Tax Compliance Rules of the HIRE Act"

USA: "Foreign Investment Vehicles and the New Foreign Account Tax Compliance Rules of the HIRE Act". 8-page report by Deloitte.

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backAMERItalk June, 2012

Due June 30 - Report of Foreign Bank and Financial Accounts (FBAR)

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).

The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.

Who Must File an FBAR

United States persons are required to file an FBAR if:

- The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and

- The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported

United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Exceptions to the Reporting Requirement

There are filing exceptions for the following United States persons or foreign financial accounts:

- Certain foreign financial accounts jointly owned by spouses
- United States persons included in a consolidated FBAR
- Correspondent/nostro accounts
- Foreign financial accounts owned by a governmental entity
- Foreign financial accounts owned by an international financial institution
- IRA owners and beneficiaries
- Participants in and beneficiaries of tax-qualified retirement plans
- Certain individuals with signature authority over but no financial interest in a foreign financial account
- Trust beneficiaries
- Foreign financial accounts maintained on a United States military banking facility

Reporting and Filing Information

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. The FBAR is not filed with the filerâ€™s federal income tax return. The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR. You may not request an extension for filing the FBAR. The FBAR must be received by the IRS on or before June 30 of the year following the calendar year being reported. Filing form 8938, Statement of Specified Foreign Assets, will not relieve a taxpayer from filing the FBAR; both maybe required.

Penalties

A person who is required to file an FBAR and fails to properly file may be subject to a civil penalty not to exceed $10,000 per violation. If there is reasonable cause for the failure and the balance in the account is properly reported, no penalty will be imposed. A person who willfully fails to report an account or account identifying information may be subject to a civil monetary penalty equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation. Willful violations may also be subject to criminal penalties.

Source: Suzanne Tuson, Clayton & McKervey - GAI

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