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Cozumel News June 16th, 2014: The breaking news this week is the effect of FATCA on US Citizens banking with Banamex. If my understanding is correct, it is probably the first crisis my family has managed to miss. We bank in the United States and use ATM cards for our needs here in Cozumel.  However, many United States Citizens living here are banking in Mexican banks and will be affected by FATCA. So you can determine how this will affect your family,  I have copied the information provided by the Yucatan Times that describes the Banamex crisis, and I have investigated FATCA in the Internal Revenue Website and provided that information for our readers. Stay tuned tomorrow for an issue on Cozumel current events and news!

Banamex Crisis for U.S. Citizens

As the first set of Foreign Account Tax Compliance Act (FATCA) compliance issues for banks worldwide is set to come into effect on July 1 we have seen a flurry of banks around the world advising US citizens that they will be immediately closing their accounts.

None has been so far reaching as this notice sent to US citizens who have accounts at Banamex USA in Mexico this week, however.

Banamex USA’s parent, Banamex, is the second largest bank in Mexico and there are over 1 million US citizens living in Mexico, by far the largest amount of any country, and so this news will be felt over a very widespread area.

Notices have begun to be sent by Banamex USA, a bank operating in Mexico and used by many American expats in Mexico, to all US citizens notifying them that their accounts will be closed within 30 days.

In most of the forums people know the reason why – FATCA – but in one of the forums in particular the people are not even aware of FATCA and its implications.  This action by Banamex USA is, of course, because of FATCA, which has forced 77,000 banks in 70 countries to surrender all information on American customers to the Internal Revenue Service (IRS) or be extorted and possibly put out of business altogether.

Banamex USA, a subsidary of Citibank with its headquarters in Los Angeles, has sent letters to many US customers informing them that their accounts will be closed June 30. As one online commenter wrote:

“No more SS check deposits: no more linking of accounts to Banamex Mexico, no more credit card, no more ATM for free, no more nada.”

One customer was told that it was a “bank decision” with no reason given why. This move has left former account holders scrambling to find a bank that will let them open an account without their presence in Mexico, something likely impossible to find.

It does not appear that all accounts will be closed, but nobody knows Banamex USA’s strategy here, even banking insiders in the US who we have contacted who are confused about what is going on.

What’s for sure is this: Are you an American expatriate living abroad or an American currently thinking of moving abroad?  This could and likely will happen to you.

OPTIONS FOR US EXPATS IN MEXICO

There are many ways to protect yourself and to sidestep many of the issues that FATCA will be bringing upon US citizens trying to transact in the financial system worldwide.

In the case of Americans who live and/or spend a large amount of time each year in Mexico one solution is to attain Mexican citizenship (this is a process that TDV Passports can help with).  By doing this you can still have bank accounts in Mexico if you so chose as you can open the account as a Mexican citizen, not as a US citizen, thereby not being restricted by banks that do wish to deal with US citizens due to the egregious nature and expense of filing with the US government all transactions of US citizens.

Having a second citizenship, especially for US citizens, is a very prudent move as it has become very difficult to do anything financially, worldwide, as a US citizen.  It also has a tremendous amount of side-benefits including large tax breaks (up to nearly $200,000 per year, tax free, for a married couple if they live outside of the US)… and if you choose to renounce your US citizenship the benefits can be massive for those with a high net worth or income as this would unchain US citizens from the worldwide taxation imposed on them by the US government.

Other options that are still available to US citizens is to re-organize their affairs internationally using things like offshore trusts which are specifically set-up in a way that FATCA regulations do not apply to it.  This is a service, for high net worth (over $1 million) US citizens that is offered exclusively by TDV Wealth Management (TDVWM).  TDVWM has recently held two Crisis Conferences in Panama and in Mexico helping US citizens stay ahead of the curve and to organize their affairs prior to events, which we predicted, such as more banks worldwide closing accounts for Americans.

We also predict that more countries in the West will begin to enact FATCA like controls as the economy in the West continues to fall and governments begin to enact more egregious worldwide taxation laws.  In the case of Canadians, for example, many “snowbirds” (those that are retired and usually spend six months or more per year in the US) are beginning to be deemed “US resident” even without their knowledge and will soon find themselves under attack by the IRS for tax liabilities.  As well, the Canadian and US governments have reached all manner of agreements tying the sharing of financial information between the two countries.

As we’ve researched and written here and at TDV Wealth Management Crisis Conferences (which we will be holding another one soon, likely in Mexico due to recent events), FATCA is very real and Americans abroad will be forced to adapt and quickly. Many might simply end up without a bank account altogether and unable to open one abroad when they get this now all-too-common letter that your bank no longer wants to serve you.

We hate to constantly be the bearer of bad news but those who have been following TDV know that we have been warning of these events for a number of years.  And we expect things to go nowhere but downhill from here as governments in the West implement nefarious capital controls such as FATCA.

Please pass along this particular news to US citizens who are Mexican expats to inform them to prepare for more bank account closures for US citizens and what they can be doing about it to protect themselves.

Source: http://dollarvigilante.com/

La Rumba Cozumel

IRS Information on FATCA Law

What is FATCA?
FATCA  stands forForeign Account Tax Compliance Act

Individuals:

The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.

FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts

FATCA focuses on reporting:

By U.S. taxpayers about certain foreign financial accounts and offshore asset.

By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest

The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.

FATCA Current Alerts and Other News

U.S. citizens, U.S. individual residents, and a very limited number of nonresident individuals who own certain foreign financial accounts or other offshore assets (specified foreign financial assets) must report those assets

Use Form 8938 to report these assets.

Attach Form 8938 to the annual income tax return (usually Form 1040)

Taxpayers with a total value of specified foreign financial assets below a certain threshold do not have to file Form 8938.

If the total value is at or below $50,000 at the end of the tax year, there is no reporting requirement for the year, unless the total value was more than $75,000 at any time during the tax year

The threshold is higher for individuals who live outside the United States

Thresholds are different for married and single taxpayers

Taxpayers who do not have to file an income tax return for the tax year do not have to file Form 8938, regardless of the value of their specified foreign financial assets.

Penalties apply for failure to file accurately.

Financial Institutions:

FOREIGN

To avoid being withheld upon, a foreign financial institution may register with the IRS, obtain a Global Intermediary Identification Number (GIIN) and report certain information on U.S. accounts to the IRS.

FATCA Information for Foreign Financial Institutions and Entities

Most governmental entities         

Playa Azul Beach Club

U.S.

U.S. financial institutions and other U.S withholding agents must both withhold 30% on certain payments to foreign entities that do not document their FATCA status and report information about certain non-financial foreign entities.

U.S. financial institutions (USFIs) and other types of U.S. withholding agents are required to withhold 30% on certain U.S. source payments made to foreign entities, if they are unable to document such entities for purposes of FATCA.

USFIs and U.S. withholding agents must also report to the IRS information about certain non-financial foreign entities with substantial U.S. owners.

USFIs are also eligible to submit a FATCA Registration application via the FATCA Registration Website for the following reasons:

A USFI with a foreign branch in a Model 1 IGA jurisdiction to obtain a GIIN for the branch.

A USFI with a foreign branch that is a qualifying intermediary (QI) to renew the branch’s QI agreement.

A USFI may register as a sponsoring entity for FFIs and agree to perform, on behalf of the FFI, all the FATCA activities that the FFI otherwise would have to do.

A USFI may register as a Lead FI to manage the FATCA registration process for members of its Expanded Affiliated Group of FFIs.

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