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US Global Tax (AUS0 Explains The History of FATCA in New Zealand and its US Tax Implications



US Global Tax Australia’s David Tzimenakis recently wrote an article on the history of FATCA in New Zealand, a redacted version of which we have reproduced here. FATCA or the Foreign Account Tax Compliance Act (FATCA) was introduced and became law of the United States on 18th March 2010 1.  

 

The introduction of FATCA changed the landscape of US citizenship based taxation, and came in two forms. Firstly 26 U.S. Code § 6038D 2 , which created a requirement for US citizens to report their interests in non-US bank accounts, subject to certain thresholds, and a second code section change, 26 U.S. Code § 1471 3, which was the main and most important part of the FATCA legislation. Under this section, US payors of income were required to withhold tax at a rate of 30% to foreign financial institutions, who did not identify their US citizen customers. 

 

In New Zealand, the FATCA laws were came into effect on 1st July 2014, and was named the Agreement between the Government of the United States of America and the Government of New Zealand to Improve International Tax Compliance and to Implement FATCA 4. 

 

 In essence, this agreement forced New Zealand banks to register themselves as Foreign Financial Institutions for FATCA purposes, and also required automated data sharing of US citizens clients with the IRD, who would in turn share with the IRS. This system gave the IRS an easy route to identify the non-US accounts of US citizens, which could also be used to identify those who were not compliant with their obligations. This information could then be used to swiftly impose penalties on non-compliant individuals, with the assistance of the Australian Federal government and financial sector. 

 

From a completely unenforceable system only a few years prior, the regulatory infrastructure enabling non-compliant US citizens overseas to be identified, tracked, and penalised was now in place. The end requirement of this was for US persons to annually declare their interest in any non-US financial account to the USA, including accounts in which they are signatory, or have an indirect interest. Of note to employers, this also includes business accounts of which the US person has authority over. In one notable instance, US Global Tax Ltd. had to gather the information for more than 280 accounts of a national retailer, who had placed a US person as signatory on the account for every branch. 

 

US Global Tax provide a wide range of services, not only for US citizens, but also businesses, trusts, or any individual with US-based income or investments, and for 

more information on FATCA Australia, IRS notices and US retirement funds please go to https://usglobaltax.com.au .