5.31.2019

FATCA Form 8938 Primer For Expats

FATCA  Primer For American Expats 






FATCA: Foreign Account Tax Compliance Act 

 
I am not a tax expert nor am I an accountant. I am just a expat living in the Philippines who needed to know if the FATCA Form 8938 is applicable to me. I'm not one of those lucky people. And seriously, they are lucky because if they are married like me and filing a joint return and living in the Philippines throughout the entire year, then in order to be required to fill out a Form 8938 they would have to have a foreign financial interest of at least $400,000. 
 

Reportable Assets:

  • Any financial account maintained by a foreign financial institution, except as indicated above
  • Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely: 
    • Stock or securities issued by someone other than a U.S. person
    • Any interest in a foreign entity, and
    • Any financial instrument or contract that has as an issuer or counter-party that is other than a U.S. person.
    The “except as indicated above” in the top bullet is referring to this:
    • financial accounts maintained by: 
      • a U.S. payer (such as a U.S. domestic financial institution)
      • the foreign branch of a U.S. financial institution - or
      • the U.S. branch of a foreign financial institution
      And this note from the IRS is interesting:
      If you do not have to file an income tax return for the tax year, you do not need to file Form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold.
      For instance, If I am married filing jointly and living the full year in the Philippines and I have $400,000 (at the end of the year) parked in some CD or something else and earning a 5% annual return. The filing threshold would be $24,000 if I and my spouse are both under 65. If my only income for the year is the $20,000 paid in interest on the 400k I would not have to file a tax return and that negates the requirement to file Form 8938. 
      While this is true, many tax sites I have read still advise submitting the Form 8938 even though you are not technically required to do so. Just in case. And this is the same advice that is given to expats regarding their actual tax returns. It is a good idea to keep filing a return every year even if your income is below the filing threshold.

      Summary of Form 8938 Filing Thresholds:



      Living in Philippines at least 330 days during the tax year


      Total value on last day of the year
      Total value at any time during the year
      Single
      $200,000             
      $300,000
      Married filing separately
      $200,000             
      $300,000
      Married filing jointly
      $400,000             
      $600,000



      Living in Philippines fewer than 330 days during the tax year


      Total value on last day of the year
      Total value at any time during the year
      Single
      $50,000
      $75,000
      Married filing separately
      $50,000
      $75,000
      Married filing jointly
      $100,000             
      $150,000


      What a difference a day makes. If I live in the Philippines for 329 days during the tax year, then my filing threshold is cut by 75%!

      See the IRS page, "Do I need to file Form 8938, Statement of Specified Foreign Financial Assets," for more information.

      You may have escaped Form 8938, but you are more likely to be required to file an FBAR.

      Recent Navy UFO Disclosure Has Link To The Past

      Recent Navy UFO Disclosure Has Link To The Past





      I get RT News here in the Philippines and I have been hearing more and more about the US military and its predicament with UFOs. I do not want to turn this blog into woo woo material, but this subject is becoming interesting. I was not sure that I actually heard the quote right so I Googled it and found it on several sites. Here is the entire account:

      In late 2014, Lieutenant Graves said he was back at base in Virginia Beach when he encountered a squadron mate just back from a mission “with a look of shock on his face.” He said he was stunned to hear the pilot’s words. “I almost hit one of those things,” the pilot told Lieutenant Graves. The pilot and his wingman were flying in tandem about 100 feet apart over the Atlantic east of Virginia Beach when something flew between them, right past the cockpit. It looked to the pilot, Lieutenant Graves said, like a sphere encasing a cube. The incident so spooked the squadron that an aviation flight safety report was filed, Lieutenant Graves said. The near miss, he and other pilots interviewed said, angered the squadron, and convinced them that the objects were not part of a classified drone program. Government officials would know fighter pilots were training in the area, they reasoned, and would not send drones to get in the way.
      The really interesting part of the quote is the pilot’s description of what he saw: “like a sphere encasing a cube.” That is not a drone in any military's arsenal. Was he telling the truth? Was the entire squad hallucinating?

      It is also interesting that none of the news reports have made the connection to World War II Allied sightings of Foo Fighters:

      The first sightings occurred in November 1944, when pilots flying over Western Europe by night reported seeing fast-moving round glowing objects following their aircraft. The objects were variously described as fiery, and glowing red, white, or orange. Some pilots described them as resembling Christmas-tree lights and reported that they seemed to toy with the aircraft, making wild turns before simply vanishing. Pilots and aircrew reported that the objects flew formation with their aircraft and behaved as if they were under intelligent control, but never displayed hostile behavior. However, they could not be outmaneuvered or shot down. The phenomenon was so widespread that the lights earned a name – in the European Theater of Operations they were often called "Kraut fireballs", but for the most part called "foo fighters". The military took the sightings seriously, suspecting that the mysterious sightings might be secret German weapons, but further investigation revealed that German and Japanese pilots had reported similar sightings.
      Foo fighters were reported by German, Japanese and Allied forces. The sightings reported recently, at least the ones being reported in mainstream news, are mostly those reported by the US Navy. One report stated that the Navy was experiencing reports of sightings almost daily for two years along the east coast.

      The object that the unknown Navy pilot described as "a sphere encasing a cube" could have been what has been termed a “Merkabah.” Merkabah are frequently mentioned in occult literature in connection with the star tetrahedron. If it is spinning fast enough and in the right way and emitting light in the right way I think it is possible that a star tetrahedron, also known as a stellated octahedron, might appear to be a cube within sphere:




      A star tetrahedron is a three dimensional depiction of the two dimensional so-called “Star of David.”

      The word Merkabah is Hebrew and means “thing to ride in.” The word is used in the Old Testament to refer to chariots both terrestrial and celestial in nature:
      Isaiah 66:15 For, behold, the LORD will come with fire, and with his Merkabah like a whirlwind, to render his anger with fury, and his rebuke with flames of fire.
      When I was younger and I saw the Israeli Merkava tank for the first time I thought it was the sexiest thing I had ever seen:

      "IDF-ground-forces002
      by Lior34 licensed under CC BY-SA 3.0

      5.28.2019

      When Philippine Banks Ask For Your US Social Security Number

      When Philippine Banks Ask For Your US Social Security Number





      Are you required to give your US Social Security number to Philippine banks?


      Disclaimer

      This article is not legal advice or professional guidance and details personal opinions on the topic of the FATCA Treaty as it pertains to an American expatriate living in the Philippines.

      Table Of Contents:

      Identity Theft


      You may have never thought about why you should not give your US Social Security number to a foreign bank. The US Social Security Administration warns that giving out your number unnecessarily can lead to identity theft:
      Identity theft is one of the fastest growing crimes in America. A dishonest person who has your Social Security number can use it to get other personal information about you. Identity thieves can use your number and your good credit to apply for more credit in your name. 
      If the bank does not need your number for any legitimate purpose, then there is no good reason to give it to them. However, they may refuse to provide you with an account if you do not give them the number. 

      Personally, if a foreign bank requested my US Social Security number for an account that clearly does not meet FATCA reporting requirements I would look for another bank.

      FATCA (FOREIGN ACCOUNT TAX COMPLIANCE ACT)


      The US Government requires information about its citizens who have bank accounts in the Philippines and the Philippines wants the same information about its citizens who have bank accounts in the US. The FATCA Treaty is the two nations’ agreement to share that information with one another.

      Reportable Accounts Under FATCA


      FATCA states that Philippine banks have certain obligations under treaty in regard to collecting data on US citizens who attempt to open a “reportable account.”

      What is a reportable account according to Article 1 Section 1 Item cc of the FATCA TREATY:
      The term “U.S. Reportable Account” means a Financial Account maintained by a Reporting Philippine Financial Institution and held by one or more Specified U.S. Persons or by a Non-U.S. Entity with one or more Controlling Persons that is a Specified U.S. Person. Notwithstanding the foregoing, an account shall not be treated as a U.S. Reportable Account if such account is not identified as a U.S. Reportable Account after application of the due diligence procedures in Annex I.
      The conditions that determine if an account is reportable are complex and many times the banks will send down a blanket requirement to gather the data on all new and or existing accounts whether or not they meet reportability thresholds. It will do no good to ask the person at the bank to tell you the article, paragraph and subparagraph of the FATCA Treaty that requires them to collect your SS#. They do not know. They only know that headquarters told them to get it. If you refuse to give them the number they may back off or they may refuse to open your new account.

      Only one bank has ever asked me to provide my SS#. I was opening a debit card account and I explained to the banker that the debit account was not even allowed to hold an amount of money high enough to ever fall under FATCA reportability requirements. They let me open the account without providing the number. I have other accounts that could possibly fall under FATCA if I were to transfer upwards of $50,000 into them. The banks where I have those accounts have been silent so far and since I intend to keep those accounts under the reportability threshold I hope they remain so.

      Non-Participating Foreign Banks


      Not all foreign banks participate in FATCA Treaty data collection requirements:
      An FFI that enters into a FFI agreement with the IRS is referred to as a “participating foreign financial institution” (PFFI). An FFI that does not enter into an agreement with the IRS is referred to as a “non-participating foreign financial institution” (NPFFI), and is subject to withholding under FATCA.
      Foreign banks that are non-participating risk being penalized via “FATCA withholding” by the IRS if those banks are subject to cash receipts from US interests:
      FATCA withholding only applies to withholdable payments, which are defined as certain income and gross proceeds from “sources within the United States”. It will also apply to foreign pass thru payments which may include non-U.S. source income.
      Annex II details that institutions like rural banks are “deemed compliant” and are not required to report due to the low probability of their being used by US persons for tax avoidance purposes.

      FATCA Data Collection Requirements (For Account Holder Identification) 


      The basic data gathering requirement is detailed in FATCA Treaty Article 2 Obligations to Obtain and Exchange Information with Respect to Reportable Accounts:
      2. The information to be obtained and exchanged is:
      a) In the case of the Republic of the Philippines with respect to each U.S. Reportable Account of each Reporting Philippine Financial Institution:
      (1) the name, address, and U.S. TIN of each Specified U.S. Person that is an Account Holder of such account and, in the case of a Non-U.S. Entity that, after application of the due diligence procedures set forth in Annex I, is identified as having one or more Controlling Persons that is a Specified U.S. Person, the name, address, and U.S. TIN (if any) of such entity and each such Specified U.S. Person;
      The requirement simply states that for US citizen accounts a Philippine bank needs to collect the US citizen’s TIN, which will be your social security number in most cases unless that US “person” has an actual TIN.

      The FATCA Treaty requirements were rolled out incrementally and Article 3 Time and Manner of Exchange of Information details that process:
      3. With respect to paragraph 2 of Article 2 of this Agreement, information is to be obtained and exchanged with respect to 2014 and all subsequent years, except that:
      a) In the case of the Republic of the Philippines:
      (1) the information to be obtained and exchanged with respect to 2014 is only the information described in subparagraphs 2(a)(1) through 2(a)(4) of Article 2 of this Agreement;
      (2) the information to be obtained and exchanged with respect to 2015 is the information described in subparagraphs 2(a)(1) through 2(a)(7) of Article 2 of this Agreement, except for gross proceeds described in subparagraph 2(a)(5)(B) of Article 2 of this Agreement; and
      (3) the information to be obtained and exchanged with respect to 2016 and subsequent years is the information described in subparagraphs 2(a)(1) through 2(a)(7) of Article 2 of this Agreement;

      Exception To Social Security Number Collection Requirement


      As you can see subparagraph 2(a)(1) of Article 2 is required from the very start. However, there is a catch to the requirement for gathering the social security number:
      4. Notwithstanding paragraph 3 of this Article, with respect to each Reportable Account that is maintained by a Reporting Financial Institution as of the Determination Date, and subject to paragraph 3 of Article 6 of this Agreement, the Parties are not required to obtain and include in the exchanged information the Philippine TIN or the U.S. TIN, as applicable, of any relevant person if such taxpayer identifying number is not in the records of the Reporting Financial Institution. In such a case, the Parties shall obtain and include in the exchanged information the date of birth of the relevant person, if the Reporting Financial Institution has such date of birth in its records.
      Paragraph 4 of Article 4 nullifies the requirement given in article 3 to gather a US citizen’s social security number:
      “Notwithstanding paragraph 3 of this Article… the Parties are not required to obtain and include in the exchanged information the Philippine TIN or the U.S. TIN… person if such taxpayer identifying number is not in the records of the Reporting Financial Institution.”
      But we also need to consider the statement “and subject to paragraph 3 of Article 6 of this Agreement”:
      Article 6 Mutual Commitment to Continue to Enhance the Effectiveness of Information Exchange and Transparency
      3. Documentation of Accounts Maintained as of the Determination Date.
      With respect to Reportable Accounts maintained by a Reporting Financial Institution as of the Determination Date:
      b) The Republic of the Philippines commits to establish, by January 1, 2017, for reporting with respect to 2017 and subsequent years, rules requiring Reporting Philippine Financial Institutions to obtain the U.S. TIN of each Specified U.S. Person as required pursuant to subparagraph 2(a)(1) of Article 2 of this Agreement.
      When the US and Philippines were rolling out FATCA requirements incrementally from 2014-2016 the requirement to gather the social security number was optional.

      As of January 1, 2017 (the “Determination Date”) the Philippines committed to “requiring Reporting Philippine Financial Institutions to obtain the U.S. TIN of each Specified U.S. Person.”

      But there are specific facts that may exempt an account from being subject to FATCA reporting requirements and these are detailed in Annex I.
      II. Preexisting Individual Accounts.
      The following rules and procedures apply for purposes of identifying U.S. Reportable Accounts among Preexisting Accounts held by individuals (“Preexisting Individual Accounts”).
      A. Accounts Not Required to Be Reviewed, Identified, or Reported.
      Unless the Reporting Philippine Financial Institution elects otherwise, either with respect to all Preexisting Individual Accounts or, separately, with respect to any clearly identified group of such accounts, where the implementing rules in the Republic of the Philippines provide for such an election, the following Preexisting Individual Accounts are not required to be reviewed, identified, or reported as U.S. Reportable Accounts:
      1. Subject to subparagraph E(2) of this section, a Preexisting Individual Account with a balance or value that does not exceed $50,000 as of the Determination Date.
      2. Subject to subparagraph E(2) of this section, a Preexisting Individual Account that is a Cash Value Insurance Contract or an Annuity Contract with a balance or value of $250,000 or less as of the Determination Date.
      3. A Preexisting Individual Account that is a Cash Value Insurance Contract or an Annuity Contract, provided the law or regulations of the Republic of the Philippines or the United States effectively prevent the sale of such a Cash Value Insurance Contract or an Annuity Contract to U.S. residents (e.g., if the relevant Financial Institution does not have the required registration under U.S. law, and the law of the Republic of the Philippines requires reporting or withholding with respect to insurance products held by residents of the Republic of the Philippines).
      4. A Depository Account with a balance of $50,000 or less.
      III. New Individual Accounts.
      The following rules and procedures apply for purposes of identifying U.S. Reportable Accounts among Financial Accounts held by individuals and opened after the Determination Date (“New Individual Accounts”).
      A. Accounts Not Required to Be Reviewed, Identified, or Reported.
      Unless the Reporting Philippine Financial Institution elects otherwise, either with respect to all New Individual Accounts or, separately, with respect to any clearly identified group of such accounts, where the implementing rules in the Republic of the Philippines provide for such an election, the following New Individual Accounts are not required to be reviewed, identified, or reported as U.S. Reportable Accounts:
      1. A Depository Account unless the account balance exceeds $50,000 at the end of any calendar year or other appropriate reporting period.
      2. A Cash Value Insurance Contract unless the Cash Value exceeds $50,000 at the end of any calendar year or other appropriate reporting period.

      The Bottom Line


      According to paragraphs I & II of Annex I of the FATCA Treaty, accounts with less than $50,000 are not reportable under FATCA and therefore Philippine banks are not required by the US Government to collect the Social Security numbers of US customers.

      As mentioned previously,  the big banks may send out a blanket requirement for all new and or existing accounts stating that regardless of whether or not they meet FATCA thresholds the data needs to be gathered. They would do this due to the complicated nature of trying to figure out if it is required for each individual account.

      You may get lucky and the bank will never ask you. If they do ask and you don't want to provide it, then you can try another bank. Personally, I do not care to oblige data mining expeditions.

      5.26.2019

      Notaries In The Philippines

      Notaries In The Philippines






      Table Of Contents:

      At Some Point You May Need A Notary


      If you decide to live in the Philippines or just visit for an extended period of time, then you may find sometime that you require the services of a notary.

      During our time living in the Philippines we have used notarial services for many purposes. The US Postal Service accepted our Delivery of Mail Through Agent form 1583 that was notarized by our Filipino attorney. We also had some real estate documents from the US that needed to be notarized and the US real estate agent also accepted the documents that had been notarized by that same attorney. 

      We have had dozens of documents notarized in the course of buying land here in the Philippines and we never had any problems with our attorney. By developing a relationship with an attorney over time you may be given discounts on the notarial fee and they may even do some documents for free.

      In The Philippines A Notary Must Be An Attorney


      Be advised that, according to the Philippines 2004 Rules on Notarial Practice Rule III Section 1 Paragraph 4, a notary public:
      must be a member of the Philippine Bar in good standing with clearances from the Office of the Bar Confidant of the Supreme Court and the Integrated Bar of the Philippines.
      The best way that I have found to verify that a person is "a member of the Philippine Bar in good standing" is this website: Philippines Supreme Court Law List 

      You can even type in the name of the municipality where you are and that database will give you a list of all of the attorneys in that place.

      It is best to find a lawyer you can trust through a referral from a trusted friend or family member if possible. Make sure that the attorney you pick is listed in the Supreme Court database above.

      I need to emphasize "go to their office" because you may be approached by people outside of various government offices that will offer their notarial services. I would not trust my documents with these individuals. To be safe always go to a fixed location law office.

      I have used the same attorney for many years and that is the kind of relationship that I encourage everyone to cultivate if possible. The notarial fees for most documents we have done has been 200-300PHP. A Deed of Sale on real property may run 2000PHP or more (generally 1% of market value of land or sales price of vehicle etc...). If you Google the fees it will be confusing because the answers vary. Our attorney has done a few documents for free.

      Alternatives For Notarial Services


      If you have a document that requires a US notary to notarize it, then you can make an appointment to have the notarization done at the US embassy in Manila.

      Alternately, US Embassy personnel perform outreach services in various cities across the Philippines. You can receive email notification regarding upcoming US Embassy outreaches by signing up for the Smart Traveler Enrollment Program. The US Embassy charges $50 for each document notarized. The website states that it can be USD or PHP or credit card. If you go to an outreach you will need to read the outreach flyer very carefully to determine if you must bring a specific currency. Make sure that you have the exact amount for payment and I doubt they can take credit cards when doing an outreach.

      If you are near Cebu you can contact the US Consular Office there to confirm whether that office can perform notarial services.

      Another option is to have your documents notarized online. Yes, if you have never heard of the concept it's actually valid. You can search for an online notary and pick the one you trust and that works for you.

      The best option, IMHO, is to go with a Filipino notary if it will work for whatever document you are creating. They are ubiquitous, charge reasonable fees and I have never had any problems with numerous documents. It is up to you and the specific circumstance and document. As always, discretion is advised.

      Public Attorney's Office (PAO)


      We received a comment/question from a reader regarding using the PAO for notary services. I decided to look into the topic a bit and found the following information on the PAO website. Download the PAO Guidelines For Service.

       

      PAO Services For Foreigners


      The Manila Times details PAO services specific to foreigners:
      Aside from the free court representation, which the PAO continuously renders to qualified foreign nationals, the latter may also benefit from the PAO’s non-judicial services and other legal services without cost. Pursuant to the memorandum of agreement (MoA) of the Public Attorney’s Office and the Bureau of Immigration signed on Feb. 4, 2009, the public attorneys may render legal assistance and legal advice to foreign nationals, including free notarization of their immigration documents and such other legal services assigned by the immigration commissioner.

      These services were directly available from the public attorneys formerly assigned at the Bureau of Immigration to attend to the combined clientele of these two offices from 2009 to 2013. In particular, under the February MoA, the public attorneys formerly assigned at the Bureau of Immigration, rendered legal assistance and legal advice to the clients therein, both Filipinos and foreign nationals, in the processing of different visa applications.

      They likewise provided them with free notarization of their immigration documents, which, during the above-mentioned public attorneys’ detail, had greatly eliminated the “fly-by-night” notaries who charged exorbitant amounts for such service. The foreign nationals trusted the free notarization service of the PAO, because their respective documents were done in their presence and within the vicinity of the bureau.
      We did benefit from the free notary service at the Intramuros office of the Bureau of Immigration, but as the article states, PAO attorneys are no longer collocated with the BI.