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.

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