Last updated: 27 March 2017
Note to HK and SG: Fatca rules might change under Trump
March 31 marks the next deadline for the exchange of information between financial institutions in Hong Kong and the United States Internal Revenue Service (IRS) under the Fatca rules, and Americans and Green Card holders living in Hong Kong who are not compliant with their US tax filing obligations are at risk of heavy fines or even imprisonment if they are discovered.
Carlo Gray, partner and head of Buzzacott in Hong Kong said, 'At a tax conference in Washington in December last year, the IRS declared that they are finishing up scrutinizing banks in Switzerland, and the next target markets for them are Hong Kong and Singapore.
'We would urge all Americans and Green Card holders residing in Hong Kong, Singapore and the region to start the process of voluntary disclosure while you still can or face dire consequences. The current streamlined program, which has been in place since 2014, may be an option for delinquent taxpayers to get compliant with minimal stress.
'However it will not last forever, and with the new administration in place in the
US, the benefits of the current program may change. The IRS has estimated that there is a tax gap of nearly $400 billion, and they are looking to recoup as much as possible.'
Hong Kong has signed an Intergovernmental Agreement (IGA) with the US, whereby tax-relevant information on US citizens and Green Card holders resident in Hong Kong can be passed to the IRS.
There is currently a range of IRS voluntary disclosure options available whereby those US taxpayers with undisclosed income from foreign bank accounts and assets can get up to date with their US tax filing obligations.
One of these options is the streamlined foreign offshore procedures amnesty which allows US taxpayers to get up to date with filing only the last three years of late US tax returns and six years of late Foreign Bank Account Reports with no penalties provided their delinquency results from conduct that the IRS regards as non-willful.
This program is one of several options that the IRS endorses to encourage US taxpayers to voluntarily disclose foreign bank accounts and assets now rather than risk detection at a later date and face more severe penalties and criminal prosecution.
According to expatriate tax specialist Buzzacott, the next few weeks are an essential window for delinquent US taxpayers to get compliant, especially for those living in Hong Kong.
The Fatca act requires foreign financial institutions outside of the US to report the names, addresses and account balances of their US clients to the IRS, and was enacted by the Obama administration to tackle the US$395 billion of US tax revenue that is estimated to be uncollected every year from tax evasion.
Buzzacott is an accounting advisory firm based in London with an office in Hong Kong servicing the Asia Pacific region.
Article first seen on Citywire Asia.