The start of Fatca was delayed by 18 months to give foreign banks time to comply with the law, after financial institutions including Canada’s Toronto-Dominion Bank and Allianz SE of Germany expressed concerns it was too complex.
More than two-thirds of 400 U.S. expatriates surveyed in November by Zurich-based deVere Group said they had considered giving up their passports.
As many as 106 Swiss banks entered a U.S. Justice Department program to volunteer information on how they helped clients hide money from the Internal Revenue Service, in exchange for leniency. Those banks have discovered that thousands of their clients have dual U.S.-Swiss or European citizenship, obliging them to make voluntary disclosures, said Ledvina. To avoid prosecution for handling undeclared American money, the banks must hand over account data and pay penalties.
June 30 was the deadline for turning over information on Americans considered in breach of U.S. tax rules, while July 31 marked the end of the second wave of deliveries and includes documents that show which American clients were compliant.
Compliance Costs
Switzerland is the largest cross-border financial center with $2.3 trillion of assets.
About a dozen banks, including Julius Baer Group Ltd. and HSBC Holdings Plc’s Swiss unit, are excluded from the program as they are already under investigation in the U.S. Credit Suisse Group AG, the second-biggest Swiss bank that was part of the probe, was fined $2.6 billion in May after it pleaded guilty to aiding tax evasion.
The additional compliance costs for companies to ensure that Americans they hire are filing the correct U.S. tax returns and asset-declaration forms are $7,000 per person, according to Ledvina. The U.S. accounting costs for individuals opting for expatriation are typically about $4,000 per year, he said.
Americans with a net worth exceeding $2 million and an average income tax of at least $157,000 over the previous five years must pay an exit tax on unrealized capital gains when they renounce U.S. citizenship.