Ireland was one of the first countries in the world to conclude an Inter-Governmental Agreement with the United States in relation to FATCA (Foreign Account Tax Compliance Act). While this has gone relatively unnoticed in the media it has had significant implications for US persons living in Ireland. This article addresses some of the significant points of the agreement and implication for US persons living in Ireland.
Who is a “US Person”?
This broad category includes U.S. citizens, U.S. residents, green card holders as well as trusts controlled by U.S. Persons.
What is FATCA?
This legislation was passed into US law in 2010. It is a broad, complex set of rules designed to increase tax compliance by US Persons with financial assets held outside the United States. The legislation creates new self-reporting requirements and increases penalties for failure to comply fully with reporting rules.
Important Irish laws have been amended to empower the Revenue Commissioners to collect the relevant information from Irish financial institutions and for the exchange with the United States. Reporting is mandated on all “U.S. Persons” ( as defined above).
What will be reported?
Irish financial institutions are required to report the below information to the Revenue Commissioners that then exchanges with the Inland Revenue Services in the US:
- Name, address, and U.S. TIN(Tax Information Number) of each Specified U.S. Person that is an Account Holder and in the case of a Non-U.S. Entity that having one or more Controlling Persons that is a Specified U.S. Person, the name, address, and U.S. TIN (if any) of the entity and each Specified U.S. Person;
- Account number;
- Name and identifying number of the Reporting Irish Financial Institution;
- Account balance or value (including, in the case of a Cash Value Insurance Contract or Annuity Contract, the Cash Value or surrender value) as of the end of the relevant calendar year or other appropriate reporting period or, if the account was closed during such year, immediately before closure.
Also in the case of any Custodial Account:
- The total gross amount of interest, dividends, and other income paid or credited to the account during the calendar year;
- The total gross proceeds from the sale or redemption of property paid or credited to the account during the calendar year to which the Reporting Irish Financial Institution acted as an agent for the Account Holder.
The agreement allows for approved retirement accounts and certain products to be exempted from reporting these include:
- An approved occupational pension schemes;
- An annuity contract or a trust scheme or part of a trust scheme approved
by the Revenue Commissioners under Chapter 2 of Part 30 of the Taxes
Consolidation Act 1997;
- A PRSA contract;
- An Approved Retirement Fund or an Approved Minimum Retirement
- Save As You Earn Share Option Schemes – approved by the Revenue Commissioners;
- Profit Sharing Schemes – approved by the Revenue Commissioners;
- Employee Share Ownership Trusts – approved by the Revenue Commissioners.
What accounts do Irish Financial Institutions need to report on?
For existing individual accounts the Reporting Irish Financial Institution are required to review or report on:
- Pre-existing accounts with a balance or value that exceeds $50,000 as of December 31, 2013;
- Pre-existing Individual accounts that are Cash Value Insurance Contracts and Annuity Contracts with a value of $250,000 or more as of December 31, 2013;
- Any Depository Account with a balance or value of $50,000 or more.
For individual new accounts the Reporting Irish Financial Institution from 1 January 2014 are required to review or report:
- A New Individual Depository Account if the account balance exceeds $50,000 at the end of any calendar year;
- A Cash Value Insurance Contract when the Cash Value exceeds $50,000 at the end of any calendar.
There are additional requirements for reporting of entities. The full text of the agreement can be found here Ireland-US-IGA-FATCA
Reporting for individuals
If you must file an income tax return and your assets are more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year you must file a form 8938.
Implications for U.S. person living in Ireland
The new FATCA agreement transforms the reporting and compliance tools available to the IRS. U.S. persons living in Ireland will have to pay new attention to many long standing reporting and filing rules that have been widely and safely ignored until now i.e. FBAR or PFIC. Failure to comply with these rules has very rarely been an issue because they were virtually unenforceable. With FATCA’s new reporting mandate via the Inter-Governmental Agreement with Ireland all this will change.
Author; Frank Mulcahy Principal & Personal Financial Manager at Trinity Financial Management
At TFM we work with Expatriates to help them navigate their complex financial affairs when abroad. Contact Frank on firstname.lastname@example.org to discuss your needs.
This article is provided on the strict understanding that it is for the reader’s general consideration only. Accordingly, no action must be taken or refrained from based on its contests alone.