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I have mentioned this on this site before –most readers
thought the proposal was silly and paranoid
So here we go again
According to the informative people at
http://www.zerohedge.com/article/its-official-america-now-enforces-capital-controlsand I quote
It’s Official – America Now Enforces Capital Controls
Submitted by Tyler Durden on 03/28/2010 14:27 -0500President ObamaSwitzerland
It couldn’t have happened to a nicer country. On March 18, with very little pomp and circumstance, president Obama passed the most recent stimulus act, the $17.5 billion Hiring Incentives to Restore Employment Act (H.R. 2487), brilliantly goalseeked by the administration’s millionaire cronies to abbreviate as HIRE. As it was merely the latest in an endless stream of acts destined to expand the government payroll to infinity, nobody cared about it, or actually read it. Because if anyone had read it, the act would have been known as the Capital Controls Act, as one of the lesser, but infinitely more important provisions on page 27, known as Offset Provisions – Subtitle A—Foreign Account Tax Compliance, institutes just that. In brief, the Provision requires that foreign banks not only withhold 30% of all outgoing capital flows (likely remitting the collection promptly back to the US Treasury) but also disclose the full details of non-exempt account-holders to the US and the IRS. And should this provision be deemed illegal by a given foreign nation’s domestic laws (think Switzerland), well the foreign financial institution is required to close the account. It’s the law. If you thought you could move your capital to the non-sequestration safety of non-US financial institutions, sorry you lose – the law now says so. Capital Controls are now here and are now fully enforced by the law.
Let’s parse through the just passed law, which has been mentioned by exactly zero mainstream media outlets.
Here is the default new state of capital outflows:
(a) IN GENERAL.—The Internal Revenue Code of 1986 is amended by inserting after chapter 3 the following new chapter:
‘‘CHAPTER 4—TAXES TO ENFORCE REPORTING ON CERTAIN FOREIGN ACCOUNTS
‘‘Sec. 1471. Withholdable payments to foreign financial institutions.
‘‘Sec. 1472. Withholdable payments to other foreign entities.
‘‘Sec. 1473. Definitions.
‘‘Sec. 1474. Special rules.
‘‘SEC. 1471. WITHHOLDABLE PAYMENTS TO FOREIGN FINANCIAL INSTITUTIONS.‘‘(a) IN GENERAL.—In the case of any withholdable payment to a foreign financial institution which does not meet the requirements of subsection (b), the withholding agent with respect to such payment shall deduct and withhold from such payment a tax equal to 30 percent of the amount of such payment.
Clarifying who this law applies to:
‘‘(C) in the case of any United States account maintained by such institution, to report on an annual basis the information described in subsection (c) with respect to such account,
‘‘(D) to deduct and withhold a tax equal to 30 percent of—‘‘(i) any passthru payment which is made by such institution to a recalcitrant account holder or another foreign financial institution which does not meet the requirements of this subsection, and
‘‘(ii) in the case of any passthru payment which is made by such institution to a foreign financial institution which has in effect an election under paragraph (3) with respect to such payment, so much of such payment as is allocable to accounts held by recalcitrant account holders or foreign financial institutions which do not meet the requirements of this subsection.
What happens if this brand new law impinges and/or is in blatant contradiction with existing foreign laws?
‘‘(F) in any case in which any foreign law would (but for a waiver described in clause (i)) prevent the reporting of any information referred to in this subsection or subsection (c) with respect to any United States account maintained by such institution—
‘‘(i) to attempt to obtain a valid and effective waiver of such law from each holder of such account, and
‘‘(ii) if a waiver described in clause (i) is not obtained from each such holder within a reasonable period of time, to close such account.Not only are capital flows now to be overseen and controlled by the government and the IRS, but holders of foreign accounts can kiss any semblance of privacy goodbye:
‘‘(c) INFORMATION REQUIRED TO BE REPORTED ON UNITED STATES ACCOUNTS.—
‘‘(1) IN GENERAL.—The agreement described in subsection (b) shall require the foreign financial institution to report the following with respect to each United States account maintained by such institution:
‘‘(A) The name, address, and TIN of each account holder which is a specified United States person and, in the case of any account holder which is a United States owned foreign entity, the name, address, and TIN of each substantial United States owner of such entity.
‘‘(B) The account number.
‘‘(C) The account balance or value (determined at such time and in such manner as the Secretary may provide).
‘‘(D) Except to the extent provided by the Secretary, the gross receipts and gross withdrawals or payments from the account (determined for such period and in such manner as the Secretary may provide).The only exemption to the rule? If you hold the meager sum of $50,000 or less in foreign accounts.
‘‘(B) EXCEPTION FOR CERTAIN ACCOUNTS HELD BY INDIVIDUALS.—Unless the foreign financial institution elects to not have this subparagraph apply, such term shall not include any depository account maintained by such financial institution if—
‘‘(i) each holder of such account is a natural person,and
‘‘(ii) with respect to each holder of such account, the aggregate value of all depository accounts held (in whole or in part) by such holder and maintained by the same financial institution which maintains such account does not exceed $50,000.And, while we are on the topic of definitions, here is how “financial account” is defined by the US:
‘‘(2) FINANCIAL ACCOUNT.—Except as otherwise provided by the Secretary, the term ‘financial account’ means, with respect to any financial institution—
‘‘(A) any depository account maintained by such financial institution,
‘‘(B) any custodial account maintained by such financial institution, and
‘‘(C) any equity or debt interest in such financial institution (other than interests which are regularly traded on an established securities market). Any equity or debt interest which constitutes a financial account under subparagraph (C) with respect to any financial institution shall be treated for purposes of this section as maintained by such financial institution.In case you find you do not like to be subject to capital controls, you are now deemed a “Recalcitrant Account Holder.”
‘‘(6) RECALCITRANT ACCOUNT HOLDER.—The term ‘recalcitrant account holder’ means any account holder which—
‘‘(A) fails to comply with reasonable requests for the information referred to in subsection (b)(1)(A) or (c)(1)(A),
or ‘‘(B) fails to provide a waiver described in subsection (b)(1)(F) upon request.But guess what – if you are a foreign Central Bank, or if the Secretary determined that you are “a low risk for tax evasion” (unlike the Secretary himself) you still can do whatever the hell you want:
‘‘(f) EXCEPTION FOR CERTAIN PAYMENTS.—Subsection (a) shall not apply to any payment to the extent that the beneficial owner
of such payment is—
‘‘(1) any foreign government, any political subdivision of a foreign government, or any wholly owned agency or instrumentality of any one or more of the foregoing,
‘‘(2) any international organization or any wholly owned agency or instrumentality thereof,
‘‘(3) any foreign central bank of issue, or
‘‘(4) any other class of persons identified by the Secretary for purposes of this subsection as posing a low risk of tax evasion.One thing we are confused about is whether this law is a preamble, or already incorporates, the flow of non-cash assets, such as commodities, and, thus, gold. If an account transfers, via physical or paper delivery, gold from a domestic account to a foreign one, we are not sure if the language deems this a 30% taxable transaction, although preliminary discussions with lawyers indicates this is likely the case.
And so the noose on capital mobility tightens, as very soon the only option US citizens have when it comes to investing their money, will be in government mandated retirement annuities, which will likely be the next step in the capital control escalation, which will culminate with every single free dollar required to be reinvested into the US, likely in the form of purchasing US Treasury emissions such as Treasuries, TIPS and other worthless pieces of paper.
Congratulations bankrupt America – you are now one step closer to a thoroughly non-free market.
Stole my thunder… I was working on an article about this after I saw …
‘Disturbing new U.S. law aims to end individual foreign bank accounts’
… but it’s going to take some time …
The amount of very NEGATIVE, freedom destroying news out of the US in the last ten days has been staggering.
Scott
That Communist Bastage we have in the White House won’t be satisfied until he has destroyed the US. COMPLETELY, and all but enslaved the population….the sheeple need to wake up before it’s too late.
it’s already too late. he isn’t in charge anyway. he’s just a puppet like all the others before him.
Oh for God’s sakes! Scott, how about throwing a bone to all of us out here who are now under the impression that this new bill means we won’t A: be able to open a Costa Rican checking account or B: are now about to lose them. I am guessing that this is not the case. I’ll bet a lot of other people who follow this forum now have their hair on fire.
Am I to understand that this bill makes it much more difficult to have funds/accounts/investments offshore where the IRS cannot “see” into those accounts? Since I am not someone who needs now, or in the future, to hide my assets from the IRS, I would appreciate your clarification (as you currently understand it) of this new law. My current understanding is that the Costa Rican government ALREADY allows that kind of transparency with the U.S.
Please advise…your input is very trusted. Thx!
Would this really effect folks in Costa Rica as you can open up a corp account (not using your name)?, thus the IRS would never know a US citizen owns the account. You could transfer funds from the US to this account.
At worst, every time you or a family member comes into the country bring in the $10,000 (max allowable) per member. The IRS will only know it was withdrawn from your account in the US, for all they know you sleep with the doe under your pillow (talk about pillow talk). You can then put it in your corp bank account in Costa Rica when you arrive.
I don’t think Switzerland would abide by any US law when it comes to banking. At least historically they have not yielded to foreign law.
The only thing I can see happening is when you wire money from a us bank over sees the IRS could nab 30% of it. but again you could always carry the max allowable into CR.
Perhaps I am way off on this? but I’m sure there gotta be some way to get around it.
sorry but there is no way around it. the Swiss already bent over and gave up the names of secret account holders after the US threatened to not let them do business in America. so they rolled over. there is no more banking secrecy for US citizens — well, maybe panama, but maybe not. if you have more than ten grand in your corporate account you must tell the u.s. treasury department and give them all the account details. the irs is already working hard in costa rica to figure out who put what money where. and when they put all the anonymous corporations online well, bye bye anonymity. you can run but you cannot hide from the tentacles of the US Govt.
[i]”With very little pomp and circumstance . . .” [/i]The BIPARTISAN HIRE legislation was signed into law with the same amount of “pomp” as the myriad of other tax code changes added or updated almost daily. IRS code is available for consumption, sans political hyperbole, in readily accessible locations and formats. Interesting that the focus of this thread is on the revenue side wthout a hint of its anticipated benefits within the employment mandate. Interesting- though not surprising. While a chat forum doesn’t provide the pallete nor decorum for an intelligent (read: fact-based) discussion on the merits of complex U.S. tax code, I’m left to consider how quickly such attempts devolve into poorly constructed arguments on the evaporation of American rights and freedoms in the last 14 months. And (usually,) from the non-participative sanctuaries of Costa Rica. Lamenting your loss of freedom(s) while collecting tax-incentivized pensions, voting in abstentia in free U.S elections, and watching from afar the orderly transition of power. But that’s right, you might lose a tax haven. Real freedoms.
I’m sorry to digress- I only meant to point out that there is really nothing sinister here- HIRE was debated publicly, open for legislative input (if you had the interest,) well documented and signed into law by the POTUS. You just had to look for it.
twinzor: Thanks for the fact-based response. I am still waiting for a fact-based answer as to what this will mean to the expat who is using their Costa Rican bank account to build a home and may (briefly) have more than the $50K limit flowing through. And later, same account is used only for paying bills, etc., and routinely falls below the $50k limit. Does the 30% withholding occur ONLY when transferring money BACK to the U.S.? What if this is a one-time transfer if we are returning home and have sold a home? Thanks to anyone who can respond with the sort of reasoned reply of “twinzor”.
SueandChris: the 30% withholding on [u]INCOME[/u][u][/u] from foreign accounts takes place one of two ways-
1. Your Costa Rican financial institution REFUSES to comply with US tax code by failing to ask you to waive your right to account secrecy, or
2. You waive your right to secrecy and you report your financial holdings during the normal tax reporting sequence (and you don’t meet the myriad of other exemptable statuses.)That said:
1. Yes, if the total value of your financial assets exceed $50K during a taxable year, you owe 30% on the income generated.
2. The $50K is an aggregate number, so you can hit the threshhold via multiple accounts.
3. It does NOT only apply when transferring $$$ back to the US. Your $50K + only has to be credited to the foreign institution and generate income.
4. I am not sure, but I think there will be exceptions made for one-time/limited transfers. However, you still must waive your right to secrecy/privacy via your institution.
5. Privacy/secrecy waivers will be the responsibility of the foreign financial institution to their foreign (i.e. US) account holders.To all of you lamenting our loss of freedom, these conditions are the direct result of the behavior (free market?) of UBS, and their absolute flaunting and evasion of US tax responsibilities. By the way, the clause which stipulated that even discussions with advisors contemplating deposits in foreign institutions should be disclosable, was pulled from this bill. I think the legislators really didn’t want to push you guys over the edge.
Tinzor: Do you work for the US Government?
Let us not forget that the United States Socialist Republic(USSR) and the African backwater country of Eritrea are the only two countries in the world that tax based on citizenship rather than residency. Obviously, the USSR is very concerned with large amounts of capital fleeing the country when Oblahblahblahma’s socialist agenda is fully enacted. It has already happened in the UK and France. The coporations will flee offshore in mass in the near future thanks to the myriad of tax liabilities forced upon them for the “benefit of the people”. Feels like Russia. The only recourse left is expatriation.[quote=”twinzor1″][i]”Interesting that the focus of this thread is on the revenue side wthout a hint of its anticipated benefits within the employment mandate. [/quote]
As an Employer, (our company in the US pays 6 figure tax bills yearly), I can assure you that the so called “employment mandate” is not going to motivate us to hire anyone for what amounts to a less then a 1% tax cut (after all the tax implications of the bill are added up) per new hire based on their yearly salary. However if we layoff our employees for 30 days (during a slow time)and then rehire then we now get the tiny tax advantage. Yes, you may say then our unemployment tax goes up…..not really, in our state the companies that do well have to pay for those that are laying off workers. Even though we have never had a lay-off, our unemployment tax doubled this year.
So when I hear “anticipated benefits within the employment mandate” I just got to giggle about it.”
…and as far as the new health care bill, this will increase the dollar amounts in which we pay for policies. The Health care insurers seem to have written this bill, boy are they going to rake it in. Just in the past 52 weeks when this bill was rumored their stock prices just about doubled while bringing their PE ratios to single digits (all in anticipation of the big profits coming their way). Couples making over $250,000 are paying the bulk of this. However in reality its going to be the working class paying for this as the expense will be passed on to them in the form of few raises or even pay cuts.
Of course I don’t like bringing out the evil side of this without suggesting a solution:
My solution is centralized health care, cut out the insurance companies completely, those huge profits will help pay for all health care. and yes Medicare works and is a very successful program. Besides do you really want companies that make a profit off you deciding on your medical treatment. Does anyone see an conflict of interest here?
Sorry this is off topic and another one of my rants but I just couldn’t help myself.
…..and for the record we are not Republicans or Democrats. We supported Ralph Nader.
Hopefully I won’t get a knock on my door after this post from the insurance companies or the Obama admin. LOL
the argument for reporting your stash of cash in CR is that if you were to have to bring that money back into the country and those forms weren’t filed, you could get a knock on your door from a Treasury Agent, asking where the money came from, and did you declare it on all the little forms for the previous years. oh, you didn’t? hmmmmmm let’s see, there are penalties for that and fines, and if they want, you could go to the slammer. the minute a big wire transfer from CR lands in your US banks, those little clerks will be busy filling out the IRS forms, and away you goooooooo
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