Possible to avoid CRS with USA setup?

[Belfort]

An european individual opens a US LLC and a personal US bank account with a debit card. Funds come to the LLC's bank account and moved as dividends to the personal account. Then, the individual spends money with the debit card in the EU.

How does the EU country this individual is a tax resident in know about their funds in the US? Most they can know is how much they're spending, right?

 

[Marzio]

How does the EU country this individual is a tax resident in know about their funds in the US?

Every foreign owned US LLC has to file form 5472 and nobody knows how IRS will use that data. It could be that they will never share anything or it could be that they will share only with some countries or it could be that at some point they will start sharing with all their partners.

 

[drysponge]

How does the EU country this individual is a tax resident in know about their funds in the US?

fatca igas are mutual exchange (sometimes)
see https://home.treasury.gov/system/files/131/FATCA-Agreement-Germany-5-31-2013.pdf article 6, 4

a) The United States commits to establish, by January 1, 2017, for reporting with
respect to 2017 and subsequent years, rules requiring Reporting U.S. Financial
Institutions to obtain and report the German TIN of each Account Holder of a
German Reportable Account as required pursuant to subparagraph 2(b)(1) of
Article 2; and
b) The Federal Republic of Germany commits to establish, by January 1, 2017,
for reporting with respect to 2017 and subsequent years, rules requiring
Reporting German Financial Institutions to obtain the U.S. TIN of each
Specified U.S. Person as required pursuant to subparagraph 2(a)(1) of Article

certain countries do not have mutual exchange in their fatca agreements but would likely get the information on request

 

[daniels27]

FACTA reports from banks which contain all details for most EU counties. If you are the signor or own the personal US bank account, they will report to Germany if you opened it with a German tax id.

 

[Don]

An european individual opens a US LLC and a personal US bank account with a debit card. Funds come to the LLC's bank account and moved as dividends to the personal account. Then, the individual spends money with the debit card in the EU.

How does the EU country this individual is a tax resident in know about their funds in the US? Most they can know is how much they're spending, right?

Heres how:
https://www.justice.gov/opa/pr/cour...eking-information-about-dutch-residents-using

 

[daniels27]

Heres how:
https://www.justice.gov/opa/pr/cour...eking-information-about-dutch-residents-using

Yes, but that was @JohnnyDoe. This John Doe is dangerous. He even defrauded Hamilton Reserve Bank:
https://iapps.courts.state.ny.us/nyscef/DocumentList?docketId=WepzwtqKjNYUMLMyRiqlaA==&display=all&courtType=New York County Supreme Court&resultsPageNum=1
Hamilton Reserve Bank Ltd. et al v. John Does 1 to 10

 

[Dandyline]

An european individual opens a US LLC and a personal US bank account with a debit card. Funds come to the LLC's bank account and moved as dividends to the personal account. Then, the individual spends money with the debit card in the EU.

How does the EU country this individual is a tax resident in know about their funds in the US? Most they can know is how much they're spending, right?

They will probably never know. As long as they don't investigate you.

 

[PinkCat]

As far as I know US doesn't automatically share any info. They get info from all but don't give to anybody.
Now if there is investigation and your country specifically asks them, they might provide to friendly countries.
At least that is as far as I know, and so far my EU country have not asked me about my US accounts. (3 years now)

Correct me if I'm wrong please, I'm always curious to learn more about that.

 

[marioIT]

As far as I know US doesn't automatically share any info. They get info from all but don't give to anybody.

not completely true: they automatically share some info depending on the intergovernmental agreement model (IGA) with the specific country. e.g. the IRS sends individual accounts data of europeans owning individual bank accounts in the USA, if the bank account generates at least some interest ($10 per year)...

e.g. with Germany, Italy, France etc they're the same IGA1 model, just change the country name to the following text...
you can search the countries involved here:
https://home.treasury.gov/policy-issues/tax-policy/foreign-account-tax-compliance-act
the direct usa-germany agreement link here : https://home.treasury.gov/system/files/131/FATCA-Agreement-Germany-5-31-2013.pdf

this is what the IRS *should* send automatically:

cc) The term “German Reportable Account” means a Financial Account
maintained by a Reporting U.S. Financial Institution if:
(i) in the case of a
Depository Account, the account is held by an individual resident in the
Federal Republic of Germany and more than $10 of interest is paid to such
account in any given calendar year;
or (ii) in the case of a Financial Account
other than a Depository Account, the Account Holder is a resident of the
Federal Republic of Germany, including entities that certify that they are
resident in the Federal Republic of Germany for tax purposes, with respect to
which U.S. source income that is subject to reporting under chapter 3 or
chapter 61 of subtitle A of the U.S. Internal Revenue Code is paid or credited.

b) In the case of the United States, with respect to each German Reportable
Account of each Reporting U.S. Financial Institution:
(1) the name, address, and German TIN of any person that is a resident of
the Federal Republic of Germany and is an Account Holder of the
account;
(2) the account number (or the functional equivalent in the absence of an
account number);
(3) the name and identifying number of the Reporting U.S. Financial
Institution;
(4) the gross amount of interest paid on a Depository Account;
(5) the gross amount of U.S. source dividends paid or credited to the
account; and
(6) the gross amount of other U.S. source income paid or credited to the
account, to the extent subject to reporting under chapter 3 or 61 of
subtitle A of the U.S. Internal Revenue Code.

I can tell that it took a long time but the data and the tax agency letters for the one caught are actually coming in the last few years.
As I said that's for individual accounts.

For entities, now that the IRS has the FINCEN BOI database, they should ask and it shall be given :

In accordance with the Corporate Transparency Act, FinCEN may permit access to beneficial ownership information to:

• Federal agencies engaged in national security, intelligence, or law enforcement activity;
• State, local, and Tribal law enforcement agencies with court authorization;
• Officials at the Department of the Treasury;
• Foreign law enforcement agencies, judges, prosecutors, and other authorities that submit a request through a U.S. Federal agency to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement;
• Financial institutions with customer due diligence requirements under applicable law (in order to facilitate compliance with those requirements); and
• Federal functional regulators or other appropriate regulatory agencies that supervise or assess financial institutions with access to beneficial ownership information (in order to supervise such financial institutions’ compliance with customer due diligence requirements).

Disclaimer: I am not a lawyer and some info here could be wrong or not up to date.

 

[JustAnotherNomad]

At least that is as far as I know, and so far my EU country have not asked me about my US accounts. (3 years now)

If they have questions, they will probably ask them at 5AM in the morning, conveniently right in your home.

 

[JustAnotherNomad]

An european individual opens a US LLC and a personal US bank account with a debit card. Funds come to the LLC's bank account and moved as dividends to the personal account. Then, the individual spends money with the debit card in the EU.

How does the EU country this individual is a tax resident in know about their funds in the US? Most they can know is how much they're spending, right?

Some countries have started cross-referencing international payment cards with their tax residency database.
Imagine you work for the tax office and you notice that John Doe, a wealthy local citizen and tax resident, goes shopping using a US debit card from time to time.
Would you think:
a) "Ah, whatever, we only goes shopping for $100 a couple times per month, nothing to see here."
b) "Interesting. Why don't we know about this account? Where is that money coming from? Let's investigate this person a bit closer..."

P.S.:
Transparent entities can't pay dividends.

 

[daniels27]

Some countries have started cross-referencing international payment cards with their tax residency database.
Imagine you work for the tax office and you notice that John Doe, a wealthy local citizen and tax resident, goes shopping using a US debit card from time to time.
Would you think:
a) "Ah, whatever, we only goes shopping for $100 a couple times per month, nothing to see here."
b) "Interesting. Why don't we know about this account? Where is that money coming from? Let's investigate this person a bit closer..."

P.S.:
Transparent entities can't pay dividends.

Hence better give them a tax residency elsewhere?

 

[JustAnotherNomad]

Hence better give them a tax residency elsewhere?

Yes, but also don't spend neither time nor money in your citizenship country.

 

[cuno]

Can someone please summarize for me what the end point is of this US setup ? I can't see how you can avoid CRS in anyway, that would be to easy.

 

[daniels27]

Can someone please summarize for me what the end point is of this US setup ? I can't see how you can avoid CRS in anyway, that would be to easy.

He wants to use a debit card of a US LLC to spend money back at home tax-free but ignores that there is FACTA and that most FACTA agreements have bilateral reporting by now.

Hence it would only work if the US bank where you hold the debit card does not have the UBO as tax resident in the country he spends most money in.

 

[Markus92]

Can bank accounts of LLC and my private US bank account be reported under Facta to Thailand if I am Thai resident?

 

[jayM]

He wants to use a debit card of a US LLC to spend money back at home tax-free but ignores that there is FACTA and that most FACTA agreements have bilateral reporting by now.

Hence it would only work if the US bank where you hold the debit card does not have the UBO as tax resident in the country he spends most money in.

nice, short and clear, thanks.

 

[Choosing7269]

F

Thread 'The USA will not provide its ‘reciprocal’ FATCA partners any information about...'

May 6, 2022

In case you didn't know, here's some good information. I can't confirm if this is 100% true but I believe the writer analyzed the FATCA agreement texts. For example, this one: https://home.treasury.gov/system/files/131/FATCA-Agreement-Sweden-8-8-2014.pdf

The USA will not provide its ‘reciprocal’ FATCA partners any information about the following types of accounts held at US financial institutions:
- Depository (i.e., cash) accounts held by entities. This includes entities that are resident in the FATCA partner country, or,
- Non-cash accounts (e.g., brokerage accounts)...

• FATCA
• Replies: 29
• Forum: Tax, Accounting, Licensing & Legal

• 

This post might be of some help.

 

[PinkCat]

F

Thread 'The USA will not provide its ‘reciprocal’ FATCA partners any information about...'

May 6, 2022

In case you didn't know, here's some good information. I can't confirm if this is 100% true but I believe the writer analyzed the FATCA agreement texts. For example, this one: https://home.treasury.gov/system/files/131/FATCA-Agreement-Sweden-8-8-2014.pdf

The USA will not provide its ‘reciprocal’ FATCA partners any information about the following types of accounts held at US financial institutions:
- Depository (i.e., cash) accounts held by entities. This includes entities that are resident in the FATCA partner country, or,
- Non-cash accounts (e.g., brokerage accounts)...

• FATCA
• Replies: 29
• Forum: Tax, Accounting, Licensing & Legal

• 

This post might be of some help.

Held by entities means companies? So persons would be reported? Except your investments in stocks. Which is nice way to stimulate us to buy their stocks I guess.

 

[PinkCat]

btw here is what AI has to say about this

The United States does not generally report comprehensive information about bank accounts held by EU citizens in the USA to EU countries. This lack of reciprocity in information sharing has been a point of contention between the US and EU.

FATCA and Information Sharing​

The Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions, including those in the EU, to report information about accounts held by US persons to the Internal Revenue Service (IRS)18. However, the US does not provide the same level of information about EU citizens' accounts in the US to EU tax authorities.

Limited Reciprocity​

While some agreements between the US and EU countries include provisions for limited reciprocity, the information shared by the US is not as comprehensive as what EU banks are required to report about US account holders25. For example:

• The Model 1A Inter-Governmental Agreement (IGA) involves limited reciprocity from the US5.
• The information exchanged by the US is generally less detailed and extensive compared to what EU financial institutions must provide about US account holders.

Global Efforts for Tax Transparency​

The Organization for Economic Co-operation and Development (OECD) has developed international standards for the automatic exchange of financial account information between tax authorities worldwide10. However, the US has not fully adopted these standards, creating an imbalance in information sharing.

Implications for EU Citizens​

This lack of reciprocity has several implications:

1. EU citizens may find it easier to maintain undeclared accounts in the US.
2. The US is sometimes referred to as a "tax haven" due to this asymmetry in information sharing5.
3. EU policymakers have expressed concerns about this imbalance and its potential impact on tax evasion and financial transparency4.

In conclusion, while EU financial institutions are required to report extensive information about US account holders to the IRS, the US does not reciprocate to the same extent regarding EU citizens' accounts in the USA. This situation continues to be a topic of discussion and negotiation between the US and EU authorities.

Funny enough another AI says the opposite, so it is indeed a controversial topic.