FATCA Ropes in Vatican Bank on Offshore Account Compliance
The Vatican Bank is the latest to join the ranks of a hundred other countries worldwide that have agreed to the terms of the FATCA. Since its enactment in 2010, the Foreign Account Tax Compliance Act or FATCA, has seen American Tax Law extend its reach further than ever before. Under the new American global tax law, all countries cooperating with FATCA will need to declare the presence of any accounts of more than $50,000 held by American taxpayers.
Countries play it safe
Non-compliance would attract the unfavorable attention of U.S. Treasury who can then debar the institution from transactions in U.S. markets. This risk has prompted even otherwise difficult countries like Russia and China to join in. Tax havens which have traditionally been secretive of their account holders are now being forced to disclose details under the FACTA.
Foreign Financial Institutions will need to share the names, addresses, account numbers, balances as well as U.S. identification numbers for these accounts. There is a voluntary disclosure system in place, but even this will attract a 50% penalty as of August 4, 2014.
FACTA came into existence to enable America to zero in on taxpayers who were holding money in accounts overseas to evade taxation. The United States taxes all its permanent residents and citizens on their income wherever in the world they may live. Failure to share this data will allow FACTA to be enforced to cut off that institution’s access to U.S. markets. In addition, they expose themselves to a 30% tax.
No one is above FACTA
In this latest development, the Holy See has now signed an intergovernmental agreement to share American account details under FACTA. The Vatican Bank’s own record isn’t exactly blemish-free either. Pope Francis has been quoted as suggesting it was time for the bank to get a makeover of its own. Transparency and accountability have been the cornerstones of recent moves by the Bank, and compliance was an inevitable next step. The Vatican Bank released its very first Annual Report since its inception, as recently as 2013.
It is quite likely that there will be some accounts held by American clergy that will now come to light under the new disclosure norms. Regardless of whether these accounts are held by proxies or entities, they are likely to come to light in the weeks that follow.