VIEWS: 38 PAGES: 2 CATEGORY: Tax POSTED ON: 2/4/2013
Though offshore bank accounts are beneficial to depositors, strategic tax planning for FBAR compliance is equally important to enjoy the benefits for a longer period of time.
Enjoy Benefits of Foreign Bank Accounts through FBAR Compliance An offshore bank is a bank that is located outside the country of residence of the depositor. A foreign bank account or an offshore bank account helps in international diversification and provides benefits such as greater privacy and protection against financial instability. Since foreign bank accounts are typically found in regions of low tax jurisdiction, they are often associated with terms such as underground economy, organized crime, tax evasion and money laundering. However, legally, offshore bank accounts offer several benefits. Let’s look at some of these benefits. ● Easy access to deposits ● Lower cost base and higher interest rates ● Provide banking services such as anonymous bank accounts, higher or lower rate loans based on risk and investment opportunities that are not available from domestic banks ● Low or no taxation However, these benefits can only be enjoyed if and only if the depositors come clean about their accounts. Though offshore banks have no legal obligation to report income to the tax authorities as they are protected by bank secrecy, this no way means that depositors can get away with the non declaration of the income or tax evasion. Following Sept 11, 2001, the US government has become very strict with respect to foreign bank accounts as a way to curb illegal money flow. The result is stricter regulations such as FBAR, FATCA and so on. Here is a look at FBAR and its requirements. FBAR An acronym for Report of Foreign Bank and Financial Accounts, FBAR is mandatory for any United States person having a financial interest in or signature authority over a foreign financial account, whether a bank account, brokerage account, mutual fund or a Trust AND if the aggregate value of these accounts exceeds US$10,000 at any time during the calendar year. Any bank, securities, securities derivatives or other financial instruments accounts, any savings, demand, checking, deposit, or any other account maintained with a financial institution can be considered as a financial account. Non compliance with FBAR can result in stiff penalties such as ● For "willfully violating" the requirements to file, the penalty is up to $250,000 and/or up to 5 years in prison ● For "willfully violating" the requirements to file "as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period”, up to $500,000 and/or up to 10 years in prison ● From providing false, misleading, fictitious, or fraudulent statements, fine or up to 5 years in prison and if the false information involves domestic or foreign terrorism the jail term is up to 8 years Thus, though offshore bank accounts are beneficial to depositors, strategic tax planning for FBAR compliance is equally important to enjoy the benefits for a longer period of time. Read More About: Entity Formation, OVDP
Pages to are hidden for
"Enjoy Benefits of Foreign Bank Accounts through FBAR Compliance"Please download to view full document