Italy is the latest country to join the FATCA club. On January 10, 2014 the United States of America and Italy signed an intergovernmental agreement under the Foreign Account Compliance Act at the headquarters of Italy’s Ministry of Economy and Finance in Rome. Earlier we provided an extensive coverage of FATCA and how it affects American expats living abroad. This news comes at no surprise. Italy was one of several countries that announced a joint statement along with Treasury back in February 2012. Italy has supported the intergovernmental approach from the beginning and it was just a matter of time before Italy signed the FATCA IGA.
Robert Stack, Treasury deputy assistant secretary (international tax affairs), mentioned, “Today’s announcement is another important step forward in the fight against international tax evasion, and underscores FATCA’s growing momentum and international support.”
“We welcome Italy’s commitment to strengthening its cooperation with the United States in improving tax compliance,” Stack said.
Overview of some provisions – Italy FATCA (Foreign Account Tax Compliance Act)
FATCA or Foreign Account Tax Compliance Act has been introduced by the United States to combat international tax evasion. However, FATCA has received an overwhelming support among foreign countries. For example, the Cayman Islands, the country that was considered a tax heaven for a long time, signed the FATCA IGA in 2013.
Italy FATCA is based on Model I intergovernmental agreement. Similar type of IGA was signed by United Kingdom, Spain, Netherlands, Cayman Islands, Costa Rica, Denmark, France, Germany, Guernsey, Ireland, Isle of Man, Italy, Jersey, Malta, Mexico, Netherlands and Norway.
Which information will be exchanged under Italy FATCA?
Under the Italy FATCA provisions of Article 3, each country will obtain the information about all Reportable Accounts and exchange this information annually on an automatic basis per the provisions of Article 26 of the Convention. The Italian financial institutions will be required to report the information to the Italian Competent Authority that will eventually share this information with the IRS.
The following information might be collected and exchanged under the Italy FATCA IGA:
- Name, address, and SSN or ITIN of each US person that is an Account Holder.
- Name, address, and SSN or ITIN of each US person that is a Controlling Person of Italian entity.
- Account number or any functional equivalent.
- Name and identifying number of the Reporting Italian Financial Institution.
- Account balance as of the end of calendar year (reporting period) or immediately before closure if the account was closed during the year.
- Value of a Cash Value Insurance Contract or Annuity Contract, the Cash Value or surrender value within the above timeframe.
- Some other information that might be reported is gross interest, dividends and other income generated in respect to these accounts
Which accounts are not reportable under Italy FATCA?
Italy FATCA stipulates a list of accounts that are not considered US reportable accounts so they are not subject to any review:
- Preexisting individual accounts with a balance that does not exceed $50,000 as of June 30, 2014.
- Cash value insurance contracts and annuity contracts with a balance of $250,000 or less as of June 30, 2014.
- Cash value insurance contracts or annuity contracts that cannot be sold to US residents. This situation might arise when a financial institutions does not have the registration under the US law and the law of Italy requires reporting with respect to some insurance products owned by residents of Italy.
- Deposits with a balance of $50,000 or less.
Conclusion
American expats living abroad with undeclared income and foreign financial accounts must act swiftly. It is essential to become compliant before the IRS finds these delinquent taxpayers. Expat tax CPAs at Artio Partners will be pleased to assist with various FATCA inquiries, expat tax preparation, renunciation and other overseas tax issues.