Offshore Accounts - The Noose Tightens Further

28. March 2010 by Dan Walkow, CFA, CMT.

WITH all the hoopla over the health care bill, hardly anybody noticed that a job creation bill that President Obama signed on March 18 makes it much harder for United States citizens to avoid taxes by hiding money in overseas bank accounts.

Congress is attacking some of these schemes, courtesy of interesting provisions aimed at curbing tax avoidance that legislators wrote into the new jobs bill, known as the Hiring Incentives to Restore Employment Act.

The most substantive section of the bill states that foreign financial institutions will face a 30 percent tax on their United States investments if they refuse to disclose information about accounts they have opened for American citizens in offshore jurisdictions. Another aspect of the bill eliminates a clever derivatives strategy used by investors to make their tax bills on dividends disappear.

The law was written broadly and covers banks, hedge funds, securities houses, derivatives dealers, commodity traders and private equity firms. Indeed, any financial firm that holds or trades assets for its own account or for clients must comply with the new reporting requirements.

The United States continues to put legal means in place to compel offshore investors and advisors to declare and pay tax on offshore investment accounts and investments. Canada, as always, is  a little behind the USA in this regard but you can be sure that that gap will close soon as well. DGW

Read the full article at the New York Times here.

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