A number of Taiwan residents with dual nationalities have chosen to renounce their American citizenship to avoid taxes under FATCA, formally known as Foreign Account Tax Compliance Act, according to local media reports.
Ruling Kuomintang Legislator Lai Shyh-bao was quoted as saying that scores of owners of small- and medium-sized enterprises and management executives have begun proceedings to relinquish their U.S. citizenship.
Because of FATCA and the latest U.S. decision to increase taxes on those whose annual income exceeds US$400,000, Lai said Taiwan residents with U.S. citizenship could be taxed up to NT$15 million (US$515,464) if they sell real estate in Taiwan, while they may just need to pay NT$1 million in taxes.
Such a grave situation have prompted many local wealthy people with dual nationalities to opt to give up their U.S. citizenship, Lai said.
The following are excerpts from a special report in the Monday edition of the United Daily News on FATCA issues:
FATCA, which took effect Jan. 1, 2013, requires foreign financial institutions to tell the Internal Revenue Service (IRS) under the U.S. Treasury Department about offshore accounts held by American citizens worth more than US$50,000.
Kuei Hsien-nung, director general of the Banking Bureau under the Financial Supervisory Commission (FSC), said the Executive Yuan has set up a special task force to work out response measures.
To facilitate enforcement of FATCA, the United States has signed tax information sharing or exchange agreements with several countries, including the United Kingdom, France, Germany and Japan.
The model of the U.S.-U.K. agreement allows foreign financial institutions to report information about American account holders to the IRS through their home governments instead of requiring the institutions to deal directly with the U.S. tax bureau.
However, Kuei said Taiwan may adopt the Japan model which allows local financial institutions to directly provide information about American account holders to the IRS.
If all goes well, the Financial Supervisory Commission (FSC) may sign a tax information sharing and exchange agreement with the U.S. in the first half of this year at the earliest, senior officials said.
Meanwhile, the officials said, the FSC will draft a package of amendments existing Banking Law and personal Information Protection Act to enable local financial institutions to provide their clients' information to U.S. tax bureau.
The Bankers Association of the Republic of China once conducted a survey in 2011 on the number of accounts worth more than US$1 million at seven largest banks in Taiwan.
The survey found that each bank had an average of 2,858 such accounts, the association said, adding that those accounts were not necessarily held by people with U.S. citizenship.
Some senior bankers estimated that about 20,000 to 30,000 residents in Taiwan may be affected by FATCA.
Financial market analysts said local financial institutions should step up preparations and begin documenting accounts that may have to be reported to the U.S. tax bureau in line with FATCA provisions.
Under the act, people with U.S. citizenship, green cards or those who have worked in the U.S. for more than 183 days annually over the past three years will have to report all of their overseas assets held in 2013 when they file their tax returns in 2014. (Jan. 14, 2014)
(By Sofia Wu)