- 1 Is a Tokio Marine Investment Policies Taxable or Reportable?
- 2 Tokio Marine ‘FATCA’ Reports to the U.S.
- 3 What is Tokio Marine Insurance?
- 4 Common Tokio Marine Insurance Example
- 5 Is a Tokio Marine Insurance Policy Taxable?
- 6 International IRS Reporting Forms
- 7 Late Filing Penalties May be Reduced or Avoided
- 8 Current Year vs. Prior Year Non-Compliance
- 9 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 10 Need Help Finding an Experienced Offshore Tax Attorney?
- 11 Golding & Golding: About Our International Tax Law Firm
Is a Tokio Marine Investment Policies Taxable or Reportable?
In many different foreign countries such as Singapore, Malaysia, and Hong Kong, insurance policies are very commonly used for investment purposes instead of just the death benefits of ILITs. From the U.S. tax perspective, when a U.S. person such as a U.S. Citizen, Lawful Permanent Resident, or Foreign National who meets the Substantial Presence Test owns a Tokio Marine Insurance Policy — the policy income is taxable and the value of the policy is reportable. While not all Tokio Marine Insurance Policies are the same, let’s take a look at some of the basics of why Tokio Marine life Insurance Policy is taxable and reportable in the United States.
Tokio Marine ‘FATCA’ Reports to the U.S.
Tokio Marine is a FATCA-reporting Foreign Financial Institution (FFI)
As provided on the Tokio Marine website:
“Singapore entered into a Model 1 IGA with the US on 9 December 2014. Pursuant to this Model 1 IGA, Singapore enacted the Income Tax (International Tax Compliance Agreements) (United States of America) Regulations 2015 (“FATCA Regulations”), which came into effect on 18 March 2015.
The FATCA Regulations require Tokio Marine Life Insurance Singapore Ltd. (TMLS) to collect certain information about each Account Holder’s tax residency and its FATCA classification. Please note that TMLS cannot provide you with any advice including tax advice and if you are unsure about how to complete your FATCA declaration, please consult your tax adviser. It is the responsibility of the Account Holder to ensure that the information provided is complete and accurate and, additionally, to provide TMLS with any additional documentation, information or replacement forms when requested or required.”
What is Tokio Marine Insurance?
Tokyo Marine Insurance is a popular investment vehicle that offers various types of policies, including investment policies in which taxpayers can invest in a policy that can both increase in value as well as payout certain types of passive income along the way. And, in many foreign countries, passive income such as dividends and interest may not be taxable to the taxpayer — or if it is taxable, it is only taxable when certain thresholds are met for that category of income. Thus, it is very common for a Singaporean citizen to acquire a Tokyo marine policy and then become a US person.
Common Tokio Marine Insurance Example
Michelle is a Singaporean citizen who previously worked and lived in Singapore before relocating to the United States. Michelle was very diligent when she first started working, and in addition to contributing to her CPF account, she also purchased a Tokyo Marine Insurance Policy. The purpose of the policy was to supplement her CPF and it has recently begun distributing dividend income each year
Is a Tokio Marine Insurance Policy Taxable?
The United States is one of the only countries that taxes individuals on their worldwide income whether they are a resident of the U.S. or if they are considered to be U.S. Persons for tax purposes. A U.S. person for tax purposes typically includes U.S. citizens, lawful permanent residents, and/or foreign nationals who meet the substantial presence test. Since Michelle is a U.S. Citizen, she is taxed on the dividends and interest generated from Tokio Marine BCP, even though those dividends may not be taxable in Singapore.
International IRS Reporting Forms
In addition to having to report her worldwide income, Michelle was also required to report her foreign accounts on several different IRS international information reporting forms. Since Michelle has a foreign life insurance policy with Tokio Marine, the two main IRS forms she has to file, are the FBAR (FinCEN Form 114) and Form 8938 (FATCA) – although other IRS foreign tax forms may be required. Even though Brian has failed to report these forms in multiple years in the past, there are various programs available to Michelle that can help her safely get into US tax compliance.
Late Filing Penalties May be Reduced or Avoided
For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.
Current Year vs. Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.