EPF & FATCA Form 8938 (Employee Provident Fund)
Do I Report EPF for FATCA Form 8938? The EPF FATCA requirement in accordance with the IRS reporting rules of foreign assets in general is a complicated analysis with many different components. The EPF is the Employee Provident Fund and is a common form of occupational pension in India.
FATCA is the Foreign Account Tax Compliance Act and Form 8938 is used by U.S. tax filers to report under FATCA.
If a U.S. person has an EPF account, then the Individual reports the EPF on the FATCA Form 8938.
In accordance with the FATCA Agreement, the foreign institution that houses the EPF does not need to report U.S. account holders of EPF to the IRS.
But, this does not impact the Individual employee’s responsibility to report the EPF on Form 8938.
We will summarize the EPF & FATCA Form 8938 Reporting Requirements.
EPF & FATCA Agreement
Foreign institutions in India are generally exempt from reporting group EPF that meets the requirements set forth in Annex II below.
FATCA Agreement Article 4, Paragraph (3)
Specific Treatment of Indian Retirement Plans.
“The United States shall treat as deemed-compliant FFIs or exempt beneficial owners, as appropriate, for purposes of sections 1471 and 1472 of the U.S. Internal Revenue Code, Indian retirement plans described in Annex II.
For this purpose, an Indian retirement plan includes an Entity established or located in, and regulated by, India, or a predetermined contractual or legal arrangement, operated to provide pension or retirement benefits or earn income for providing such benefits under the laws of India and regulated with respect to contributions, distributions, reporting, sponsorship, and taxation.”
FATCA Annex II
Annex II expands upon certain institutions or account that are not reportable or “Deemed Compliant.”
One Example is the Provident Fund:
“A fund established in India under the Provident Fund Act of 1952 or the Employees’ Provident Funds and Miscellaneous Act of 1952 to provide current and former employees of Indian employers retirement benefits in consideration for services rendered, provided that fund:
Does not have a single beneficiary with a right to more than five percent of the fund’s assets;
Is subject to government regulation and provides annual information reporting about its beneficiaries to the relevant tax authorities in India;
The fund is generally exempt from tax in India on investment income under the laws of India due to its status as a Provident Fund; and
Contributions (other than certain permitted make-up contributions) by employees to the fund are limited by reference to earned income of the employee or may not exceed $50,000 annually, applying the rules set forth in Annex I for account aggregation and currency translation.”
Individual EPF Owners are Not Exempt From FATCA
One common question we receive is, if the EPF Institution does not have to report, then how does the U.S find me?
When the Individual reaches retirement and begins taking payments, and those payments are transferred to a bank, the account may increase in value and result in the bank (such as ICICI, SBI, BOI, etc.) reporting to the U.S.) — and the individual receiving a FATCA/CRS Letter.
Likewise, if the individual no longer resides in India and takes the lump sum, this large deposit (or international wire transfer) into the U.S. may result in foreign institution reporting to the IRS as well.
Unreported EPF on FATCA Form 8938
The non-reporting of the EPF on the FATCA Form 8938 does not spell disaster.
The extent of amnesty required will depend on various factors, using the totality of the circumstance test.
For example, was the EPF the only unreported account, or were there multiple accounts missing. Likewise, if the Form 8938 was never filed, it will be more of an undertaking.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.