Hong Kong Signs FATCA Agreement with U.S.
FATCA Hong Kong: Many nations, including the Unites States and Hong Kong are working to reduce and minimize offshore tax evasion. FATCA (The Foreign Account Tax Compliance Act) was developed to facilitate financial transparency. Numerous countries have agreed to take part in FATCA (Foreign Account Tax Compliance Act) and the number of countries continues to grow.
In 2014, Hong Kong signed the FATCA Hong Kong Agreement with the United States.
Hong Kong has made it known that they are seeking to comply and enforce International Criminal Tax Laws for U.S. Taxpayers they believe are not in compliance.
Hong Kong FATCA Agreement
Hong Kong has represented that it wants to help promote compliance of IRS tax law by any Hong Kong Citizen or Resident who also has a U.S. Foreign Bank Account reporting requirement.
Many U.S. Account Holders (U.S. Citizens, Legal Permanent Residents, Visa Holders) who reside in Hong Kong have mistakenly or intentionally misrepresented their status when they initially opened their Hong Kong account.
U.S. Persons are at Risk
The formalization of the FATCA Agreement will cause a major headache for Hong Kong citizens who are also U.S. Citizens, Legal Permanent Residents, or Visa Holders and have not updated the Hong Kong banks of their U.S. status.
Whether a U.S Citizen, Legal Permanent Resident, or certain Visa Holders reside in the U.S., Hong Kong, or a third-party country does not matter when it comes to Foreign Bank Account Reporting; they are still required to inform the foreign bank as to their US status (aka U.S. Status does not automatically change for U.S. Citizens or Legal Permanent Residents no matter where they live)
Thus, even though a person may be a Hong Kong citizen, and a U.S. green card holder and maintains accounts in Hong Kong, with respect to IRS Tax Law, the Hong Kong Account is considered to be a “Foreign Account” and must be reported on an annual FBAR and FATCA Form 8938 (if the respective threshold requirements are met)
Non-Compliant Foreign Account Holders
When a person is out-of-compliance for not properly reporting their foreign accounts, the IRS has developed various programs to assist taxpayers with getting back into compliance.
These programs are collectively referred to as Offshore Voluntary Disclosure. Several of the programs may result in minimal penalties, or even full penalty waivers.
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