- 1 Millennium BCP Interest, Dividends, and Capital Gains Taxation
- 2 Millennium BCP ‘FATCA’ Reports to the U.S.
- 3 Common Brazil/US Tax Example
- 4 Taxation of U.S. Persons
- 5 International IRS Reporting Forms
- 6 Late Filing Penalties May be Reduced or Avoided
- 7 Current Year vs. Prior Year Non-Compliance
- 8 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 9 Need Help Finding an Experienced Offshore Tax Attorney?
- 10 Golding & Golding: About Our International Tax Law Firm
Millennium BCP Interest, Dividends, and Capital Gains Taxation
For taxpayers who are originally from Brazil or Portugal and/or have investments in Brazil or Portugal, Millennium BCP is one of the main Brazilian foreign financial institutions where taxpayers can invest in stocks and funds. And, with the globalization of the US economy, it has become much more common for taxpayers who may have originally come from Brazil/Portugal or worked and invested in Brazil/Portugal to become US persons for tax purposes. Once a person becomes a U.S. person for tax purposes, there are various requirements they must meet to be in compliance. The two main aspects of IRS compliance for US persons are taxation and reporting. Let’s walk through the basics of what a taxpayer who is considered a US person for tax purposes must do if they have Millennium BCP income.
Millennium BCP ‘FATCA’ Reports to the U.S.
Millennium BCP is a FATCA-reporting Foreign Financial Institution (FFI)
As provided on the Millennium BCP website:
“What is FATCA
FATCA (Foreign Account Tax Compliance Act) is a US regulation, which provides for imposing upon foreign (without registered office in the US) banks and other financial institutions (e.g. insurance companies, brokerage houses, mutual funds) the obligation to inform the US tax authorities about accounts kept for US taxpayers. FATCA is intended to make sure that private persons and entities, who have a US tax obligation, were fulfilling it.
Financial institutions, including Bank Millennium S.A., are fulfilling their obligations in keeping with the Act of 9 October 2015 on implementation of the Agreement between the Government of the United States of America and the Government of the Republic of Poland to Improve International Tax Compliance and to Implement FATCA.”
Common Brazil/US Tax Example
Brian is a Brazilian citizen who was initially transferred to the United States for work on an L-1 visa. After remaining in the United States for several years, he became a Lawful Permanent Resident and ultimately a dual citizen of the United States and Brazil. Prior to relocating to the United States, Brian maintained investments in various funds and securities at Millennium BCP. The majority of the income he is generating at Millennium BCP is dividends – which are not taxable in Brazil. But, is the income taxable in the United States?
Taxation of U.S. Persons
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 a US person 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 Brian is a U.S. Citizen, he is taxed on the dividends generated from Millennium BCP, even though those dividends are not taxable in Brazil. In fact, ever since coming to the United States and meeting the substantial presence test as an L1 transfer, Brian should have been reporting his worldwide income.
International IRS Reporting Forms
In addition to having to report his worldwide income to the IRS, Brian is required to report his foreign accounts on various US international information reporting forms. Since Brian has foreign accounts with foreign mutual funds in his Brazilian Millennium BCP account, the three (3)main forms he would have to file are the FBAR (FinCEN Form 114), Form 8938 (FATCA), and Form 8621 (PFIC) – 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 Brian that can help him 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.