Download FATCA Guide

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Transcript of Download FATCA Guide

Page 1: Download FATCA Guide
Page 2: Download FATCA Guide

There’s no gettingaway from the factthat US expats are

currently under siegefrom the IRS.

The introduction of the ForeignAccount Tax Compliance Act(FATCA) set for 1 July 2014 isalready causing a wave of panicamong US expats.

Under FATCA, non-US banks and financialinstitutions with American clients mustseparately report those account detailsdirectly to the IRS. What we at GuardianWealth Management are seeing is that thecomplexity and costs involved for institutionsto comply means financial firms are reducingor withdrawing their services to US clients.

The unintended result is that US expatsnow have fewer and fewer choices when itcomes to financial advice. And this reduction

in the choice of investmentvehicles and savings optionsis taking its toll. We’ve heardof a number of cases whereAmericans have given uptheir citizenship becausethey’ve felt overwhelmed bythis new tax law andincensed by having toconsider financial optionsthat are not only taxinefficient, but could wellprove costly. Indeed, the USFederal Register reports wellover 1,000 Americans havesurrendered their passportsat overseas embassies thisyear.

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However, while this may be theright decision for some, we atGuardian Wealth Managementurge US expats not to throwaway their national birthrightwithout taking advice first andexploring all the options.

To help we’ve put together this primer tosupport and help you understand theimplications and impact that FATCA will haveon your medium and long term financialfuture. Plus, we have already begun to workwith partners on investment vehicles thatare not only FATCA-compliant, but also taxefficient.

So before you make any decision on yourfinancial future, use our step-by-step guidebelow to brief yourself on current key financialpoints. We’ve also put forward somerecommendations on a potential course ofaction so that your wealth aspirations andambitions can remain both FATCA-compliantand on course for you and your family’sfuture.

Tax efficiencyThe US is virtually unique in requiring all UScitizens wherever they are in the world toreport their income to the IRS at an individuallevel. And with top rates of income tax upfrom 35% in 2012 to 39.6% in 2013, dittocapital gains tax and the tax on ordinary

dividends also now 39.6% (up from 15% in2012), the challenge, particularly for highnet worth US expats, is to achieve a taxadvantage on savings that is otherwisesubject to the above rates, while at the sametime remaining FATCA-compliant. While it ispossible for US taxpayers to obtain incomeand capital gains tax deferral using traditionalqualified variable annuity contracts, the costsof these contracts can be quite significant. We are currently working with regulatedtrust and employee benefits experts to offera tax efficient savings vehicle subject to USand Maltese double tax treaty requirements,which means income and gains within theplan are not subject to US Federal taxes.What’s more, as a qualifying plan for US taxpurposes, members can claim relief onrealised income and gains generated withinthe plan saving between 20% - 39.6%.

KEEP CALM AND PLAN!

Action Points:

Explore double tax agreementsto increase tax efficiency aswell as wrapping upinvestments in compliantstructures.

Ensure any realised incomeand gains are subject to taxrelief.

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Long termsavingsoptions

Such a strategy introducesdiversity into a savings plan andreduces risk.

However, for US expats the need to complywith IRS tax reporting as well as theintroduction of FATCA means the underlyingplan structure is an additional consideration.For long term savings or retirement planscheck on any restrictions on withdrawals interms of age and percentage of the plan’svalue you are able to take out. Our ownresearch at GWM has resulted in an IRS-compliant plan that allows members towithdraw their savings in the form of retirementbenefits from age 50. Withdrawals can betaken as an initial lump sum of up to 30% ofthe total value of the plan or as part of ongoingprogrammed withdrawals. This approach notonly provides gross roll up to defer US tax onrealised income and gains on investments,

but an absolute saving canbe achievedthrough

payinguntaxed income

and gains in theform of a lumpsum and/or

programmedwithdrawals, which will not

be subject to either USFederal taxes or Maltesewithholding taxes.

Building up a substantial savingspot is a key priority and best

achieved by employing anapproach that provides accessto a wide range of investment

opportunities.

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RetirementPlanningThere is still a level of uncertainty on howFATCA could impact certain company or statesponsored retirement funds of US employeesworking abroad. News reports pointing outrestrictions on underlying investments mayresult in changes to member plans in orderto comply. It is important not to panic, stoppension payments or change any investmentstrategy without fully reviewing the implications.At present we would recommendsupplementing company schemes with

savings plans that are geared towards pensionplanning. By structuring plans as a ForeignGrantor Trust, the IRS accepts that the valueof the plan forms part of the member’s estatefor US Estate Tax on death. This means thereis no limit on the level of savings which canbe contributed to the plan as contributionsare not removed from the member’s US estate.While contributions made to such a Plan willnot receive US tax relief, they can be madein a wide variety of forms such as cash, existinginvestment portfolios, life assurance policiesor shares in mutual funds.

If you would like to make an appointment totalk about any of the above points or have aninformal chat about our financial planningservices for US expats, then please contactus on + 41 (0) 22 710 7876.

Action Points:

Ensure your savings plan has asmuch diversity as possible tocapture market gains, balancevolatility and reduce risk.

Verify that your savings vehiclecomplies with reportingobligations and does not penaliseyou for withdrawals orcompromise your tax position.

Check any savings plans are heldin politically stable jurisdictionson good terms with the US.

• Action Points:

In the light of FATCA, keep aneye on any potential changes tocompany or state sponsoredpension plans you contribute to.

Think about supplementingexisting retirement plans withvehicles that offer diversity andare more tax efficient.

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About Us

Guardian Wealth Management is one of the few wealthmanagement firms that are fully regulated and operating in a

range of jurisdictions including the UK, Qatar,Hong Kong, Belgium and Switzerland. We only work with a select

group of regulated partners who are experts in their field.

For more information seewww.guardianwealthmanagement.com

The information contained within this document is correct as of September 2013. This

information does not constitute advice and is provided for guidance only. It is strongly

recommended that you seek professional advice when considering the suitability of any long

term investments. Copying and/or distribution of the above information/designs without the

prior consent of Guardian Wealth Management UK Limited is strictly prohibited.