Fighting FATCA

Welcome to Sovereign Confidential Weekly, where I paraphrase and reply to your questions.

In reading the chapter on Uruguay in Where to Stash Your Cash (Legally), I got the impression that Uruguay does not comply with U.S. FATCA laws. Is this true? Can an American living in the States open an account with a Uruguayan bank, transfer U.S. dollars to and from that account and a U.S. bank, and not have to report this to the IRS? Or at least correct me as to what I need to do to properly set up a Uruguayan bank account. I went to the Banco Itaú’s website and it seems pretty straightforward.

There is a lot of confusion about this — not just in relation to Uruguay — because of the different ways the IRS interacts with foreign governments.

  • The U.S. has “tax treaties” with some countries, which formally give U.S. taxpayers credit for taxes paid to foreign governments to prevent double taxation. Uruguay and the U.S. don’t have a tax treaty, but Uruguay does give Americans credit for taxes paid to the U.S., so there is no double taxation.
  • Then there are “tax information exchange” agreements. These commit both governments to share taxpayer information with the other. The U.S. and Uruguay don’t have one of these, either.
  • Finally, there are intergovernmental agreements, or IGAs, that the U.S. and foreign governments have concluded under the Foreign Account Tax Compliance Act (FATCA). These compel foreign governments to provide U.S. taxpayer banking information to the IRS and vice versa. The U.S. and Uruguay don’t have one of these, either.

Essentially, the Uruguayan government has refused to change its laws on banking and personal privacy to accommodate the U.S. government. Nothing has changed in Uruguay’s legal system. Nevertheless, all of the Uruguayan banks that open accounts for U.S. taxpayers have registered with the IRS on their own and report under FATCA. They therefore require the U.S. person opening the account to sign a form that releases them to disclose information under FATCA provisions. There is no way to avoid this.

For more information on specific Uruguay banks, see http://non-fatca-banks.com/uy.html.

I’m seriously thinking of following your advice concerning Social Security checks deposited offshore and converted to another currency than dollars — but into what currency? I’m thinking the yuan or krone; care to share your preferences?

I know it sounds like a dodge, but I’m really not a currency specialist — my beat is asset protection. I would suggest exploring Jeff Opdyke’s writings to zero in on the best currency option for you. Nevertheless, I can offer you some principles. First, do you need to access your Social Security income for living expenses? If not, you can certainly direct your benefits to a foreign bank account in a jurisdiction that offers multiple currency accounts, where they can be converted. Second, however, there aren’t many retail banks abroad that will open a small-value account for a U.S. taxpayer unless he or she has some connection to the country. That means either an investment such as real estate or a regular presence there, like a Panamanian pensionado visa or having a residence application pending. If that’s not on the cards, a better bet would be to transfer your SS benefits into a U.S.-based foreign currency product in a reliable institution like EverBank.

From your experience, what is the best country in which to buy real estate?

That’s like asking what flavor of ice cream you should eat! Seriously, it depends on your goals. Here are some of the questions you should ask yourself:

  • Do you want to live abroad on the property, invest in property or both — i.e., invest in a place now that you rent out, in order to live there yourself later?
  • How much do you have to spend?
  • What’s your time horizon?
  • Do you want to visit the property regularly?
  • If investing, are you looking primarily for income yield, asset appreciation or asset protection?
  • Do you prefer residential or farmland investment?

As you can see, there are a number of variables involved. Speaking for myself, I’m a huge fan of Uruguay, as you probably know. Whether it’s for personal use or investment, the country is far and away one of the best values in the world at the moment. But your mileage may vary!

Kind regards,

Ted Bauman
Editor, Sovereign Confidential

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