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Florida | MWC Group

US Connected Persons

What does it mean to be a US connected Person and how does one identify if they meet the criteria? The first port of call would be to identify what constitutes an US Citizen/Connected Person?

A US Citizen is:

  • A person who was born in the U.S.

  • A person born outside of the U.S. with one U.S. citizen parent, the passport of your birth may be irrelevant in this case

U.S. connected persons are:

  • Green Card Holders

  • Visa holders living in the U.S.

  • Persons ordinarily tax resident in the U.S.

Thus, if you meet any one of the above criteria, this will mean that you are a U.S. citizen or connected person.

One important takeaway from it all, if you are an American or a U.S. connected person you will be obligated to report your taxes to the IRS, irrespective of your current place of residence. Upon any significant taxable event in your life would result in the IRS knocking on your door irrespective of your residency. Failures to report your U.S. taxes result in significant fines/penalties.

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) was introduced by the U.S. Department of Treasury and the U.S. Internal Revenue Service (IRS) in order to combat tax evasion and encourage stricter tax compliance by U.S. persons engaged in offshore financial activity. FATCA requires all U.S. persons, living in the U.S. or abroad, to pay tax on assets exceeding $50,000 in value. U.S. taxpayers must report on their foreign financial assets through Form 8938, Statement of Specified Foreign Financial Assets. Failure to comply with FATCA is costly and will have a significant effect and may take the form of:

  • 30% penalty on withholdable payments

  • Up to $50,000 for failure to file Form 8938

  • 40% penalty on understatements of tax attributable to non-disclosed assets


Who is subject to FATCA?

The FATCA legislation affects clients treated as a ‘U.S. person’ for tax purposes, which is a very broad segment, referring to more than just U.S. citizens, including, but not limited to:

  • Any person residing in the U.S.

  • Green card holders

  • S. residents for tax purposes

  • Individuals who spend a significant portion of the year in the U.S.

  • S. citizens residing in a foreign country

Any American living in Europe is subject to FATCA, but there are also other instances of individuals who are exposed to the U.S. tax system in some way or another and will have to comply with U.S. tax laws. Such instances include, obtaining some form of education in the U.S., individuals having U.S. parents or family among others.

Why should you consider using a European based Financial Adviser?

  • S. advisers in most cases cannot provide regulated advice in your home country

  • The ability to access mutual funds in the U.S. while overseas

  • Advice can encompass and compare European based products such as pensions

  • S. banks are closing brokerage houses to U.S. citizens based in Europe

  • Understanding and comparing the tax implications of investing in both Europe and the U.S.

In addition to this, U.S. advisers do not typically possess the expertise and knowledge to be able to guide you through financial planning within Europe, especially when considering that opportunities for Americans based in Europe tend to be limited and include complex investment structures. Through our joint venture partnership with an SEC regulated firm, our financial advisers with ‘Series 65’ qualifications are able to function as an investment adviser representative in the U.S., for U.S. individuals both in and outside the U.S.

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