We’re now more than ten years into the introduction and roll out of FATCA legislation in New Zealand, however the process still catches many people off guard.
To elaborate, I am referring here to the Foreign Account Tax and Compliance Act, abbreviated to FATCA.
FATCA was signed into law in New Zealand in 2014, and started to be put into practice in 2015. But, given the size of the task at hand, many of us are only now beginning to see the impact it has had in New Zealand and around the world.
But anyway, lets get to the point at hand, and discuss why an NZ bank would be asking for a customer’s social security number.
This usually begins on a letter or a form with the question “Are you a tax resident of any other country than New Zealand?” or “Are you a tax resident of the USA?”.
We’ll delve in below.
What is FATCA legislation?
FATCA is part of a series of laws put into place around the world at the request of the United States, and is designed to ensure that foreign banks are reporting the accounts of US citizens to the United States.
This means that most banks worldwide were required to identify their US citizen clients, and then report annually, details on the accounts held by US citizens to Dept of. Treasury. In New Zealand, this process occurs in collaboration with IRD.
My bank is asking me if I am a tax resident of the USA, what do I do?
If you are a citizen of the USA, a green card holder (in most situations), or otherwise believe you could be US tax resident, then you should tick Yes to this question.
Some individuals who spend a significant amount of time in the US, could be treated as US tax resident under the substantial presence test. US tax advice may be necessary here to confirm.
If you're unsure about the meaning of the term "tax resident", you can learn more about this here.
It is important to answer this question accurately, as this is a legal document which can have implications for an incorrect submission.
Why is my bank asking for my social security number?
The bank is asking for your social security number to ensure that they are in compliance with the FATCA legislation in New Zealand.
This usually occurs when opening a new account with any financial institution, or if any transaction in your account gives the bank reason to believe you may be a US person.
What is a TIN?
A TIN stands for Taxpayer Identification Number, this is your social security number or ITIN number. In the case of an entity such as a company or trust, this is your US EIN number if you have one.
What is a Foreign TIN?
In the case of New Zealand, a foreign TIN is your IRD number.
I live in New Zealand, does this mean I am resident here and not the USA?
Tax residency and physical residency are essentially two separate concepts. Generally speaking, US citizens and green card holders are treated as tax residents of the USA in addition to the country where they reside.
I am a US citizen but I don’t have a social security number. What do I do?
Most banks will usually (within reason) provide you an extended period of time to obtain an SSN and to respond to their form.
It is wise to obtain US tax advice at the same time or even before the process to obtain an SSN, as your next steps may involve US tax return filing.
I haven’t been filing US tax returns, will giving the bank my SSN mean I need to begin filing?
If you are a US tax resident, then there is a strong chance you already needed to be filing US tax returns annually.
Providing your SSN to the bank doesn’t necessarily change this, but it might mean there is more urgency on beginning the process.
This is a prime situation to obtain specialist US tax advice.
What happens if I don’t give the bank my SSN?
The approach varies by NZ bank, but we have seen instances of accounts being frozen on a number of occasions. This can be prevented, but it is very important to communicate with your bank, most are reasonable and can be flexible in the time you need to respond to them on your tax residency.
Summary
Given that we are now beyond the ten year mark of FATCA in New Zealand, many of us will have seen the impact of this many years ago, however the process is still evolving and to many of us this is entirely new.
The information above is indeed only general information, and specialist US tax advice should be sought to ensure that issues are prevented before they occur.
If you’d like to discuss, reach out to us at info@usatax.nz – 09-242-3445