This week it was announced that Hong Kong has agreed to hand over financial details of Americans working in the city, to US tax authorities under Foreign Account Tax Compliance Act, US can ask for data if certain conditions are met. The Financial Services and Treasury Bureau said the tax-information exchange agreement allowed the US to file a request to the Inland Revenue Department “under specified conditions”. The bureau said that provided the basis for a further agreement that would enable US tax authorities to seek information directly from local banks.
Hong Kong having signed a Tax-information Exchange Agreement (TIEA) with USA is a major benefit for American Expats that decide to use a 402(b), foreign pension plan because now these pensions will be tax-recognized under FATCA. Any bona-fide pension trustee will have obtained a FATCA ID code already, which streamlines the enrollment process and simplifies tax reporting.
[box type=”note”]FATCA is an enforcement regulation and has nothing to do with any new tax[/box]
The key point for U.S. Expats, is that with the new Hong Kong TIEA, pension plans in that jurisdiction are now exempt from FATCA. A regulated asset protection structure (RAPS) under the guidelines of a 402b provides the Anti-money Laundering (AML) disclosure for each individual enrolled in the pension plan. Therefore the foreign financial institution where that pension plan member applies for an account, via the trustee of the pension plan, is not required to submit another AML disclosure.
Those banks and financial institution which previously would not accept USA persons, due to the liability of the AML disclosure under the FATCA rules, will now accept USA persons because they have no need to know if the trustee is opening an account for a USA person or another nationality. No foreign financial institution wants a USA person.
For law abiding, legitimate U.S. Expats, FATCA is a non-issue
The RAPS pension trustee is exempt – meaning he does the AML/disclosure and reports that to the Hong Kong government. The 402b foreign pension plan is a huge advantage for U.S. Expats because no offshore trust, IBC, LLC, or any other offshore asset protection structure is exempt from FATCA. Bottom-line is that the Regulated Asset Protection Structure (RAPS) is the perfect strategy for a U.S. Expats to obtain an offshore financial account because direct access to an offshore investment account, bank or brokerage account is not possible via those other structures.
Your desire as an Expat, to put funds away for your retirement, is a perfect fit for one of nine different types of RAPS investment account structures: The Hong Kong pension law is flexible enough to meet each of the USA IRC 409A requirements. The plan can be established for one individual, or can be established for a large number of individuals. It an also be established for an independent contractor, including directors. Contact us for more information.
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