Comment by FooBarWidget
2 years ago
One thing to note if, as a Dutch person (and possibly even if you're another European), you incorporate in the US:
Many Dutch financial institutions hate people who have the "US person" status. If you own a US-incorporated company then I believe you will gain that status. Banks, lenders, stock brokers, etc will either refuse to do business with you, or will give you a lot of paperwork headache and/or charge you more tax. I think this has to do with the fact that US persons have to comply with FACTA.
For example I have 3 stock brokerage accounts (1 for personal, 1 for pension, 1 for business). They all ask me whether I have the US person status, and 2 of them just flat out tell me that they won't do business with me if I answer yes.
Not sure whether financial institutions in other European companies also come with this caveat. But since it's related to FACTA, I believe they do.
I am indeed another European and I do know about the issues with being a "US person". Many banks and brokers will simply immediately close your existing account or not allow you to open one.
However, are you sure that simply by owning a US company you become a US person? Because according to my understanding if you don't live in the US (and don't spend more than 4 months / year there) you wouldn't actually be tax resident in the US and therefore also not be a "US person".
Wow you’re getting some bad takes here. Having a phone number does not make you a US Person. Having a bank account there does not make you a US Person. I can only assume people are confusing this with the domiciled test that can exist in other tax jurisdictions. It’s mostly the same criteria as the usual tax resident status (so all citizens + those with work visas + if you’re in the country for 183 days).
HSBC had the most succinct summary I’ve seen: https://www.fatca.hsbc.com/-/media/fatca/pdfs/global---commo...
The Australian Tax Office has a reasonable guide on the overall scheme and how it applies: https://www.ato.gov.au/General/International-tax-agreements/...
Having a US phone number, bank account, company and a house does not make you a "US-Person". So why the banks ask you these questions?
The banks deal with FATCA with checkboxes. If you cross one incorrectly, I can imagine they need documentation for that. And no bank wants that.
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Well the question is - will owning a share in a US entity make you a “US Person”?
My initial assumption that seems to be confirmed by HSBC and the ATO is “no”.
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The issue isn't just whether you actually are a US Person; it's whether banks, etc., believe that you're not. Risk-averse institutions may just avoid doing business with anyone who seems like they might be, and can use whatever proxies they like to decide who they don't want to transact with.
The US doesn’t care if you live there or not (unlike every other country except China); you still have reporting requirements and technically have to file returns saying you don’t owe taxes.
https://travel.gc.ca/travelling/living-abroad/taxation
My banks had me sign that my income is not from US. So owning a company in the US that I invoice or that pays dividends or something would not land well.
I recall that some of the questions mention that having US income is problematic, and that even having a US phone number is problematic.
But I'm not 100% sure.
Having certain ties to the US (such as a US phone number or regular transfers to or from a US account) are considered "US indicia". Having them triggers a requirement (thanks to FATCA) for the bank to verify your status as a non-US person. Usually this means furnishing a W-8BEN to the bank. This applies even if you're not a US citizen and never set foot in the US.
Even having a US phone number can signal that you are a potential "US person".
On top of that, even after you lose your "US person" status, some financial institutions may just claim that "you have been found in a US registry" without any specification which registry, and now either you prove that you are no longer in the unspecified US registry, or they just deny business with you. Not fun, and a fight that you cannot win.
Why are "US person" hated?
Probably because FACTA compliance is a huge pain.