SHANGHAI: The USA has now launched the Foreign Account Tax Compliance Act, a law intended to prevent tax avoidance by Americans living overseas.
However, it was not until a few days before the implementation of this law on 1st July 2014 that the USA reached an agreement in Shanghai.
This will ensure that those residing in China are party to the ruling, which now has agreements in effect in over 80 jurisdictions across the globe.
FATCA requires foreign financial institutions such as banks and investment funds to inform the US government if any of their American clients have accounts that hold in excess of $50,000.
If any institutions choose not to comply with the legislation, they will face a taxation on any US-based investment income to the tune of 30%. In many cases this will result in complete exclusion form American markets.
FATCA was introduced as an idea in 2010, following the discovery of several wealthy US citizens evading US tax via secret Swiss bank accounts.
The legislation is extremely paperwork-heavy, and affects all Americans living abroad, regardless of wealth category.
If you are a US expatriate living in China, you must disclose all your accounts to the IRS on an annual basis. If you previously have not disclosed any accounts which you hold that may be of interest back in the States, it is advisable that you seek the advice of a financial advisor or accountant, as the scope is there for extremely large fines and penalties.
Popularity Increasing
China has historically been extremely restrictive in its visa regulations, usually only granting short-term stints with a specified employer. However in recent months many long-term green card applications have been accepted, as the Chinese government wakes up to the financial benefits of having a strong and skilled expatriate workforce.
As a country and economy still very much in the development stage, now is seen as a good time to look at China as an exciting working destination. Despite the Chinese green card being perhaps the hardest to get in the world, some 800,000 expatriates live and work in China – mainly based in Shanghai and Beijing – and the rate of green cards accepted looks set to exceed 100,000 for 2014.
