Moneywise uses hypothetical composite cases to protect reader identities and to illustrate the experiences, confusion, and financial impediments to the ordinary lives of Bermuda residents with global financial connections.

Another reader question.

“This whole business with all the new compliance requirements from our local Bermuda banks has left me frustrated and confused. Here is my background and situation. I am a Bermudian by birth and have resided in Bermuda all of my life — just an ordinary guy.

• I have never lived in the US.

• I have never worked in the US.

• I do not meet the US resident alien classification since I have never applied for or held a US green card, nor overstayed in the US, taking only brief vacations over the years, and I certainly, never met the US substantial presence test that defines a US tax resident, that is staying more than 182 days in a year.

• I do not have a US passport, have never had a US passport, nor do any of my close relatives, nor have I ever been a naturalised US citizen. Neither of my parents or other relatives ever been US citizens.

• I have never held US citizenship, then renounced it under the US expatriation regulations.

• Finally, since I never was employed in the US, I have never applied for, was never eligible for, US Social security benefits and never had a United States Social Security number.

• I am considered a foreign national, or in US Internal Revenue terms, a foreign person (a non-resident alien).

About 18 months ago, I bought a small condominium property in the US that is currently rented. A US CPA was consulted during the process to provide advice and be sure that I was complying with all US tax filing and reporting at the time, and going forward.

The property sale was quick, of course, aren’t they always? But the process of obtaining an Individual Taxpayer Identification Number (for a foreign person) was tedious. It finally came through so that I could provide substantiation (US tax Form W-8BECI, certificate of foreign person’s claim that income is effectively connected with the conduct of a trade or business in the US, (1)) to the US property manager of my foreign status, in order for them to withhold US taxes from the condo rental income.

I have accounts at a local Bermuda bank. My bank relationship manager has informed me that because I pay US taxes, in their classification of US indicia, I am considered a US person for their compliance reporting purposes and that I have to fill out, sign and certify that I am a US citizen or other US person for tax purposes on US tax Form W-9 (request for taxpayer identification number and certification) and because I have a US Social Security number. (2)

I have spent considerable amounts of time reviewing both of these forms finding them close to incomprehensible for a person who has never been exposed to a tax regime. Further, US Social Security numbers for US persons, and ITIN description for foreign persons consistently are used interchangeably, and one wonders whether local employees at local banks know the difference or whether they just follow managerial directions. I then consulted my US CPA who informed me that I am not in that category and cannot certify (under penalties of perjury) to such US persons category as I am a non-resident alien (foreign person) who holds US income-producing real estate.

When I told my relationship manager that on the advice of my US CPA tax practitioner that I cannot sign the Form W-9 for US persons, she stated, in no uncertain terms, that non-compliance would necessitate the bank closing my accounts. No one seems to realise that by my merely filling out the completely wrong US IRS tax form, that I may be subject to all sorts of additional inquiries from US Internal Revenue Service on the basis of my being represented as a US person.

I’m a foreign person who has complied with all due diligence in tax filing and reporting requirements for both countries, and this is what happens?

What am I going to do?”

***

Dear readers: welcome to the world of global tax compliance where automatic sharing of financial information between countries is now the new, new thing — United States, Fatca; United Kingdom Fatca (Gatca) and OECD Common Reporting Standards for automatic exchange of information.

Background for cross-border tax compliance: the United States-Bermuda Model 2 Intergovernmental Agreement enforcement regarding Fatca (the Foreign Account Tax Compliance Act) was enacted in December 2013, and the subsequent similar UK-Bermuda Fatca IGA Model 2 agreement followed.

Bermuda local financial institutions (referred to in US/UK terms as foreign financial institutions (FFIs) are almost three-and-a-half years into this mandated, costly exercise in reviewing and identifying all of their account holders in reporting and tax compliance processes to meet these global standards. (3,4)

If this information is not exciting enough, the Bermuda Government has also entered into another agreement. The OECD Standard for Automatic Exchange of Financial Account Information (commonly known as the Common Reporting Standard or CRS) is a global information exchange regime developed to facilitate and standardise the automatic exchange of information (AEOI) on residents’ assets and income between participating jurisdictions on an annual basis.

Bermuda, along with more than 90 other countries, has signed or committed to sign a Multilateral Competent Authority Agreement providing the legal basis through which countries can agree to the CRS with the first exchanges of information between competent authorities of participating jurisdictions expected by September 30, 2017. (5)

Get used to it.

So if you think the situation is limited to just US connections, think again. Global tax compliance is the order of the day across this possible 90-country spectrum.

So, what can be done about the confusion with our reader’s compliance forms?

Next: we discuss the US reporting dilemma and why asserting to, signing and filing the correct forms are incredibly important. Here are two reasons:

• A US social security number is assigned for life.

• A US ITIN number for a foreign person has to be renewed every five years, or the number is lost. Imagine trying to back track IRS forms with no valid ITIN number?

No wonder everyone hates paperwork. There is never an end.

Sources:

1 — www.irs.gov/pub/irs-pdf/fw8eci.pdf

2 — www.irs.gov/pub/irs-pdf/fw9.pdf

3 — US-Bermuda Intergovernmental Agreement (IGA) Model 2, Dec 19, 2013 www.conyersdill.com/publication-files/2014_12_Article_Impact_of_FATCA_on_Bermuda_Entities.pdf

4 — Ministry of Finance FAQ on Bermuda /US/UK IGA2: http://bda.bm/wp-content/uploads/2015/04/Bermuda-IGA2-FAQ-Mar-2015.pdf

5 — Conyers Dill And Pearman: Bermuda and the Common Reporting Standard Issued by the Organisation for Economic Cooperation and Development (OECD CRS)

https://www.conyersdill.com/publication-files/2016_04_Common_Reporting_Standard_Bermuda.pdf

Martha Harris Myron CPA PFS JSM: Masters of Law — International Tax and Financial Services; Pondstraddler Life™ Financial Perspectives for Bermuda islanders with multinational families and international connections on the Great Atlantic Pond. Contact: martha@pondstraddler.com