In terms of the language, English and French are the two official languages. English is widely spoken throughout the country. Majority of the French speakers are located in the Quebec region of Canada. In terms of economic freedom, Canada ranks higher than the US and within the top 10 globally.

Individual tax rates in Canada are high, with the top bracket coming in at 33%. However, its corporate tax rate is just 15%. Doing business Canada is quite attractive for businessmen and entrepreneurs around the world.

Canada’s passport happens to be the fifth strongest in the world. Canadian passport holders can travel visa-free to about 185 countries around the world. That is a very handy benefit for a global businessman, who has interests in multiple countries.

Canada allows dual citizenship. So, you can hold on to the passport of your home country and freely travel, live, and work in Canada at the same time. The only significant rider for dual citizenship is that you lose the right to vote in federal elections if you live outside Canada for over five years.

So, after learning about all these benefits, you might be thinking about becoming a Canadian citizen. However, Canada’s immigration system is a lot stricter than even America’s. It heavily favors entrepreneurs, venture capitalists, and high-skilled workers. Becoming a citizen is not very straightforward. Let us look at the process of attaining Canadian citizenship.

Steps to become a Canadian citizen

There are 5 main steps involved in becoming a Canadian citizen:

Step 1 – Permanent Residency

First, you have to become a permanent resident. There are many ways in which you can become a permanent resident. You could be running a business, get married to a Canadian citizen, have Canadian descent in your nuclear family, or be a high-skilled worker. Getting permanent residency is perhaps the toughest part of the entire process of becoming a Canadian citizen.

Step 2 – Naturalization

Naturalization means being present in Canada for 1095 days within a five year period. The presence does not have to be continuous and there are no minimum days to fulfill in one calendar year either.

Your stay in Canada on a temporary basis also counts towards this requirement of 1095 days of stay within Canada. Temporary status includes staying in Canada as a refugee, visitor, or student. However, there is one rider. Every day spent on temporary status counts as half-a-day. Additionally, the number of days that can be counted towards naturalization while on temporary status is capped at 365 days.

You will also have to demonstrate that you have filed your income tax returns throughout your stay in Canada. Only after you fulfill this requirement will you be able to take the citizenship test. The citizenship test is a prerequisite (in almost all cases) to getting a citizenship certificate.

Step 3 – Apply for citizenship

Now that you have attained permanent resident status and are naturalized resident as well, the next step is to apply for Canadian citizenship. In order to initiate the process, you need to fill out the application form on a computer and print it out. Then you have to submit your application along with all supporting documents.

An application fee of CAD $630 is payable as well when submitting the documents. The application is then assessed and it can take up to 12 months before you find out about your eligibility. If you are deemed to be eligible for citizenship, then you will be invited to have an interview with an immigration officer. The interview is meant to assess your language proficiency and other criteria for becoming a Canadian citizen.

Step 4 – Take a citizenship test

The final step, if you are successful in your citizenship application, is to take a citizenship test. This test is a written examination in which your knowledge of Canadian history, geography, culture, and government is assessed.

A time and date are assigned to you in advance for taking the citizenship test. If you fail the test once, you can re-take it again. However, if you fail for a second time, then you will have to go through a citizenship interview.

Step 5 – Citizenship Ceremony

You have passed the eligibility phase and the citizenship test. You are now ready to become a Canadian citizen. A citizenship ceremony will be scheduled and you will be assigned a date for attending that ceremony.

That is the day when you officially become a Canadian citizen. You will receive your citizenship certificate at the ceremony. You have to take the Oath of Citizenship and sing the Canadian national anthem at this ceremony.

Citizenship by Descent

If either of your parents is a naturalized citizen of Canada or if he/she was born in Canada, then you are eligible to get Canadian citizenship by descent. You are eligible even if you have lived outside Canada all your life or if your Canadian parent also lives outside Canada.

For people who were born before 2009, they are eligible for citizenship by descent even if one of their grandparents is a Canadian citizen. The year 2009 is emphasized because that is when the law changed. The change in law, however, was not applied with retrospective effect and that is why those born before 2009 can still be eligible for citizenship by descent.

In certain specific cases, a person who can prove to have ancestors (going back a few generations) who were Canadian citizens can also apply for citizenship by descent.

The application process for acquiring citizenship by descent begins with an application for getting a citizenship certificate. This application form is filled on the computer and then printed out. All supporting documents along with the application form are submitted. All copies of documents that are part of the application need to be certified by a public notary.

An application fee of CAD $75 is also to be paid when submitting the documents. There is no citizenship test if you are applying for citizenship by descent. The reason is that you are trying to prove that you are already a Canadian citizen. The process for the citizenship certificate to be issued takes about 5 months after all the documents have been submitted.

Citizenship by Marriage

Citizenship by Marriage in Canada is quite complicated. If you marry a Canadian citizen, then you do not automatically get citizenship as is the case with a few other countries. In Canada, you have to follow the same procedure for citizenship as any other applicant.

One benefit of marrying a Canadian citizen is that the Canadian spouse can sponsor you for a permanent residency. However, this benefit also comes with conditions. The spouse has to become a sponsor not just in terms of the permanent residency process, but also in terms of financial obligation. Essentially, the spouse has to commit that he/she can financially support and cover your basic needs.

Not only that, if the relationship between you and your Canadian spouse ends for some reason, then the spouse is still liable to provide financial support. If you cannot support yourself financially, then the government will claim support money that they spend on you from your Canadian ex-spouse.

If your spouse is willing to sponsor you after knowing about these obligations, then a Sponsor application has to be submitted by the spouse. You also need to submit a general application. Then, you and your close family members have to undergo medical examinations. Even if your family members do not intend to live in Canada or emigrate, they still have to take the medical examinations.

Getting permanent residency via the marriage route can take some time. Hence, if you intend to work in Canada for that waiting period, then you also need to apply for an open work permit under the category of “Spouse or Common Law Partner in Canada”. You can make this work permit application along with your permanent residency application or after submitting the residency documents.

The open permit normally takes four months to get approved. An application fee of CAD $1040 is payable for sponsoring a spouse for a permanent residency.

Other burdensome requirements

Getting a passport after becoming a citizen is straightforward. You have to wait for two business days after you become a citizen. Then, you need to fill out a passport application form on your computer and then print it.

Next, you need to find a guarantor who has known you for more than two years and who holds a Canadian passport. The guarantor has to sign your passport application form and supporting documents. You also need to provide names of two references in your application. These references cannot be family members.

Next, you need to gather supporting documents, your citizenship certificate, and passport photographs and take it to the passport office. You can also mail your documents to the office. You also need to pay a CAD $160 fee before you apply for your passport.

Becoming a permanent resident

As pointed out above, getting a permanent residency is the most difficult part in the path to becoming a Canadian citizen. The task is further complicated by the fact that the number of permanent residencies handed out each year is capped at 300,000.

There are three main channels that make immigration to Canada possible. The first is humanitarian factors, the second is reunification with family, and the third is economic programs. The most common channel for immigrants becoming permanent residents is the third one, economic programs.

Canada has plenty of economic immigration programs. People with substantial money in the bank, people with business experience, and high-skilled workers have all been beneficiaries of Canada’s permanent residency.

Express Entry Program for skilled workers

Express Entry program is designed for high-skilled workers who wish to become permanent residents and eventually citizens of Canada. This program is not open to investors or entrepreneurs. It also does not apply to anyone wanting to immigrate to Quebec. Quebec has its own immigration program and Express Entry requirements do not apply to that program.

The application for Express Entry is free. Once you apply, the immigration authorities will assign you points for various skills and attributes that you possess. A skilled worker needs to achieve 67 points out of a maximum of 100 points in order to be eligible for permanent residency under the Express Entry Program.

An applicant receives 24 points for language proficiency in one language and 28 if proficiency in both English and French can be demonstrated. Your education will also give you points. The minimum is 5 points for a high school certificate and the maximum for a Ph.D. is 25 points.

Prior work experience also results in additional points. Applicants with 6 or more years of work experience can score 15 points, those with four to five years can score 13 points, and every year lesser than four years results in a deduction of 2 points from the 13 point mark.

If the Canadian government deems that certain industries have excess labor supply, then such industries can be restricted from the points system from time to time. A permanent job offer in Canada can result in an additional 10 points.

Age is also a factor. Those between the ages of 18 and 35 get 12 points. Every year over 35 results in the loss of 1 point. People over the age of 47 receive no points. Additional points can be obtained if you have a relative living in Canada or if your spouse also has a strong educational background, language proficiency, or work experience.

Once you apply for the Express Entry program and are found to be eligible, you have to demonstrate language proficiency in either English or French.

Your Express Entry application may not be successful if you have a criminal history, serious health issues, any past record of organized crime, or any record of human rights violations. Even if any of your family members have been barred from entering Canada, then it will also bar you from immigrating to Canada. The immigration system in Canada is pretty strict.

One can also become eligible for the Express Entry program if a particular Canadian province nominates a skilled worker for permanent residency under the Provincial Nomination Program (PNP program). Most provinces throughout Canada have their own immigration programs. To find out more, you have to visit the website of each province.

Quebec Skilled Workers Program

Quebec has its own immigration program which is outside the ambit of the Express Entry program. This program is called the Quebec Skilled Workers Program. It is designed to attract skilled professionals and educated students to Montreal and other cities in Quebec.

QSWP also used a points system like the Express Entry system. The rating of points for various attributes is a bit different, but the principle is the same. It is based on factors like language proficiency, educational qualifications, family ties in Quebec, work experience, etc.

In order to apply, you have to fill out an online application and then allow some time for the immigration officials to determine your eligibility. If you are deemed eligible, then a CSQ will be granted which can then be used to apply for a permanent residency.

Programs for investors

Investors who are willing to invest a minimum of CAD $2million in a government-controlled venture capital fund can apply for permanent residency. There are two main programs geared towards investors:

Immigrant Investor Venture Capital (IIVC)

This program is for those investors who want to move to a province of Canada other than Quebec. A personal net worth of CAD $10 million is the minimum requirement for eligibility. Inheritance money cannot count towards the 10 million minimum. It has to be sourced through business or investments.

Once you send in an application, the source of your wealth will be analyzed. Besides wealth, your educational qualification also needs to be higher than a post-secondary degree. The higher your educational qualification, the better it will be from the IIVC’s application point-of-view.

At the final stage of the application process, you will be required to make the CAD $2 million investment. This capital is subject to the same risks that any VC investment would be. You may expect to get your investment (hopefully with some returns) back over time or when the duration of the fund ends.

It is entirely possible that you may not get your investment back if things do not work out with the investee company. So, making an investment via IIVC is very similar to make a regular VC investment. The risk factor is high.

The Business Development Bank of Canada assigns fund managers for the IIVC fund. Investments are made in promising Canadian start-up businesses located outside Quebec.

The application process for IIVC is quite simple. You fill out a form, print it, and send it in along with other documents. Your profile, skills, and background are then assessed. If you meet all the requirements, then the immigration office will get in touch with you. You will then have to submit your passport and the evaluation will continue before a visa is pasted in your passport.

Quebec Immigrant Investor Program (QIIP)

Quebec has its own investor immigrant program which is similar to IIVC. However, it is a lot more competitive because there are only about 1900 admits each year. The minimum net worth of $2 million is substantially less than the requirement of $10 million in the IIVC program. The minimum investment needed is only $1.2 million (interest-free), which is also much lesser than the $2 million mandated by IIVC. What’s more, the payback (the principal as interest is 0%) is guaranteed in 5.5 years post the initial investment.

Interest is zero because the money you invest is lent to businesses or it is used to finance refugee programs. The benefits of the QIIP program also come with some additional requirements. Firstly, in QIIP, you need to have strong management experience. You need to demonstrate that you have been a shareholder in a private company and have held a management role in that company for two of the past five years.

If you intend to participate in QIIP, then you also have to stay in Quebec. In the past, various immigration programs have led to foreign nationals purchasing property and pushing the price up without actually staying in those provinces. So, to prevent a real estate bubble, the requirement of staying in Quebec was brought in.

If you have family outside Quebec, own property outside the province, or have children attending schools in provinces outside of Quebec, then you will probably be rejected. The immigration officials will analyze the likelihood of you not staying in Quebec and every detail will be closely analyzed.

While educational qualifications and language proficiency are not explicitly highlighted as a criterion for success in the QIIP application, they do count because QIIP is a lot more competitive than other federal investor-related immigration programs.

The application process for QIIP is similar to IIVC. You print out your form, send in all the supporting documents, and write a narrative document about how you accumulated your wealth. If you are successful, you will be asked to come in for an interview. Successful candidates will receive a CSQ certificate. The CSQ can then be used to make a permanent residency application.

Programs for Entrepreneurs

If investor immigration programs seem like an expensive and a time-consuming prospect, then some people might find the entrepreneur programs more useful. There is a federal program applicable to all Canadian provinces except Quebec and there is a Quebec-specific program.

Start-Up Visa Program

The Start-Up Visa Program is for those entrepreneurs who have the ability to bring innovation to Canada. They should have the capacity of hiring local Canadians in their start-ups. The applicant of this program should hold at least 10% voting share in the start-up.

A maximum of five people can apply as owners. They should be willing to relocate their start-up to a Canadian province (except Quebec). All applicants collectively should hold 50% voting rights in the start-up.

In terms of financial support for your start-up, you must demonstrate that you have funding support from a Canadian government designated VC fund, angel investors, or business incubators. You have to pitch your business to multiple such designated organizations. Interested funds may ask you to present your business in person. If they like your start-up, then they will give you a Letter of Support.

Angel investors need to make a minimum commitment of CAD $75,000 and VC funds need to be ready to invest a minimum of CAD $200,000 in your start-up.

You will also need to establish your language proficiency, financial self-sufficiency for your family, and any other requirements of the Start-Up Visa Program.

Once all your documentation is in place, you have to fill out a form, print it, and send it in along with supporting documents. Once your application is received, it will be evaluated. If you are successful, the program office will contact you. Ultimately, you will receive a permanent residency and a travel visa.

Quebec Entrepreneur Program

Quebec’s entrepreneur program is more geared towards businessmen rather than start-ups. The maximum quote in recent times has been around 50 a year. So, this program is extremely competitive. There is even a cap on submitting applications. Only about 5000 applicants are allowed to submit applications.

Requirements for the Quebec Entrepreneur Program include establishing a net worth of CAD $300,000 (between the entrepreneur and his/her spouse), business management experience, a minimum 25% equity in a profitable business (with 25% being valued at at least CAD $100,000), and substantial management responsibilities.

You basically need to demonstrate that you plan to be an active part of a profitable and sizeable business if you immigrate to Quebec. Other factors like age, education, language skills, etc. are also evaluated.

The application process is similar to other investor programs. You fill out and print the application form. You then submit it along with other supporting documents, pay an application fee, and wait for the Quebec Entrepreneur Program office to contact you.

You then go through an interview if you clear the first round. If you are successful in the second round, you receive your CSQ. The CSQ then allows you to apply for permanent residency.

The post How to Become a Canadian Citizen appeared first on Metro Treasury.

IRS Form 5472 is known as Information Return of a 25% Foreign Owned US Corporation or a Foreign Corporation Engaged in a US Trade or Business. As the name of the form suggests, it is for US businesses which have at least 25% of foreign ownership and are involved in a US business or trade.

Form 5472 gives these businesses a way to disclose all “reportable transactions” to the IRS. Around the end of 2016, the IRS came up with some crucial changes in Form 5472. It included foreign owned US disregarded entities under its purview as well. It effectively meant that US disregarded entities would be considered as domestic US corporations.

So, to make it clear, Form 5472 demands information from not only US corporations about foreign involvement in its business, but also foreign persons who have substantial interests in US businesses. The widened scope of Form 5472 has made even non-US persons file IRS forms which are normally meant for US persons. Foreign or domestic, interest in US business is to be disclosed via Form 5472.

The motivation behind the changes to Form 5472

There were plenty of reasons why foreign nationals owned a US LLC. For some, it was a part of their tax planning, while for some others, it was a way to collect US dollars from American customers of their businesses.

The interesting thing with US LLCs is that certain states allow US and non-US persons to own and operate an LLC completely anonymously. States like Delaware, New Mexico, and Wyoming offer great privacy to owners of LLCs.

This anonymity led to certain foreign nationals stretching the laws for activities that the IRS and the US government considered questionable. For example, foreign LLC owners started purchasing property in places like New York City. The properties got registered under the LLCs name and no one would know who owned these properties.

The US government wanted to put an end to this trend and wanted to know exactly how money was coming into the country. There were fears of large scale income tax evasion being carried out via the LLC route. Hence, the changes in the scope of Form 5472 became a reality.

The extensive requirements of Form 5472

Form 5472 now asks foreign filers who own a US disregarded entity to provide a foreign taxpayer identification number (FTIN). Obtaining this taxpayer number is not a simple process. It can take months and involves a lot of time-consuming paperwork. Most importantly, this number has to be in place before the foreign national can file his/her returns.

The list of qualifying transactions that need to be reported on Form 5472 is two pages long. It includes rent payments, sales proceeds, royalties, interest income, commissions, insurance premiums, loans between the LLC/corporation and foreign shareholders, equity related payments from the formation, dissolution, acquisition, or disposition of an entity, and much more. Basically, any cash that is either coming into the corporation or going out of it are covered under Form 5472’s requirements.

What exactly is considered a disregarded entity?

A disregarded entity is one that the IRS disregards an en entity that is separate from its owner for tax purposes. This definition generally applies to US LLCs. US LLCs are tax transparent and all its profits flow straight to the shareholders. A US person owning a disregarded entity does not have to file Form 5472. However, if the entity is 25% or more foreign owned then both the US and foreign owners of that entity have to file Form 5472.

An informational return

It is important to note that Form 5472 is not a tax return. It is simply a way for filers to disclose to the IRS the various types of transactions that their corporations have made throughout the year. These transactions also include transactions made with foreign parties.

For foreign individuals who own a substantial part of an LLC or have an LLC of their own, the Form 5472 is a way for them to disclose their business interest in the US. The IRS wants to know who is doing business in the US and Form 5472 allows it to identify those entities that are trading or doing business in the country. Foreign nationals do not have to file Form 5472 because it will make them pay their taxes. Rather, it is an informational return which will disclose certain details to the IRS.

Who files Form 5472?

Any foreign individual who directly or indirectly owns 25% or more in a US company has to file Form 5472. If multiple foreign nationals hold 25% each, then each of those individuals has to file a separate Form 5472. If multiple foreign nationals hold an aggregate of 25% or more in a US company but individually own less than 25%, then those individuals do not need to file Form 5472.

If you are a foreign individual who has set up a US LLC through services like Stripe Atlas, then you need to file Form 5472. Foreign individuals have to disclose their name, address, country of citizenship, organization information, and all qualifying transactions made by the individual.

Any foreign company that does business in the US and derives income from any economic activity in the US also needs to file Form 5472. If a US citizen operates a foreign company abroad, and if that company owns a US disregarded entity, then that US citizen also has to file Form 5472. Even non-US citizens who own a foreign company that, in turn, owns a US disregarded entity, then such non-US citizens also have to file Form 5472.

When should you file Form 5472?

Form 5472 is normally filed along with the US corporation’s annual tax return. Any extensions availed by the US corporation also apply to deadlines for Form 5472.

For a foreign national, the IRS considers the tax year as the calendar year. So, if the foreign national has no US tax return to file, then he/she will have to file Form 5472 in early January for the year gone by.

Are there penalties for not filing Form 5472?   

The standard penalty for not filing Form 5472 or filing an incomplete Form 5472 is $10,000 per year. Other collateral damage would be increased vigilance of the company by the IRS and multiple follow-ups and audits in subsequent years.

Even though Form 5472 states the penalty for non-compliance to be $10,000, the penalties can actually be a lot higher. Recent changes in the Tax Cuts and Jobs Act hiked the penalties required under Sections 6038a (d)(1) to $25,000.

These changes also extend to any reportable transactions occurring under Section 6038b. That section is the basis for all the filing requirements of Form 5472. It is always recommended that you file Form 5472 if you think you are required to.

Countries around the world are increasingly getting serious about tax returns and informational returns. Provisions like FATCA make it very difficult to hide any transaction or ownership of assets. It is a good idea to work with a tax professional and understand whether the Form 5472 requirements apply to you.

The US, with its network and reach, will find out one way or another, if there is any non-compliance. The penalties for non-compliance are quite steep as well.

The post Form 5472 appeared first on Metro Treasury.

The minimum percentage of stock ownership in a foreign company which qualifies a US person (green card holder or citizen) for mandatory filing of Form 5471 is 10%. So, for example, if you own a Panama corporation, a Hong Kong corporation, or have invested in stocks of a foreign company in which you hold more than 10% stake, then that holding or ownership has to be disclosed to the IRS through Form 5471.

It is important to note that Form 5471 is not a tax return. It is simply an informational return. Form 5471 does not carry any obligations with it as to make payments to the US government. The only monetary obligations associated with Form 5471 is any penalty that is payable in case of non-filing.

However, Form 5471 is used by the US government to track people who may be hiding assets in order to avoid paying taxes on those assets. There is no tax requirement associated with Form 5471. The IRS simply wants to have information about foreign assets of US persons.

Some people may have foreign assets for completely legitimate reasons like risk diversification, the ability to hold foreign currency, or genuine international business expansion. For some people, having foreign assets does offer some tax benefits. The United States has tax treaties with various countries and it is perfectly legal for businessmen to take advantage of these treaties and avail foreign tax credit.

Form 5471 simply allows the IRS to keep tabs on what US persons own abroad.

Who needs to file Form 5471?

Form 5471 is required by US citizens and green card holders who are officers, directors, or shareholders of a foreign corporation. A foreign corporation can be any legal entity which has been formed under the laws of a country outside the United States. The word corporation does not imply that only entities which are called “corporation” under foreign law will be treated as foreign corporations. The IRS will regard any non-US entity in which the owners have limited liability as a foreign corporation.

Even large companies like Apple and General Motors that have subsidiaries in foreign countries have to file Form 5471. So, regardless of whether you live in the US or not, if you own a foreign company, open your own business in a foreign country, or have a US company which has an interest in a foreign company, or if a company has a subsidiary in a foreign country, all of those instances mandate the filing of Form 5471.

Keep in mind that if you live outside the US for taking advantage of tax benefits, then filing Form 5471 will not take away those benefits. As long as you do everything legally, you can disclose your foreign asset ownership and still enjoy all the legal tax benefits that exist.

The only way you can exempt yourself from filing Form 5471 is to renounce your US citizenship or give up your green card, if you have one. Even changing the non-US entity from corporation to partnership will not resolve your issue because you would then have to file Form 8865 or 8858, both of which are equally burdensome.

Passing on ownership of the foreign business to a foreigner spouse or a friend will also not work. Neither will putting an island law firm’s name work as you would still have to file Form 5471. If you are the ultimate beneficial owner, then you have to file Form 5471.

Categories for filing Form 5471

There are 3 main categories of filers that IRS classifies for filing Form 5471. The first is a US person who acquires 10% or more stock in a foreign corporation as an officer or director. This category has to report a minimal amount of information about the acquirer and the corporation.

The second category of filer is for a US person who acquires additional stock in a company, taking the holding to over 10%. Alternatively, if the US person sells stock and takes the holding below 10%, then both such instances come under category 2. The amount of information to be reported under this category is quite large. Income statements, opening and closing balance sheets, and identity information all need to be compiled for this category.

The third category applies to a US person who owns over 50% of stock in a foreign corporation. Disclosure requirements are similar to category 2 with the addition of undistributed earnings and reportable transactions.

The best time to file Form 5471

Form 5471 should be filed along with your annual income tax return if you are filing as an individual. For corporates, the Form 5471 filing should be attached to the annual corporate tax return.

It is a good idea to file Form 5471 by March 15th if it is being filed by a corporate. Individuals can file by April 15th and expats can file by June 15th.

Penalties for non-filing

Penalties for not filing Form 5471 can start from $10,000 and run up to $50,000. The initial penalty is $10,000 for each tax year for not filing Form 5471. Then, an additional $10,000 penalty is levied if you do not provide foreign asset ownership details within 90 days of the IRS notice for non-filing of Form 5471.

After the 90-day window, an additional penalty of $10,000 is levied for every 30 days of non-compliance. This way, the penalties for failure to file Form 5471 add up and the maximum limit is $50,000 before more serious measures are pursued by the IRS.

Having outlined the penalties, it is important to point out that these penalties are not like taxes. Even if your foreign business entity is not making profits, the penalties still have to be paid. Taxes get levied only when the business makes a profit, but penalties are more severe.

Conclusion

The IRS estimates that the time to learn about Form 5471 and prepare the filing is around 120 hours. Given the filing requirements of Form 5471, the whole process is relatively tedious and time-taking. You would ideally want to work with a tax professional to file your Form 5471. You would want to make sure that everything is in order and that you because the penalties for non-compliance can be quite steep, as outlined above.

If you are a US person and have a substantial interest (greater than 10%) in a foreign entity, then you have to satisfy the reporting requirements of Form 5471. It is an important part of the tax law and has to be filed one way or another and the information has to be disclosed to the IRS.

The post Form 5471 appeared first on Metro Treasury.

The EB-5 Immigrant Investor Visa Program was created back in the year 1990 via the Immigration Act of 1990. It was a way to encourage foreign investment in the United States and the growth of the US economy. The EB-5 visa program is one of the five employment-based (EB) preference programs in the United States.

The basic idea

The basic idea of the EB-5 visa is for a foreign national to invest at least $1 million towards financing a business that will employ ten local American workers. The other option for the foreign national is to invest $500,000 (half the amount in the first option) in a special “targeted employment area” (TEA). TEAs are basically locations with high unemployment or locations in a rural area.

The foreign nationals can either invest in a business or a project directly or they can join a pool of other investors through a regional center. Over the last few years, most of the EB-5 investments have happened through regional centers. Real estate projects are a popular choice for EB-5 investors.

Once the investment happens, a conditional permanent residency is offered by the US to the foreign investor. Within two years of obtaining the EB-5 visa, the foreign national must invest in a business entity or commercial enterprise that creates and then sustains 10 local jobs. Once the two year period is over and all the conditions of the EB-5 visa are met, the conditional residency turns into a permanent residency. The foreign national, his/her spouse, and all their children under the age of 21 who are unmarried all become green card holders.

Green card holders can live, study, and work in the United States. Hence, the EB-5 visa program essentially incentivizes investment and job creation by offering permanent residency to the program applicants.

Why real estate projects are so widely featured as an EB-5 project?

Real estate development is often the area where EB-5 investments find their way. The first reason is that real estate projects are a good fit for the $1 million or $500,000 investment requirement. Real estate developments tend to be quite large scale and capital intensive.

The second reason is that real estate developments create the 10 jobs that are a requirement for the EB-5 visa getting converted into a green card. With real estate projects, the jobs that initially get created are construction and architecture related ones. Later on, when the project is complete, there are a good number of service jobs that get created. For example, investing in a hotel project would eventually lead to hotel staff being employed. Similarly, restaurants, resorts, and stadiums will all require people to run the operations.

Hence, real estate projects are a popular investment choice for an EB-5 visa applicant who wishes to successfully pass through the two-year conditional residence status and ultimately become a lawful permanent resident.

EB-5 regional centers

EB-5 regional centers are third-party entities that connect foreign investors and real estate developers who are seeking funding. A regional center is essentially an economic unit which enables foreign nationals to find projects and invest their money in such projects. Both private entities, as well as states, can apply to become a regional center. A regional center is a for-profit entity and it will charge a commission for connecting foreign investors to local developers.

A regional center helps foreign nationals track the number of jobs which their investment created. This metric is important to track because it is one of the criteria for getting the EB-5 visa and, eventually, a green card. A regional center also allows investors to pool in their investments for a large project.

An EB-5 regional center is approved by the USCIS. It maintains a list of all such centers by each state of the US. In the year 1994, there were only two regional centers for the EB-5 visa. Since then, there are now close to 900 regional centers throughout the United States.

Targeted Employment Areas

The original criterion for classifying an area as Target Employment Area (TEA) was a jobless rate which was 150% of the national average. However, states and regions that wanted funding were able to skillfully position their area as TEA even when some of them were wealthy areas. Over time, the real estate industry and states pressured the government to change the policy of approving TEA locations.

At the moment, any state designated location is accepted by the USCIS as TEA. In fact, an investor can now gather statistics and data on his/her own and present them to the USCIS in order to petition the governmental body to designate a subdivision or area as a new TEA. In some states, this sort of petition is to be made to the state government rather than the USCIS.

While there is no centralized list of designated targeted employment areas, some states like California, Washington, and Florida maintain a statewide list.

The employment creation requirements

The 10 jobs that the EB-5 mandates an applicant to create have to be created within two years of the applicant’s investment and entry into the United States. These jobs have to be sustained during those two years.

The jobs that need to be created can be direct, indirect, or induced. Direct jobs would mean that jobs get created in the exact same venture in which the investment was made. Indirect jobs can be jobs that get created in businesses which supply services or materials to the EB-5 project in which investment was made by the applicant. Induced jobs are jobs which get created in the greater community due to enhanced spending by EB-5 project employees. This spending has its source in the incomes that get generated through the EB-5 project.

The application process

There are three main steps that every EB-5 visa applicant has to go through:

The first step is to invest the required money and create 10 jobs. This can be done by either directly investing in a project or investing through a regional center.

The second step is to get a conditional green card. After the approval of the I-526, the investor needs to submit the conditional permanent residence application by filing an I-485, which is the application of Adjustment of Status, or by filing a DS-260, which is the application for an immigrant visa. This petition or filing will grant the investor a conditional green card.

The third step is the conversion of the conditional permanent residency into a full permanent residency. For this, the applicant has to remain in conditional green card status for two years. About 90 days from the expiry date of the conditional permanent residency, the applicant or investor has to an I-829 application to remove the conditions attached to his/her green card. Upon the removal of conditions subject to verification of all EB-5 requirements, the investor finally gets a 10-year green card.

Projects funded by the EB-5 program

Some well known projects which have been funded via the EB-5 program include the Lucky Dragon Hotel and Casino in Las Vegas, the Resorts World Las Vegas, the George Washington Bridge Bus Terminal in New York, the Hudson Yards Redevelopment Project in New York, the Europa Village in California and the JW Marriott Hotel in downtown Los Angeles.

The post EB-5 Visa appeared first on Metro Treasury.

Gold prices haven’t done much in recent years. It did go up significantly in the 2000s but hasn’t done much in recent years. So, why would anyone invest in gold then?

The main wealth creation from gold comes in the form of capital appreciation.

Gold also plays an important role in wealth preservation. Among all the precious metals, gold seems to have the best safe haven and hedging properties. It is particularly viewed as a good hedge against inflation.

People pour money into gold during a financial crisis when stocks, bonds, and real estate markets are creating havoc.

In fact, people still remember the pains of the global financial crisis of 2008 and invest a portion of their wealth in gold just to feel safe about their money.

Gold by itself may be too volatile and deeply affected by supply and demand factors. Gold prices can either change quickly or remain stagnant for long periods of time. Hence, investing in just gold and gold mutual funds might not be the best idea.

However, if gold can become one of your asset classes in a well-rounded portfolio, then the precious metal has plenty to offer. It tends not to do much when stock markets are rising. However, it can provide positive returns when the rest of your portfolio is not performing well. Thus, gold can be a safe investment if it is viewed in the right way.

The intrinsic value of gold and the demand-supply scenario

Statistically speaking, about 50% of all gold is used for making gold jewelry. Countries like India and China are voracious consumers of gold products. The other 40% of gold is used for investments. Gold coins, bullion, gold bars, medals, etc. are bought by central banks, gold investors, and mutual funds that invest in gold on behalf of their clients. The remaining 10% of gold find use in industrial and commercial applications.

Looking at these numbers, it is clear that almost 90% of gold demand is driven by its intrinsic value. This has been the case for many decades with money also being backed by gold throughout history (gold standard). It is only recently that paper money got stopped being backed by gold. However, that does not affect gold’s intrinsic value or its safe haven status.

There is a limited amount of gold available on earth. The gold that has already been mined is already in use, as described above.

The gold that is still to be mined is increasingly more complex and expensive to extract.

There is a finite quantity of gold in the world and unless there is a technologically enhanced way of extracting gold cheaply, the price can only go up due to rising demand and limited supply.

Gold has more intrinsic value than the US dollar, which is often considered as a safe currency.

The US government can simply print more dollars if it wants to. However, one can create gold.

Medieval alchemists have proven that gold can’t be created and if the gold-peak theory is true, then declining gold production means that the supply of gold will continue to shrink in the future.

Gold’s correlation and standard deviation

Gold has an interesting set of stats in terms of returns when compared with the stock market.

Most people tend to invest their savings and wealth in stocks either by direct investments or by purchasing units of mutual funds and ETFs.

The standard deviation, a measure of volatility, for the stock market over the past five or six years has been around 10%.

The average return of the S&P 500 during that time has been around 13%. So, an investor in most cases would have had returns range between a low of 3% and a high of 23%.

Gold, on the other hand, had an average return of around 4% during the last five or six years and a standard deviation of about 16%.

This high standard deviation means that gold investors could have had returns of -12% to 20%.

That basically means a loss of 12% annualized or a gain of 20%. That kind of return range is far more volatile than the stock market returns. Hence, gold returns tend to be more unstable than stock returns.

Now let us look at the correlation of gold with the stock market. Over the last ten years or so, the coefficient of gold with respect to the stock market has been around 0.04.

That basically means that gold moves in a direction that are not closely linked to the stock market’s direction. Gold does its own thing.

Now compare that correlation with the correlation between the stock market index and the midcap index over the last ten years.

That number is 0.98, which means that mid caps move very much in sync with stock market indices.

Even when you compare gold’s correlation with bonds over the last ten years, the coefficient number comes out to be around 0.25. This means gold has a low correlation with bond prices and is a safe hedge against bonds as well.

So the conclusion from the correlation analysis is that gold can provide refuge during bear markets even though gold is more volatile.

How much gold should be owned?

Because of its volatility, gold should not be the sole investment. If you get the timing wrong, then you could end up with losses as outlined in the analysis above.

An investor should focus on the interplay between gold and other asset classes and use gold as a hedge against downturns in the stock, bond, and real estate markets.

Perhaps a 5 to 10% allocation to gold may be a wise decision. Discuss your desire to invest in gold with your financial advisor and try to come up with a ratio that positions gold as a hedge rather than as a growth component in your portfolio.

What form of gold should be purchased?

Once you have made your decision to invest in gold, the next question that comes to mind is how to invest in gold? Should an investor buy gold coins, gold bars, invest in gold exchange traded funds (ETFs), or buy jewelry?

Buying jewelry is really not recommended. Jewelers not only charge you the gold grammage cost but also making charges and a mark-up.

You would lose a significant percentage of your outlay in these additional charges.

Gold coins and gold mars also have a mark-up slapped on them by sellers. After all, jewelers and sellers also need to make a living and will build-in their cut into the price that they will quote you.

Even if you were to buy the gold coins or bars, you would have to spend some money to rent out a deposit box to keep that gold safe.

It might not be easy to sell a partial portion of your gold holdings in case you need to rebalance your portfolio further down the line. You cannot sell half a gold bar, you would have to liquidate the full bar. The same goes for jewelry.

One attractive option for investing in gold is buying a gold ETF. This exchange traded fund tracks the price of gold closely and counts gold as its primary asset. It also has a low expense ratio of less than half a percent.

So, the investor retains most of the returns that the underlying gold generates.

With an ETF, buying and selling are very easy. You can trade as many units as you like and do not have to sell a full bar of gold if you don’t need to. You also don’t have to drive to the bank or deposit box and then take your gold to the dealer. Gold ETFs are pretty liquid.

Another option is to invest in gold miners. However, gold miners extract not just gold, but also copper and other metals.

Hence, even though the majority of a gold miner’s activity is extracting gold, it is still not a pure play investment in gold.

With gold miners, the investor is also exposed to risks like sub-optimal miner performance, political risks in the country where the mine is, and other health and safety issues on site.

These things can pull down a miner’s stock price even if gold prices are heading up. So, investing in gold mines or miners is not the safest investment option.

The post Gold as an Investment appeared first on Metro Treasury.

A person who lives outside his/her home country and works as a skilled worker, professional, or an artist is considered to be an expatriate or expat. The term expat may also extend to a retiree who has chosen to live outside his/her home country.

People have been living in foreign countries as workers, diplomats, missionaries, or merchants since ages. With the invention of steamships and airplanes, travel became easier. As a result, the number of expats in the world also became larger. People were either choosing to live in a foreign country for a few years or their employers were sending them to offshore branches of their businesses.

Some people confuse expatriate with “expatriot” or someone who does not like his/her home country. Nothing could be further from the truth. In fact, being expats will make such people living abroad realize how much they miss some of the good things about their home country.

Why become an expat?

There are plenty of things to like about being an expat. Firstly, one gets to live in a foreign country and experience the local culture of that country. An expat goes much deeper into the local lifestyle than what a tourist would ever go. An expat also builds a network of foreign contacts that can be very valuable for business or personal pursuits.

Depending on the country where the expat is going to live, the savings from salary can be quite significant. If someone on a US payroll is asked to live in Southeast Asia for a few years, then the lower cost of living in that country would mean a lot more dollars available for investment/retirement savings. This benefit is particularly visible in cases where a company sends its employee for work in a lower-income country while still having the employee earn his/her regular salary.

Expats can also greatly develop themselves on a personal level by being an expat. A study conducted back in 2007 found that one of the biggest drivers for an employee wanting to become an expat was the breadth of responsibility in an international assignment. The employee has to work through various challenges and risks when working abroad. Expat assignments also tend to have a fair degree of autonomy. All of these factors can really hone the skills of an individual and help them grow professionally and personally.

Some challenges of being an expat

Being an expat is not always rosy. Moving to a new country can be a culture shock to many. Moving to a new country, even for a short period of time, can mean a total loss of an existing social network. A person who cannot immediately integrate into a new environment may feel lonely for a while. If the foreign country has more government restrictions than the home country, then the expat may miss the freedom that he/she enjoyed at home.

If the country where the expat is moving has a higher standard of living than the home country, then the increased cost of living can cost a business a lot more money in terms of employee expenses. Even the expat’s savings might get eroded due to higher personal expenses.

If one of the spouses has to move abroad as an expat, then it may disrupt the career of the other spouse. The foreign country might have strict rules regarding dependents of expats being able to work on a dependent visa. Or perhaps the foreign country does not have job opportunities in an industry in which the spouse of the expat was working in her home country.

Children can also have a hard time identifying themselves and relating themselves because of living life as an expat. Because they have lived in another country for extended periods of time, they find it difficult to answer the question “where are you from?”

Children who have lived abroad as expats may also find it difficult to find peers or friends who they can relate to. Even culturally, they can be in a grey zone. They already have their home culture inculcated in them but then they also absorb the foreign culture of the country where they live as an expat. So, because of a jumble of multiple cultures, they might be misunderstood by people who have always been surrounded by only one culture.

There is also something known as Expat Child Syndrome which children between the ages of 10 and 15 may experience.

Expat vs immigrant

An expat is also different from an immigrant. An expat is a person who lives outside his/her native country for a certain duration. An immigrant, on the other hand, is a person who seeks to live and work in a new country permanently. The immigrant has an intention of settling into a new country and staying there indefinitely. An expat does not go to a foreign country with the mindset or goal of permanently living there.

So, Sergey Brin of Google is considered as an immigrant while an American diplomat in Nigeria or a Moroccan executive stationed in the company’s Paris office would be considered to be an expat. While all of these people are living outside their birth countries for an indefinite period, it is sometimes observed that the term expat is reserved for white people (Western Caucasian) who go and work abroad.

This debate about labeling people from specific races as expats has been a political one. The words expat and immigrant can imply certain nuances about a person’s wealth. Expat is considered to be a wealthy person while an immigrant is supposed to be considered as someone who left poverty in a third world country to do low-skilled low-paid work in a developed country. However, in reality, the definition of an expat does not change with race or skin color.

Do expats remain aloof from local communities?

Expats may have a reputation for not integrating with the local community. Sometimes that may be intentional, while at other times it may be totally unintentional. For example, there are situations where people have moved to a foreign land and lived there for a few years and they would still not greet the locals in the local language.

The kids of diplomats at international schools tend to be regarded as expats as well. They are prone to moving to a new country every three or four years. They might appear as if they do not integrate with the local community, but you can’t really blame them either. By the time they build deep bonds with the local people, it is time to pack up and leave.

The post Expat- What Is An Expat Anyway? appeared first on Metro Treasury.

The government in Mexico is also stimulating entrepreneurship with significant investments in the start-up ecosystem. Mexico’s tourism economy is also booming while real estate investments can also be quite rewarding. Whether you want to retire in a beach house, invest in a growing economy, or simply live outside the US yet still be close to it, then Mexico as a citizenship option is worth exploring.

The process of becoming a Mexican citizen is actually quite straightforward. It takes only five years to get a Mexican passport. This passport is no pushover either. It is considered to be the 28th most powerful passport globally and it provides a Mexican citizen visa-free access to a whopping 139 countries which includes Europe’s Schengen region as well.

Entering Mexico

Entering Mexico is simple if you are a citizen of the US, most of Western Europe, or from certain Latin American countries. You can show up as a tourist and visit Mexico visa-free for up to 180 days. Citizens of other countries need a visa which costs about $15 USD.

You can stay in Mexico for this entire duration and even work online or in a business that is not location dependent. However, if you want to work for a Mexican company, then you will need a work permit. This permit costs $155 and you need a job offer on hand to apply. The interesting rule with work permits in Mexico is that you cannot get paid in Mexico for the work that you do in Mexico.

There are a couple of other visas that let you enter Mexico such as an adoption visa or a student resident visa.

If you are serious about living in Mexico permanently and moving to Mexico, then you would want to look at a temporary or permanent resident visa. One has to apply for a resident visa from a Mexican consulate located outside Mexico. When you apply, you will be given a temporary visa which is valid for 180 days. You can enter Mexico on this visa and then exchange the visa document for a temporary or permanent resident card.

You will have 30 days post entering Mexico within which you must do this exchange procedure. If you fail to exchange your visa for a permanent resident card, then you will have to pay extra fees, go through interviews, and complete a regularization process.

Qualifying for the temporary resident visa

As outlined above, the first step to living in Mexico for a longer duration is to apply for a temporary resident visa. This visa allows foreigners to stay in Mexico for up to 4 years. Besides getting a temporary resident visa, foreigners also need to apply for a work permit in order to be able to live and work in Mexico.

If you are planning to simply reside in Mexico and not work, then you will have to show that you have sufficient funds to pay for your housing and food expenses while in Mexico. There are also certain instances where you may receive an invitation to volunteer for a Mexico-based institution without receiving any income.

If you have such an invitation, then you may qualify for a temporary resident visa as well. The third possibility is relationships. You may be related to a Mexican citizen or a permanent/temporary resident. In such a case, you may qualify for the temporary resident visa as well.

If you marry a Mexican citizen, then you need to apply for a two-year temporary resident card. You can then apply for permanent residency (and eventually citizenship) after you get this two-year card.

There are two more ways to become a temporary resident in Mexico. It is through investments in a business or in real estate. If you invest about $86,000 in stocks or business and $86,000 in real estate for that business, then you can get a temporary resident visa. You also have to show that your business employs at least 3 people. You also need to show invoices, contracts, receipts, permits, and a registration with the social security department in Mexico which proves that you have hired three people.

With the business investment route, there are no significant rules on how long you need to stay in Mexico at one stretch. You can enter and exit the country with a lot of freedom. The temporary residence card in the case of business investment is granted for one year. However, it can be renewed easily for another 1 to 3 years. The only thing that you should be careful about is that you should stay in Mexico for the most part of the year if you plan to apply for citizenship in the future.

Coming to the real estate route, if you purchase Mexican real estate which is valued at forty thousand days times the minimum wage in Mexico, then you may be able to get a temporary resident visa. This amount works out to around $175,000. With that kind of money, you can easily find a 2 or 3 bedroom apartment in Mexico City or a spacious 3 to 5 bedroom house (with a swimming pool) across Mexico.

Qualifying for a permanent resident visa

Once you have your temporary resident visa, the next step is to obtain a permanent resident visa. Holders of a temporary resident visa have to remain in that temporary status for four consecutive years before they can qualify for a permanent residency. If a temporary resident is married to a Mexican citizen, then that wait is shorter at two years.

There are some situations where a person can directly qualify for a permanent resident visa without having to hold a temporary resident visa. The first possibility is if a person is related to a second level of permanent resident or citizen. Second level relation can be grandfather, grandmother, parent, son, daughter, or a grandchild.

The second situation could be a person who is retired, has pension payments coming in, and is able to provide for himself/herself through investment income, savings, or pension payments.

A third possibility is a person who seeks political asylum. The final possibility is if the person is a sibling of a Mexican citizen or permanent resident. All of these people can directly go for a permanent residency.

More recently, the Mexican government has introduced a points-based system to attract high-skilled people to become permanent Mexican residents. Foreign nationals who have expertise in sciences, technology, arts, humanities, sports, or other priority areas that the Mexican government deems capable of improving Mexico would qualify.

For the points-based program, the Mexican government looks at an applicant’s education level, work experience, skills in priority areas like science and technology, Spanish language proficiency, and a reasonable amount of knowledge about Mexican culture.

Foreign nationals who are directly applying for a permanent resident visa have to do so outside Mexico at a Mexican consulate. One exception is applicants of the points-based program who can apply within Mexico at any one of the Instituto Nacional de Migracion (INM) offices.

The good thing about a permanent residency is that the holder then does not have to apply for a work permit. He/she can pretty much work anywhere in Mexico. All they need to do is notify the INM immigration office. Any change in employer, marital status, nationality, or address needs to be notified to the immigration office. If you work online or are location independent, then there is no need to notify the immigration office about a change in your work/employer.

If you are born in Mexico, then you automatically become a citizen. The process of becoming a citizen normally happens within the first year of birth.

Obtaining citizenship and dual citizenship

Mexico is one of the countries in the world that allow dual citizenship. You can hold two citizenships at the most if a Mexican citizenship is one of the two. The path to citizenship is fairly simple once you have a permanent residency.

Most foreigners qualify for Mexican citizenship through a process known as naturalization. The duration of naturalization is five years of residency. Both temporary and permanent residency periods count in this five-year duration. Foreigners who come from Latin American countries or from the Iberian Peninsula can naturalize in just two years of residency.

The path to becoming a naturalized Mexican citizen directly is by birth within Mexico, outside Mexico to Mexican parents or parents of Mexican descent (going back two generations), through marriage to a Mexican citizen, or by having Mexican children.

Children who have been adopted by Mexican parents can also become naturalized citizens. They simply have to live temporary or permanent residents of Mexico for 1 year.

The process of applying for citizenship

The first thing you have to do is fill out the DNN-3 form. Make sure you fill the form in Spanish. You will need to bring two copies of this form along with your foreign birth certificate, foreign passport, and the Mexican residency card (temporary or permanent depending on your specific case). Make sure you keep backup copies of every single page of these identity documents because the Mexican immigration might ask you to submit the originals.

Next, prepare a letter listing out all the countries that you visited in the last 2 years. Make copies of this letter too for your records. Next, you also have to fill out a form that proves that you do not have any criminal record. For this, you will have to visit the local police station wherever you reside in Mexico and also the police headquarters in Mexico City.

Gather any extra forms or documents that may be needed. Go to the office, consulate, or immigration office, as may be the case, and submit your documents. At the end of the process, you may be asked to take a Spanish language test and Mexican history and culture test. Lastly, you will pay the required fee and become a Mexican citizen.

Conclusion

Thus, obtaining citizenship in Mexico is quite clear with multiple paths. Obtaining a Mexican citizenship makes sense for someone who has a manufacturing business and wants to produce cheap and sells to US customers. Someone who has a location independent business but simply wants to get out of the US can also look at a Mexican citizenship. It allows the person to be close to the US and visit family and friends whenever he/she feels like. If you think that becoming a Mexican citizen has benefits for you, then contact a professional or an immigration expert to get started.

The post How to Become a Mexican Citizen appeared first on Metro Treasury.

Though one might think that FBAR is a tax evasion tool managed by the IRS, then that is only part of the scope of FBAR. FBAR is a report that is actually filed with the Financial Crime Enforcement Network (FinCEN) which is a separate division under the US Department of Treasury.

While FBAR was initiated to keep a check on money laundering and illicit deposits of money at offshore locations, the instrument today is used to tackle drug trafficking and terror financing. Due to the sensitive nature of issues that FBAR targets, the penalties for non-compliance or minor mistakes are quite steep.

A point to note, FBAR is independent of IRS Form 8938, which is titled “Statement of Specified Foreign Assets”. These two forms need to be filed separately if you are required to do so. The requirements for both these forms are completely different.

Who has to file FBAR forms?

A US person who has a financial interest in a foreign account/accounts or a US person who is a signatory to such accounts, where the combined value of the foreign accounts exceeds $10,000 in one calendar year, needs to file FBAR. US persons are classified as US citizens, green card holders, resident aliens or non-US persons who pass the Substantial Presence Test. Besides individuals, corporate/legal entities like partnerships, corporations, estates, and trusts with any connection to a foreign account (as outlined above) are also required to file FBAR.

As you can tell, pretty much all US persons and businesses/entities with any sort of significant interest in foreign accounts are covered under FBAR. Also, note that the $10,000 limit is an aggregate limit and it is applicable to the total value of all foreign accounts put together. If you have one foreign account with $9,000 and another at $1,000, then you have to report both the accounts even though the account with $1,000 seems insignificant.

There are some notable exceptions where the FBAR provision does not apply:

• Foreign accounts maintained in a US military banking facility
• Beneficiaries of trust in the case of the person reporting the foreign account via FBAR on behalf of the trust
• Beneficiaries and owners of US IRA accounts
• Qualified individuals like bank officers or company employees who have signature authority over a foreign account but no financial interest in such an account
• Beneficiaries and participants in tax-qualified retirement plans

In terms of the types of accounts that need to be reported via FBAR, we are talking about any kind of financial assets. It could be simple bank accounts, mutual fund accounts, stocks and securities, and any other financial or investment accounts where you have a financial interest or are a signature authority for any such account. If you have precious metals like gold and silver stored in an overseas vault, then those holdings will also need to be reported via FBAR.

If you are ever in doubt as to what should be reported and what shouldn’t, remember that it won’t hurt to report something that did not need to be reported. There is no penalty on over-reporting. However, if you do not report something, then the penalties are steep.

What forms to file?

FBAR is not filed with the IRS. It is filed with FinCEN’s Bank Secrecy Act digital filing system which is online. However, if you are filing FBAR, then you may also have to file Form 8938 with the IRS. Form 8938 is the “Statement of Specified Foreign Assets”.

The threshold for filing Form 8938 is very different from the thresholds for filing FBAR. US persons with foreign assets of aggregate values of $50,000 at the end of the year or $75,000 at any point in a year need to file Form 8938. For joint returns, these thresholds go to $100,000 and $150,000 respectively. For expats, the thresholds are even higher. Individual expats need to report assets when they exceed $200,000 at the end of the year or when they exceed $300,000 at any point in a year. For joint returns, the limits are $400,000 and $600,000 respectively.

One thing is clear, if you own substantial foreign assets, then they need to be disclosed via FBAR and Form 8938. Non-business entities and non-US trusts might need to file additional forms besides FBAR and Form 8938.

When to file FBAR?

FBAR is to be submitted along with your annual tax returns in April. The due date is April 15 every year. However, there are quite a few expats who file the FBAR forms after April. Usually, there is no penalty for them filing the form later in the year. In fact, if you claim Foreign Earned Income Exclusion, then the deadline automatically gets pushed back to June 15th. Most FBAR filers are also known to receive an extension until October 15th to file FBAR. However, quite a few people file FBAR along with their tax returns in April itself.

How to file FBAR?

There are six parts in total on the FBAR form 114. The first part is the type of filer (individual/partnership/consolidate fiduciary/other), personal information like name, address, date-of-birth, and other entries like taxpayer ID or foreign identification number.

The second part is about the value of your accounts. You have to enter the maximum value of all your accounts put together and converted into US dollars at the prevailing exchange rate. The final entry in the FBAR form will be in USD. Along with disclosing the value of all accounts, you also have to disclose the type of account (e.g. bank account, securities account, etc.). Other information like the account number, the name, and the address of the bank/financial institution is also to be entered.

The third part is about joint accounts i.e. accounts which are jointly held either by you and your spouse or by you and someone else. The details asked will be similar to parts one and two. But, this section is only applicable if you jointly hold an account with someone else.

The fourth part is the section about disclosing whether you have no financial interest in a foreign account but are simply a signature authority or a trust beneficiary. This is the place where you declare your non-financial interest.

The fifth section is for a business entity that needs to file FBAR. If a US person has an interest in the business entity of more than 50%, then a consolidated FBAR for the person as well as the business entity may be filed.

The last section is the signature section. Here, you have to check the box labeled 44a, fill your title, and then return to the home tab to digitally sign the FBAR form. You can also save and print the form at this last section.

After all the sections of the form have been completed, the system checks the form for any errors. If no errors are found, then you will see a “Ready to File” button activate itself. This means that you are now ready to submit your FBAR filing.

Conclusion

Please note that this guide is meant to provide you with broad information about FBAR and its filing procedure. Nothing in this article should be treated as professional legal or tax advice.

FBAR filings have to be done correctly or else there are steep penalties for non-compliance. If you are serious about renouncing your US citizenship and will file your final FBAR, then it is best to speak to a tax professional or an attorney to get the right advice which will not land you in any trouble in the future.

The post FBAR Filing appeared first on Metro Treasury.

The length of the sentence is what counts. Felony is a crime that is more serious than a misdemeanor. The range of crimes that come under a felony is quite broad. Everything from drug crimes and financial offenses to murders and treason can be considered as a felony.

Felons can face challenges in terms of getting jobs and even voting (some states disqualify criminal convicts from voting). You might be thinking that felony sounds somewhat scary and that a person who is convicted of a felony may have no chance of getting a passport.

However, that is not true. A person who is convicted of a felony is not automatically disqualified from getting a US passport. A passport is simply a form of identity. It is not a guarantee of a person’s character.

Everyone is encouraged to apply for a passport. There is no harm in trying. Whether you get to travel to a foreign country depends on how the foreign country views you and your background.

Countries like the UK and Canada are very strict on denying visas or entry to a person convicted of a felony. Some other countries have no such restrictions. So, the country that a felon is planning to visit matters.

When can a person get rejected from getting a passport?

The rules that disqualify felons from getting a passport are quite narrow. If a felon fits into the description that those rules list out, then he/she won’t be able to get a passport.

The only exception is if the convicted felon makes a special appeal citing an emergency situation, in which case the US government may consider giving him/her a passport. On the other hand, if the felon is not in the “bad” category, then the procedure to apply for a passport is quite similar to the one that any normal person would follow.

The one rule to look at is 22 US Code 2714. As per this code, a person who gets convicted of international drug trafficking and gets caught with any controlled substance while crossing an international border will not be able to get a passport.

Subsection b of the 22 US Code 2714 also bars felons convicted for a federal or state drug offense when the offense is a felony. People convicted of certain misdemeanors are also barred from applying for a passport, but that action is taken on the direction of the Secretary of State. First-time misdemeanors involving only possession (and not trafficking) of drugs do not bar a convict from getting a passport.

If a person owes $5000 or more in child support or certain loans, then that person may also be disqualified from getting a passport. Basically, owing large sums of money makes a person look like a high-risk case who can flee and never come back again.

Interestingly, if the government authorities deem that a person’s activities abroad (in the past) were detrimental to the United States, then even in that case the person can be denied a passport. A person who may have committed crimes in foreign countries and incurred expenses while in prison may also be denied a passport.

The state department generally does not (but it may) disqualify an applicant who has been convicted of a misdemeanor.

Applying for a passport

To apply for a new passport, you will have to fill out Application Form DS-11. That form is the official application for a US passport. You will also have to furnish your proof of citizenship, identification documents, and a couple of passport photos.

A birth certificate or the naturalization certificate can work as proof of citizenship. It is a good idea to make photocopies of all the documents that you plan to submit. For passport photos, make sure you get them made at a credible place like CVS or Walgreens.

Once you have all the documents in order, you will have to submit them either at a post office branch or a passport acceptance facility. A processing fee will be charged when you submit your passport application.

If you are applying for the very first time, then you will have to submit the application in person. If you have had a passport before and it is 15 years old or older, if you lost your passport, or if your passport got stolen, then there is no requirement of submitting the documents in person.

It normally takes 4 to 6 weeks post submission for an applicant to receive his/her passport. In order to make the whole process move as smoothly as possible, make sure that you fill out the application form clearly and honestly.

Also, make sure that your passport photograph is a recent one (less than 6 months old). If everything in your application is true and accurate, then the people processing your application will be able to move faster.

There are expedited services that will ensure that your passport is made in a much shorter time frame.

Do some research before you apply

While the information above was compiled at the time of writing, the laws are constantly changing. What might be legal today may become illegal tomorrow. The suggestions and tips mentioned in this article can get obsolete over time. Hence, it is a good idea to brush up on the laws in your state and country with regard to felons applying for a passport.

Also remember that even if you are successful in getting your passport, you can easily lose it as well. Felons have to be very careful that they stay within the confines of the law.

There is a statistic that a high number of felons who are released from prison end up returning back within one or two years. Even a small offense can make the Department of State revoke a felon’s passport. So, always stay focused.

The post Can a Felon Get a Passport appeared first on Metro Treasury.

Switzerland as a banking destination

Banking in Switzerland is seen as something very emblematic to the country. Besides Swiss Alps, watches, and chocolates, the only thing that comes to mind when someone talks Switzerland is Swiss banking.

You might be wondering what makes a hilly country in Europe such a hot banking destination. The answer lies in Switzerland’s long history of banking secrecy and client confidentiality. Switzerland is often considered as the “grandfather of banking secrecy”.

Banking secrecy laws in Switzerland

Switzerland has banking laws which prohibit banks in the country from disclosing the identities of the account holders to foreign governmental institutions or anyone else. However, things have changed lately as the banking secrecy has been weakened through sustained pressure by various countries demanding the disclosure of information of account holders who may be suspects for tax evasion.

At the same time, there are initiatives to incorporate the banking secrecy laws into the constitution of Switzerland to protect the laws from weakening.

The laws in Switzerland make it an offense for a banker to disclose the account holder’s information. The laws also shield the bankers from any foreign-led lawsuits, criminal charges, or extradition requests for not disclosing client information.

Situations where secrecy does not apply

The only time the client confidentiality lapses is when the account holder does something which is contrary to Swiss law. Movies often show shady characters wire transferring large sums of money into offshore Swiss accounts. Similarly, wealthy individuals in the past have tried to misuse the baking secrecy laws of Swiss banks to shield assets from enforcers, taxmen, and creditors. All such activities would be considered illegal by the Swiss authorities and account holder information may get disclosed in such cases.

Information sharing of account holders can also happen if there are criminal allegations, divorce proceedings, or tax investigations being conducted against an account holder. The Swiss Banking Association is quite clear about the fact that Swiss accounts cannot be used as safe havens for ill-gotten wealth. Swiss banks have an incentive to co-operate with foreign governments on matters like terrorism and fraud.

Judgments from US courts in matters related to civil and criminal offenses can also compel Swiss authorities to disclose account information. Swiss accounts do not offer creditor protection in that sense to an account holder. Swiss banks tend to co-operate with US authorities on such legal proceedings.

The relatively recent Foreign Account Tax Compliance Act, or FATCA, has pressured Swiss banks to share information about US account holders with the Internal Revenue Service (IRS). FATCA also requires US citizens to declare all their foreign accounts and holdings. If they don’t do it, their foreign banks will end up disclosing the information.

FATCA was envisioned with a goal of eliminating tax evasion. It requires banks all over the world to report account information of all its US citizen-customers to the IRS. There are stiff sanctions for non-compliance. In fact, FATCA is something that has made US citizens less attractive as customers to banks all over the world. Some Swiss banks may not entertain US citizens as a result of FATCA.

Regardless of the situation around banking secrecy, those who are interested in knowing what Swiss bank accounts are and how to open one will find plenty of useful information below.

What are Swiss Bank Accounts?

A Swiss bank account is an account that any person can open at a bank in Switzerland (including cantonal banks). The account is identified by a number rather than the client’s name in order to keep the identity of the account holder anonymous.

Swiss banks will also give their account holders debit cards, credit cards, and checks. However, since most people do not use Swiss accounts for everyday use, they do not really use debit cards and checks very often. In fact, by using the cards and the checks, you would be letting the world know that you hold a Swiss bank account.

Anyone can open a Swiss bank account irrespective of nationality. Swiss citizens or US citizens can open Swiss bank accounts. The most obvious and well-publicized benefit of opening a Swiss bank account used to be secrecy.

However, there are other benefits to opening a Swiss account. Firstly, Switzerland is a very stable country, both politically and economically. It has not had a war with any other country for many years.

Additionally, Swiss law mandates banks to have high capital requirements. There is strong protection for depositors of funds as well. Hence, any risk of a financial crisis of political conflict is very low.

Switzerland is a global powerhouse and a well-known destination for high-quality wealth management. Value-added services like gold storage vaults also make Swiss accounts attractive.

Some banks operate undisclosed or secretive vaults, underground bunkers, and storage facilities for diamonds, precious stones, and other valuable physical assets. In fact, it is believed that the Swiss department sold ten military bunkers out of which six were picked up by Swiss banks.

There are minimum deposit requirements associated with a Swiss bank account. These range from a few thousand dollars to a few million, depending on the type of account being opened.

How to open a Swiss Bank Account?

The process for opening a Swiss bank account used to be quite simple. It was similar to opening a regular bank account. However, with the recent rise in scrutiny and past cases of money laundering, the process has become a relatively long one. There is plenty of paperwork involved, most of it on the bank’s end. There is plenty of due diligence and other procedural work involved in opening a Swiss account.

The first thing you need to do to open a Swiss bank account is research into banks who work with US citizens (or your home country). Shortlist banks that you believe are the best options. Then, you will have to reach out to them and start a conversation. Gradually, you will make an application to open a bank account. The bank may request documentation from you. You will actually have to visit Switzerland and meet the bankers in person at some point. Swiss bankers want to know their clients and where their money comes from.

Swiss banks perform thorough due diligence on any potential client wanting to open an account with them. Valid identification like passport and government ID needs to be provided first. Then, detailed information on the sources of your funds needs to be submitted.

The Swiss bankers will look to understand where your money came from and how you earned that income. If you have large transactions in your source of funds, then the bank may ask you for agreement copies from any asset sales and bank statements verifying such transactions. Documents that verify your source of funds will be examined before you open the account.

Please note that you cannot simply fly to Switzerland and walk into a bank branch to open your Swiss account. The above steps will have to be done, a conversation will have to be initiated, and then things will start falling into place.

Work with a professional

If you are serious about opening a Swiss bank account, then it may be best to speak with a tax attorney to understand the tax implications of owning and operating a Swiss account. You do not want to get into trouble with the IRS later on.

Additionally, since significant paperwork is involved, and since there may be a chance of you getting turned down by a Swiss bank if they do not find your profile to be trustworthy, it is best that you work with an experienced professional.

The process of corresponding with a Swiss bank needs to be smooth and efficient in order to maximize your chances for account approval. Working with someone who has opened Swiss accounts before and who has relationships with banks in Switzerland will go a long way in helping you open a Swiss bank account.

The post Open A Swiss Bank Account appeared first on Metro Treasury.