Which Accounts Are Exempt From FATCA Reporting?
Exemptions are for Foreign Financial Institutions (FFI), not individuals
Our recent article highlighting how tax deferral investments in non-U.S. countries may not receive the same beneficial treatment by Uncle Sam (we highlighted ISAs in the UK, TFSA accounts in Canada, and Aksjesparekonto in Norway). As a followup we received quite a few queries on whether Norwegian IPS (individuell pensjonssparing) accounts are reportable on FBAR/FATCA, as there is a specific clause in the Norway FATCA agreement.
"The following categories of accounts and products established in Norway and maintained by a Norwegian Financial Institution shall not be treated as Financial Accounts, and therefore shall not be U.S. Reportable Accounts or accounts held by a Nonparticipating Financial Institution, under the Agreement:
A. Certain Retirement Accounts or Products
Tax Favorable Pension Schemes (and paid-up policies or pension assets certificates)
covered by section 6-45 of the Norwegian Tax Act."
As much as we love Norway, this clause is not unique.The U.S. Treasury has a list of exempt accounts for the purposes of FATCA for each country. As referenced above, the list includes for Norway indeed Tax Favorable Pension Schemes covered by section 6-45 of the Norwegian Tax Act.
Exemption from FATCA only alleviates reporting requirements of foreign financial institutions. The IRS does not grant exemption to the individuals from reporting any non-U.S. retirement accounts on FBAR.
To illustrate the difference, compare two documents. Exhibit one is the list of account types and financial institutions exempt from FATCA reporting in Canada. Exhibit two is the FBAR reference guide with the list of accounts required for reporting.
- While FATCA intergovernmental agreement with Canada (Page 45) shows both types of retirement accounts as exempt from FATCA reporting :
- An illustration example of accounts required for reporting (page 3 of IRS FBAR guide): A Canadian Registered Retirement Savings Plan (RRSP), Canadian Tax-Free Savings Account (TFSA):
Similarly, Norwegian individual retirement accounts are exempt from FATCA on the Norwegian side. However, for the U.S. Treasury they are on-U.S. retirement accounts, subject to FBAR reporting.
If the U.S. taxpayer meets FATCA threshold, then those accounts must be also reported on form 8938.