Our office is advising dozens of clients (including many HSBC customers) regarding offshore accounts, all…
“Financial interest” or “Signature Authority” in a Foreign Account
Any United States person with a “financial interest” in or “signature authority” over a foreign financial account, where the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the year, must file a Foreign Bank Account Report (FBAR). However, “financial interest” in or “signature authority” are often confusing and misunderstood.
“Signature Authority” in a Foreign Account
Signatory interest is more obvious and clear. The general requirement is that those who can control the disposition of funds in the account have signature authority, and must file FBARs. If a person can sign on an foreign account then FBAR reporting is required.
For certain employees or officers with signature authority over, but no financial interest in foreign financial accounts, an FBAR is required (in FBAR Part IV) but often the due date is deferred.
“Financial interest” in a Foreign Account
The term “financial interest” is far less obvious and clear. Under FBAR reporting regulations (31 CFR §1010.350 Reports of foreign financial accounts), accounts held in the name of entity, can create a financial interest in a person if the entity falls within any of the following categories:
1) a corporation in which the U.S. person owns more than 50 percent of the company’s stock;
2) a partnership in which the U.S. person receives profits or capital exceeding 50 percent;
3) a trust in which the U.S. person is an owner of any part of the trust;
4) a trust in which the U.S. person (1) “has a present beneficial interest in more than 50 percent of the assets” or (2) “receives more than 50 percent of the current income;” or
5) an entity in which the U.S. person “owns directly or indirectly more than 50 percent of the voting power, total value of the equity interest or assets, or interest in profits,” other than a corporation, partnership, or trust.
How We Can Help with FBAR Reporting
If you have questions about the filing requirements and potential tax implications of your foreign accounts, you must seek the counsel of an experienced tax attorney. We offer a free consultation with the protection of attorney-client privilege to help people understand their legal options.