- 1 FBAR Reporting of Chile Accounts, MPF & Investments
- 2 US Person Definition
- 3 FBAR Reporting Basics
- 4 Largest Banks in Chile
- 5 Expats Still Report FBAR
- 6 Chile Foreign Bank Accounts & FBAR
- 7 Chile Mutual Funds and FBAR
- 8 Term Deposits, Fixed Deposits, and CDs
- 9 Stock Investment Accounts in Chile
- 10 Chile & Mutual Funds, ETF, SICAVs
- 11 Chile Insurance Policies and FBAR Reporting
- 12 FBAR Amnesty Program Summary
- 13 Can I Just Start Filing FBAR This Year Instead?
- 14 Our FBAR Lawyers Represent Clients Worldwide
FBAR Reporting of Chile Accounts, MPF & Investments
Over the past few years, the Internal Revenue Service has significantly increased enforcement of foreign accounts compliance to ensure US Persons with overseas accounts, assets, investments, and income properly report to the IRS. We represent many taxpayers each year who have either relocated to Chile or previously resided in Chile and now reside in the US — and have a significant amount of unreported assets — such as bank accounts, investment accounts, pension accounts, mutual funds, life insurance policies and more. With the recent surge in the number of cases involving FBAR penalties (both willful and non-willful), it is important that US persons residing in either Chile or the United States who have assets in Chile properly disclose their financial accounts to the Internal Revenue Service on the FBAR and other international information reporting forms. Let’s go through some of the basics of reporting Chilean bank accounts and other investments on FBAR (FinCEN Form 114).
US Person Definition
US Persons includes more than just individuals — it also includes entities — but the focus of this article is for individuals.
US persons with accounts in Chile who may have to file FBAR, including:
Foreign Nationals who meet the Substantial Presence Test
FBAR Reporting Basics
When a US Person has accounts in Chile, they have to report the accounts, when the annual aggregate total of all accounts combined exceeds more than $10,000. The due date is April 15 but is on automatic extension until October (this rule is subject to change).
Largest Banks in Chile
There are many different banks and other Foreign Financial Institutions located in Chile. Here are some of the more common institutions.
Banco de Chile
Banco de Crédito e Inversiones.
Expats Still Report FBAR
When a US person resides in Chile — and even if they are considered a permanent resident of Chile — but they have not formally expatriated from the United States — they are still considered a US person and must still report the annual FBAR. If a taxpayer qualifies as a foreign resident under the Streamlined Foreign Offshore Procedures (aka Expat Amnesty) they may qualify for a full penalty waiver.
Chile Foreign Bank Accounts & FBAR
Even though the United States and Chile have not entered into a bilateral tax treaty, many foreign institutions in Chile including Itau, Banco de Chile, and Scotiabank Chile report account holder information to the US government by way of the FATCA Agreement that was entered into between both countries. It should be noted that even if a Chilean bank account does not generate any income — or that income is exempt from tax in Chile — it is still taxable in the United States and reported on the 1040 tax return.
Chile Mutual Funds and FBAR
It is very common for investors in Chile to have different types of investment funds, such as mutual funds, ETFs, and SICAVs. Even if the funds are not technically in an account, mutual funds are reportable on the FBAR, Form 8938, and Form 8621.
Term Deposits, Fixed Deposits, and CDs
Most all types of bank accounts are reportable on the FBAR. This includes ancillary types of accounts at Banks such as term deposit accounts, fixed deposit accounts, and CDs. In addition, the interest generated on these accounts is generally taxable in the US.
Stock Investment Accounts in Chile
There are various different types of stock investment accounts in Chile. And, even though certain Taxpayers with residence or citizenship in Chile may receive tax-related benefits under foreign tax laws — whether or not there taxable — they are still reportable on the FBAR.
In addition, unless the PFIC rules apply — accrued but non-distributed income in a Stock Investment Accounts is taxable.
Chile & Mutual Funds, ETF, SICAVs
When a US Person Taxpayer has foreign investment accounts in Chilesuch as Mutual Funds, ETFs, and SICAVs — they may have an FBAR reporting requirement when the threshold is met. The value of the investment accounts is aggregated with the value of the other accounts to determine the annual threshold value for reporting is met.
With investment funds, there is the additional issue of potential PFIC reporting on Form 8621.
Chile Insurance Policies and FBAR Reporting
In countries such as Chile and Singapore, life insurance policies — which serve primarily as investment wrappers — are a common type of investment scheme More often than not, these types of life insurance policies do not qualify as traditional life insurance under the US tax code, and therefore income accumulates within the policy may be taxable. From a reporting standpoint, foreign life insurance policies with a cash value or surrender value are generally reported on the FBAR, Form 8938, Form 720, and possibly Form 8621.
FBAR Amnesty Program Summary
The FBAR Amnesty Programs are programs developed by the Internal Revenue Service to assist Taxpayers who are already out of compliance for non-reporting.
Some of the more common programs include:
Can I Just Start Filing FBAR This Year Instead?
No, unless the current year is the first year you had an FBAR Reporting requirement. If you had a prior year reporting requirement, but only begin to start filing in the current year (Filing Forward) it is illegal. In the world of offshore disclosure, this is referred to as an FBAR Quiet Disclosure. The IRS has warned taxpayers that if they get caught in an FBAR Quiet Disclosure situation, it may lead to willful penalties and even a criminal investigation by the IRS Special Agents.
Our FBAR Lawyers Represent Clients Worldwide
Our FBAR Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.