Contents
- 1 Pakistani Bank Accounts for FBAR & FATCA Disclosure
- 2 US Person Definition
- 3 Pakistani Bank Account FBAR & FATCA Reporting Basics
- 4 Largest Banks in Pakistan
- 5 Pakistani Bank Accounts: Term Deposits, Fixed Deposits, and CDs
- 6 Pakistani Investment Accounts in Pakistan
- 7 Pakistan & Mutual Funds, ETF, SICAVs
- 8 Foreign Business and Pakistani Bank Account Reporting (FBAR/FATCA)
- 9 Pakistani FBAR/FATCA Amnesty Program Summary
- 10 Can I Just Start Filing FBAR/FATCA This Year Instead?
- 11 Our FBAR/FATCA Lawyers Represent Clients Worldwide
Pakistani Bank Accounts, Assets & Income Tax & Disclosure
Pakistani Bank Accounts for FBAR & FATCA Disclosure
Pakistani Bank Accounts, Income & FBAR/ FATCA Compliance: Each year US Persons who have ownership of Pakistani Bank accounts, investment accounts, assets and/or income may have one or several IRS international reporting requirements in accordance with the US tax code. The United States requires US Persons with offshore accounts to report their global assets and income in order to properly comply with the disclosure requirements. Some of the more common requirements include FBAR (Foreign Bank and Financial Account Reporting aka FinCEN Form 114); FATCA Form 8938 (Foreign Account Tax Compliance Act) and Form 8621 (Passive Foreign Investment Companies — including mutual funds). When a Taxpayer has not complied with the Internal Revenue Service International reporting and disclosure requirements — they may become subject to fines and penalties. To avoid and minimize the penalties, the Internal Revenue Service developed various offshore tax amnesty/disclosure programs — collectively referred to as offshore disclosure. If you are seeking to submit to one of the offshore disclosure programs you will want to consult with a Board-Certified Tax Lawyer Specialist who specializes exclusively in these types of matters to get the lay of the land. Let’s review the basics of Pakistani Bank Accounts, Income & FBAR/ FATCA Compliance:
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 Pakistan who may have to file FBAR, FATCA, etc. include:
- U.S. Citizen
- Lawful Permanent Resident
- Foreign Nationals who meet the Substantial Presence Test
Pakistani Bank Account FBAR & FATCA Reporting Basics
When a US Person has accounts in Pakistan, they have to report the accounts on the FBAR 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). As to the Form 8938 (FATCA and Form 8621), the reporting threshold will vary based on the various factors such as the filing status of the Taxpayer.
Largest Banks in Pakistan
There are many different banks and other Foreign Financial Institutions located in Pakistan. Here are some of the more common institutions.
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Habib Bank
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United Bank
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Allied Bank
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MCB Bank Limited
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National Bank of Pakistan
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Pakistani Bank Accounts: Term Deposits, Fixed Deposits, and CDs
Most all types of bank accounts are reportable on the FBAR and FATCA. 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 are generally taxable in the US.
Pakistani Investment Accounts in Pakistan
There are various different types of stock investment accounts in Pakistan. And, even though certain Taxpayers with residence or citizenship in Pakistan may receive tax related benefits under foreign tax laws — whether or not there taxable — they are still reportable on the FBAR, FATCA and other international reporting forms.
In addition, unless the PFIC rules apply — accrued but non-distributed income in a Stock Investment Accounts is taxable.
Pakistan & Mutual Funds, ETF, SICAVs
When a US Person Taxpayer has foreign investment accounts in Pakistan such as Mutual Funds, ETFs and SICAVs — they may have an FBAR/FATCA reporting requirement when the threshold is met. The value of the investment accounts are 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.
Foreign Business and Pakistani Bank Account Reporting (FBAR/FATCA)
When a US Person owns a Business and/or has signature authority over an account (as an employee for example) — those accounts are generally reportable as well, although if there is no financial interest in the account(s) then the account is usually not subject to penalties.
Pakistani FBAR/FATCA Amnesty Program Summary
The FBAR/FATCA 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/FATCA This Year Instead?
No, unless the current year is the first-year you had an FBAR/FATCA 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 a Quiet Disclosure. The IRS has warned taxpayers that if they get caught in a FBAR/FATCA Quiet Disclosure situation, it may lead to willful penalties and even a criminal investigation by the IRS Special Agents.
Our FBAR/FATCA Lawyers Represent Clients Worldwide
Our FBAR Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure for Taxpayers with Accounts in Pakistan.
Contact our firm today for assistance.