Understanding the Foreign Bank Account Report
For US citizens or residents, a “foreign bank account” refers to any bank account held outside of the United States. Depending on the balance in that account or multiple other foreign bank accounts, there are some filing requirements to meet. One such requirement is the foreign bank account report (FBAR).
When do I need to file an FBAR?
Consider all your non-US bank accountants, including investment accounts.
Take the highest balance from each account during the calendar year and add them together.
If the total is more than US$10,000 or 36,725 dirhams, you need to file an FBAR.
Report every non-US account, even those old accounts you don’t use or have zero balance.
Many US persons in UAE mistakenly believe that their bank files the FBAR on their behalf, especially since banks often request information about their customers’ US person status. However, this is a separate requirement for the banks, and individuals must file their own FBAR.
Banks ask for a Know Your Customer (KYC) form to comply with their own regulatory requirements, not to file FBARs for their customers. You, as a US person or green card holder, are responsible for filing your FBAR independently.
What is the deadline for FBAR?
FBAR forms are typically due by April 15. However, there’s an automatic extension to file until October 15, giving you additional time if needed.
It’s also important to note that FBAR is purely a reporting requirement. You don’t pay taxes on the highest balance in your foreign accounts. But there’s a catch. If your foreign account generates income, such as interest from savings or fixed deposits, this income must be reported on your US tax return and is subject to taxation.
What is the difference between FBAR and FATCA?
FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act) are two different US regulations aimed at combating tax evasion, but they serve different purposes.
- FBAR requires US persons to report foreign financial accounts exceeding $10,000 at any point in a calendar year, focusing solely on bank account reporting.
- FATCA, on the other hand, mandates foreign financial institutions to report financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest.
While FBAR is directly filed by individuals with the FinCEN, FATCA involves reporting by foreign financial institutions to the IRS and is linked to individual tax filings through Form 8938.
What if I have a joint or company account?
If you have joint accounts with a spouse or family member, these must be reported on the FBAR if you’re a US person with authority over the account.
Additionally, If your employer grants you signature authority over company financial accounts, these also trigger the FBAR filing requirement. You must report these accounts even if they’re not in your name, as long as you have control over them.
All-in-all, what do I need to remember about FBAR filing?
- Deadlines and Requirements: Knowing when and how to file an FBAR is essential for compliance with US regulations.
- Separate from Tax Returns: FBAR is separate from your tax return and focuses solely on reporting foreign account balances.
- Seek Professional Advice: If you’re unsure about your FBAR filing requirements, especially in complex situations like joint or company accounts, consulting with a tax professional can provide clarity and ensure compliance.
Why partner with a specialist Expat accountant?
Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in the UAE. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.
