Thoughts on FATCA:

Some politicians have used the very myopic argument that USA has the right to determine its own taxation rules. Of course it does, so does Taiwan, but does the USA have the right to impose US taxation rules on Taiwanese citizens living in Taiwan who have never earned a dime of US source income? Even if you think so, and I can’t imagine why anyone would, does USA have the right through its taxation laws to effectively prevent some Taiwanese from planning and saving for their retirement?

This is what FATCA in combination with USA’s unique to the world citizenship-based taxation laws will do to Taiwanese and their families where one family member is deemed to have ‘US person‘s status.

Who is a ‘US person’ living in Taiwan? Although you may be a Taiwanese citizen, FATCA considers you a ‘US person’ if you:

·        were born in USA even if you left as a young child, and your parents are Taiwanese!

·        were born in Taiwan to one or more American parents, even if you never lived in USA!

·        regularly visit the USA and meet the substantial presence test

·        hold a green card

·        are an American citizen

What Information will FATCA collect?

FATCA requires all Taiwanese financial institutions to report annually to the IRS (to be done via IGAs through the FSC) on details of a variety of bank accounts with focus being on account balances.

What happens if I am married to a ‘US person’?

If you have joint accounts with your ‘US person’ spouse, those accounts will be subject to FATCA reporting regardless who actually earned the money inside those accounts.

What will USA do with the bank account balances of Taiwanese who are ‘US persons’ or share accounts with a ‘US person’?

The vast majority of Taiwanese living in Taiwan with ‘US person’ status are unaware that USA law requires them to submit annual ‘Foreign Bank Account Reports’ (FBAR) detailing bank accounts held in Taiwan which are considered ‘foreign’ despite being held by a Taiwanese living in Taiwan. Financially devastating penalties are imposed for failure to file FBARs. The IRS will use the information it gets from the FSC to verify against FBAR reports, and will then assess devastating penalties for non reporting of these so-called ‘foreign’ accounts. Penalty calculations were devised as punishment for homeland Americans hiding untaxed money offshore, so they are very harsh, and are applied with no consideration as to whether or not the ‘US person’ is a Taiwanese living in Taiwan or an American living in USA.

Besides, penalties for not reporting my so-called ‘foreign’ accounts here in Taiwan, what are the taxation and retirement planning implications of being a Taiwanese living in Taiwan with ‘US person’ status?

Although there is an exemption of approximately $97,000 of earned income called the Foreign Earned Income Exclusion (FEIE) which provides relief from double taxation of the first $97,000 of Taiwanese earned income, the key is that it applies only to EARNED income. Non-earned sources of income are not subject to the FEIE. Thus Taiwanese with ‘US person’ status will be taxed by USA on the following sources of Taiwanese sourced income: disability benefits, unemployment insurance benefits, pension income, investment income, etc. Thus low-income people and retirees are double taxed on non-earned income which for most retirees is the bulk of their income.

US imposed citizenship-based taxation laws mean it is impossible for a Taiwanese living in Taiwan with ‘US person’ status to effectively save for their retirement, or for the education of their children, or for the care-taking of their disabled children.

Why can’t a Taiwanese with ‘US person’ status just renounce their US citizenship, and avoid FATCA reporting, FBAR penalties, double taxation, and restrictions on retirement planning?

Most Taiwanese with ‘US person’ status who have lived for decades in Taiwan were unaware that the USA considered them to be US taxpayers. This is not difficult to imagine, because citizenship-based taxation is counter to international taxation norms, and not intuitive. It just plain does not make sense, and is unfair to tax someone who does not live in a country and does not earn in that country, just because they were born there. Many consider this a human rights violation and a form of slavery. Only one other country in the world has citizenship-based taxation – Eritrea, a dictatorship in Africa.

So, getting back to the answering the above question, a Taiwanese with ‘US person’ status cannot relieve themselves of their US tax obligations by renouncing US citizenship. The renunciation process includes a promise that the ‘US person’ either is, or will become tax compliant for the prior 5 years. Getting up to date on past tax returns and FBARS is complex, expensive, and comes with risk of penalties for prior non-filing.

SUMMARY: FATCA is an American law which would be unenforceable in Taiwan, without the cooperation of the Taiwanese government. FATCA will be used to enforce American laws on Taiwanese, thus violating every Taiwan citizens’ sovereign right as a country to govern its own citizens. FATCA will be used to enforce immoral citizenship based taxation laws that run counter to the international norm of residence based taxation.

FATCA in combination with citizenship-based taxation will ruin the financial lives of Taiwanese families who have one family member with ‘US person’ status. FATCA will cause Taiwanese of retirement age, who have saved and planned for their retirement to become reliant on Taiwan government handouts, rather than their hard earned money which will be siphoned off by the USA in the form of mostly penalties (relative to taxes owed) assessed on Taiwanese earned, already highly taxed money.

Please reconsider your view on FATCA and citizenship based taxation imposed by USA on Taiwan, and all countries in the world. It is too simple just to say, ‘USA has the right to make its own taxation laws’. The picture is much more complicated than that. If USA had a law that prevented women from driving, would it be OK for USA to tell Taiwan that Taiwanese women with ‘US person’ status could not drive in Taiwan?

Think about it.

121 Questions for the Taiwan Financial Supervisory Commission on FATCA!

Subject: USA laws to be implemented in Taiwan! 121 questions for the Taiwan Government Concerning FATCA and IGA Legislation! The public has a right to know!


Dear Finance Minister Chang,


Taiwan is in the process of accepting the American law FATCA, written by American lawyers, in the interest of the American Government.  Below is a list of questions that I have for all involved that need to be answered.


1.     Have you done a full analysis and risk analysis concerning the USA FATCA regulation and your Intergovernmental Agreement (IGA)? I suspect you have not.


2.     Have you not demanded that your own legal department review the legal commitment that Taiwan is making to the USA?  Do you make legal commitments without using legal advice? If so, what was the result?


3.     Do you understand that the definition of “US person” is owned by USA and not controlled by any IGA?    You do understand what s US person is today?  Today, it includes many Taiwanese citizens living in Taiwan, some of them who may have never set a foot in USA or ever had any connection with the USA. 


4.     What is the risk of the definition of “US person” changing?  Is it controlled in your IGA agreement?   The definition of US person changed as recently as this summer in similar situations---have you controlled in your IGA that it isn’t going to change again?  


5.     As you are implementing and accepting USA law into Taiwan, do you understand that you are taking upon US punishments into Taiwan as well?  Do you understand the punishments that are applicable to bank employees?   Has your IGA contract specifically protected Taiwan bank employees from prosecution under US law? (No, it hasn’t and it doesn’t matter whether you have signed an IGA or not.)


It says:

Shall be imprisoned not more than 3 years;

Or fined not more than $250,000 for individuals ($500,000 for corporations);

Or both, together with cost of prosecution.


6.     Have you taken into account that the above punishments are US laws, not Taiwan laws, and that they are subject to change at any time according to US legislation or US tax rules?


7.     The Taiwan tax treaty with the USA is unique, in that it requires Taiwan to aid in tax and penalty collection to the USA.  Have you analyzed if Taiwan will then be liable to collect fines and/or extradite bank employees to USA?


8.     Are you aware that the IGA you are signing for Taiwan commits Taiwan to everything yet commits USA to nothing? (meaning that Taiwan gets nothing but promises in return?) Reference Rep Posey Letter to Treasury Secretary Jack Lew, July 1, 2013 as below: 


(Posey letter July 1)


9.     You are aware that an IGA is not a treaty, aren’t you?  A treaty needs to be ratified by a legislative body, and the IGA will not be.


10. Are you aware that the IGA is not connected to the original FATCA legislation, HR 2847, and therefore does not commit the USA to anything?


11. Have you analyzed the effects of FATCA upon Taiwanese citizens living in Taiwan? 


12. Have you analyzed FATCA’s reporting and mechanisms upon Taiwanese citizens, regarding discrimination according to national origin?  Is it such that certain Taiwanese citizens are the new Jews? Will they be punished? How? Bankrupted? Extradited? Will they be loaded onto transports and sent off to their fate?


13. What changes to the discrimination laws will be required in order to search out and find citizens of a particular nationality?  Will Eritreans also be searched out and found?  Perhaps Muslims? Jews?


14. Have you analyzed the IGA?  Do you realize that it over-rides existing tax treaties?


15. Do you realize that the information you are sending to the USA is not considered as confidential tax information (Title 26 information), rather that it is non-tax information (title 31), and hence not subject to the privacy rules which govern USA tax information?


16. Have you analyzed the effects of the fact that the information from FATCA and its reporting mechanisms is shared with the NSA, the FBI, CIA and other agencies?  Information not only upon US persons, but those that are one contact away from a US person and upon the Taiwanese FFI financial institutions.


17. What information from the FFI’s will be shared with the other three-letter US agencies?


18. Have you realized that US tax law requires US persons to be financial spies inside Taiwan to the USA?   That these people are then REQUIRED to spy upon Taiwanese corporations, Taiwanese spouses, Taiwanese business partners, and Taiwanese volunteer organizations?  That FATCA requires that US persons (Taiwanese Citizens living in Taiwan) spy upon Taiwan?  Does this break any current laws in Taiwan? If so, which ones? Have citizens agreed to be spied on by their fellow cititzens?


19. The private financial information of all family members (those who share joint accounts with the US person) will be reported to the IRS, even if they are fully Taiwanese persons and have no US personhood.  See section 3 of the FBAR form foreign “joint accounts”. 


Also, trusts which are set up by US persons for elderly Taiwanese in-laws or any children must be reported.


The private financial information of a Taiwanese volunteer organization must be reported to the IRS by any US person who may have volunteered to help pay the bills. See sec 4 of the FBAR form.


The private financial information of a Taiwanese corporation must be reported to the IRS by any officer or person signing corporate checks upon the FBAR form.


Form 5471 –A US person shareholder must spy on the entire Taiwanese Corporation.


A US person living in Taiwan is required to report the private financial information of the Taiwanese Company to the IRS, regardless that the company is majority owned by full-Taiwanese persons.


Form 926, A US person in Taiwan must report loans made to a corporation in Taiwan to the IRS, even if fully owned by a Taiwanese.


Form FBAR, A US person in Taiwan must report all banking details if their aggregate account balances are over US$10,000.



20. Are you aware that Taiwanese jurisdiction laws have no effect: The fact that a Taiwanese jurisdiction would impose a civil or criminal penalty on you if you disclose the required information is not reasonable cause (for not reporting to USA).


21. Are you willing to have Taiwanese banks absorb costs which are greater than the gains which USA will gain?


22. Does Taiwan have any backbone?   Does Taiwan negotiate to have an IGA agreement which (it mistakenly believes) is less bad than the FATCA applications upon its banks?


23. Is Taiwan considering to sue the US government in a WTO court over FATCA regulations and the 30% withholding required for not reporting American citizens to the US government?


24. Is Taiwan ready to break international concepts, in making an agreement which is not upon equal terms between nations?


25. Do you realize that FATCA is simply a method of transferring money from a prosperous Taiwanese to the USA, via compliance agencies and expensive defense lawyers and US banks?


26. Has your risk analysis been comprehensive?  Do you realize that your greatest risk in FATCA relations with USA is the risk that you haven’t discovered all of the risks that lie inside the insane US tax laws?


27. Without a full analysis of the IGA agreement by US lawyers, how do you know what it is that Taiwan is committing to?


28. Shouldn’t Taiwan be hiring a US lawyer to analyze what Taiwan is signing up for?  Someone who fully understands US laws?  There are many international lawyers in Washington DC and New York City—many of whom have lobbied for FATCA and helped to write the laws.  Their fees are between $400 and $2000 per hour, they could be immensely helpful for Taiwan to understand what it is that they are signing up for.  Why not take some Taiwan money and get some real advice upon US law from a US lawyer?


29. Are you aware that foreign nationals married to locals will be affected by the proposed FATCA legislation and that those local citizens will be caught in the middle?  And how do you plan to address this issue?


30. Are you aware that married couples in Taiwan are subject to US tax laws if both names appear on bank accounts and one is a US citizen? In this case the US citizen might be subject to double taxation? And how do you plan to address this issue?


31. How does the proposed FATCA legislation circumvent Human Rights laws in Taiwan?


32. Has any research been conducted on the possible circumvention of any privacy laws that passing FATCA legislation might have on Taiwanese citizens?


33. Has any legal authority in Taiwan been consulted on potential conflicts of the proposed IGA with Taiwan’s Bill of Rights and other provisions contained within the privacy act? (i) If so, what have their responses been? (ii) If such consultation has not occurred, does Taiwan plan to seek such advice prior to the signing of any IGA?


34. Has Taiwan considered the safety and security aspects of such a database falling into the wrong hands, and the possible effects on those Taiwanese citizens identified as “American”?


35. How can Taiwan guarantee the protection of this information once it has been transmitted outside of its control?


36. Does Taiwan realize that the data collected and sent to the IRS may be shared with other US government agencies for purposes unrelated to taxation, with no further consultation or agreement?


37. If so, is it considered acceptable to expose the personal and financial data of Taiwanese citizens in such an unconstrained manner?


38. Does the Taiwan government realize that many banks will simple not separate American citizen data, other countries’ citizen data, and local Taiwanese data before it is sent to the American government?


39.  Will the government bring any IGA before the legislature, if so, when and in what form?


40.  What studies have been undertaken as to whether an IGA can be implemented as an interpretation of the existing double tax treaty?


41. In what ways will the government involve the legislature in any process to amend interpretation of the double taxation treaty?


42. Who is involved in the process indicated in by what criteria? Is the government evaluating any proposed IGA with the US; (i) who established the criteria, (ii) on what date, (iii) under what authority?


43. Is a draft IGA currently being negotiated, and if so, what is the status of said negotiations? When will the draft IGA be made public?  Will the public be consulted for input on any agreement, and if so, by what means?


44. What is the estimated cost of implementing the FATCA legislation to the Taiwanese Taxpayers?

45. What benefit will Taiwan receive in return?

46. What studies and analyses has the Finance Ministry and Taiwan Financial Supervisory Commission undertaken with respect to FATCA?

47. What analyses and studies have been undertaken as to whether the proposed FATCA regime constitutes an override of the existing double tax convention? And what were the conclusions of these studies?

48. What steps is the government taking to ensure that, as a result of FATCA or an IGA, the US will not be allowed to impose higher taxes on Taiwan persons or Taiwan residents than those agreed under the current convention?

49. What studies and analyses have been undertaken to determine whether Taiwanese citizens and residents are or will be denied financial services in Taiwan owing to US tax law in general and FATCA in particular?


50. What are the conclusions or recommendations of the studies?


51. What mechanisms are in place to ensure that Taiwanese citizens and residents are not and will not be denied financial services in Taiwan owing to US tax law in general and FATCA in particular?


52. What mechanisms are in place to ensure that American citizens and citizens of other countries who reside in Taiwan are not denied financial services owing to US tax law in general and to FATCA in particular?


53. Are you aware that US citizens are already barred from opening accounts at some Taiwan banks?


54. What measures will be taken to remedy denial of services to Taiwanese as a result of FATCA?


55. What measures will be taken to remedy denial of services to American citizens as well as other citizens of other countries?


56. What analyses and studies have been undertaken regarding whether the US definition of “resident” for tax purposes, and its impact on Taiwanese with dual status, is compatible with Taiwan law?


57. What analyses and studies have been undertaken regarding whether the US definition of “resident” for tax purposes, and its impact on Taiwanese with dual status, as will be enforced by FATCA or by an IGA, is compatible with Taiwanese law?


58. What analyses and studies have been conducted with respect to FATCA’s consequences upon Taiwanese who believed their US Citizenship had been relinquished?


59. Is Taiwan aware of the potential taxes, fines and penalties that may be levied on Taiwanese citizens (and therefore the Taiwan Treasury) as a result of the US “diaspora tax” which will be enforced using FATCA? If so, have these costs and the effect on the persons involved been factored into the equation?

60. Will Taiwan inform the US and the Taiwan public that it will not enforce the collection of taxes and FBAR penalties on Taiwanese citizens, in the same manner that Canada has done?

61. As part of the negotiation, has Taiwan considered requesting a streamlined renunciation process, free of the fear of penalties or exit taxes, for Taiwanese citizens who wish to formally renounce their unwanted US citizenship?

62. What mechanisms are in place to ensure that Taiwanese citizens and foreign residents are not and will not be denied financial services in Taiwan owing to US tax law in general and FATCA in particular?

63. What measures will be taken to remedy denial of services to Taiwanese and foreign residence as a result of FATCA?

64. What studies and analyses have been undertaken regarding the likely cost of FATCA implementation to (i) Taiwan private institutions, (ii) Taiwan individuals, (iii) the government?


65. How were the figures in the above arrived at, by whom, when, and in consultation with whom? What studies and analyses have been undertaken as to whether the likely cost of FATCA implementation to Taiwan private institutions, Taiwan individuals, and the government will be offset by the receipt of reciprocal tax information and Taiwan tax law enforcement by the US?


66. What analyses and studies have been undertaken as to whether the likely costs and benefits described above are likely to be greater, lesser, or the same as under the current tax-information-sharing relationship with the US?


67. What agencies, boards, departments, ministries, committees or commissions of the government have studied, interpreted, analyzed, or commented upon FATCA, (i) to what extent, (ii) on what dates? (iii) with what conclusion(s)?


68. How will the government monitor and enforce compliance by Taiwanese institutions with FATCA requirements?


69. How will the government monitor and enforce regulatory oversight of the bank due-diligence efforts required by FATCA and its implementation, including (i) by whom (ii) how, (iii) using what standards such efforts will be evaluated?


70. What penalties exist and what penalties does the government intend to establish for failure to adhere to standards indicated in the above?


71. Has the Ministry of Justice or the Taxation Administration developed any legislation or guidance relative to the implementation of an IGA or FATCA and, if so (i) how was it developed, (ii) in consultation with whom, (iii) to whom was it provided, (iv) who requested it, (v) what were its findings, conclusions, and recommendations?


72. Has the Ministry of Justice reviewed any proposed legislation relative to the implementation of an IGA?


73. With what individuals or groups has the Ministry of Justice consulted relative to the implementation of FATCA?


74. What steps have been undertaken to assess regulatory changes to federal institutions at the provincial and territorial level that would be required as a result of FATCA or any IGA?


75. What tax information does the Taiwan Taxation Administration currently share with the US, (i) when, (ii) under what circumstances, (iii) in what form?


76. Has the government assessed whether FATCA and its implementation would require changes to the ways in which tax information is currently shared with the US?


77. What has the government sought, or does the government plan to seek from the US, in terms of reciprocal information sharing as a result of the FATCA or IGA negotiations, and what is the current status of negotiations on this point?


78. What measures are in place to ensure that no privacy laws or policies are violated in any transfer of information contemplated in the above?


79. When was the government first made aware of this FATCA legislation and how?


80. What steps has Taiwan taken since the legislation’s introduction in the U.S., broken down by year?


81. During the consideration of this legislation in the U.S., did Taiwan make any representations to the U.S. government and if so, (i) when, (ii) by whom, (iii) to whom, (iv) on what dates, (v) by what authority (vi) with what desired effect (vii) and with what outcome?


82. How many individuals in Taiwan will be affected? And how was this figure determined?


83. How many Taiwanese citizens residing in Taiwan are U.S. persons under FATCA?


84. How many Taiwanese permanent residents are U.S. persons under FATCA?


85. How many applications for permanent residency is Taiwan currently processing from persons who are or will be treated as U.S. persons under FATCA?


86. How many Taiwanese financial institutions will be impacted by FATCA? And how was this calculated?


87. How many non-financial Taiwanese entities will be impacted by FATCA? And how was the figure calculated?


88. What consultations has the government undertaken with respect to FATCA’s impact on persons resident in Taiwan?


89. What consultations has the government undertaken with respect to FATCA’s impact on financial institutions?


90. What consultations has the government undertaken with respect to FATCA’s impact on non-financial entities?


91. What estimates and studies have been undertaken with respect to the consequences of a 30% withholding of U.S. sourced income to financial institutions?


92. When did the studies above occur and what were their conclusions?


93. How much has been spent evaluating FATCA’s impact on the Taiwanese? Please break it down by department and explain how was the figure was determined;


94. What estimates have been undertaken with respect to FATCA’s cost to implement for Taiwan and with what conclusions? In addition, how many opinions has the government received, (i) on what dates, (ii) with what conclusions, (iii) with what impact on the Government’s actions?



95. For the five years starting 2014, how much is FATCA implementation expected to cost the (i) Ministry of Finance (ii) Taxation Administration (iii) Financial Supervisory Commission (iv) the Ministry of Justice (v) other government departments, agencies, boards, or tribunals; (v) and broken down by year and cost from 2010-2020, (vii) what is the total financial impact of FATCA implementation expected to be on Taiwan taxpayers? How were these figures obtained?


96. What outside legal opinions has the government sought with respect to FATCA’s compatibility with Taiwan law?


97. When were the opinions in the above sought and at what expense?


98. Have unsolicited legal opinions been sent to the government regarding FATCA?


99. Has the government assessed the possibility of not acceding to FATCA in any way and, if so, with what conclusion and with what cost to Taiwan or to Taiwanese when compared to accession?


100.     How much has been spent on negotiations surrounding FACTA, broken down by year and expense?


101.     Which individuals from the government have negotiated on Taiwan’s behalf regarding FATCA?


102.     What has the Minister of Finance’s personal role been with respect to FATCA negotiations?


103.     What has the Minister of Foreign Affairs’ personal role been with respect to FATCA negotiations?


104.     What has the Taiwan Supervisor Commission’s role been with respect to FATCA negotiations?


105.     What plans or strategies has Taiwan developed regarding enforcement of any FACTA related agreement with the United States?

106.     What penalties will there be for U.S. failure to meet any of its negotiated obligations?


107.     Has the litigation risk regarding any FATCA implementation agreement been evaluated and, if so, (i) how, (ii), when, (iii), by what means?


108.     Broken down by department and agency, and with specific record numbers and titles, what briefing materials and files have been developed regarding FATCA;


109.     What measures are in place to assess the lawfulness and legality of any implementation of FATCA in Taiwan?


110.     Have any future public consultations with respect to FATCA implementation been planned and, if not, why not?


111.     What is the projected impact of FATCA on the Bank of Taiwan?


112.     What efforts has the government made with respect to informing financial institutions of their obligations under FATCA?


113.     What efforts has the government made with respect to informing non-financial entities of their obligations under FATCA?


114.     What efforts has the government made with respect to informing individuals residing in Taiwan of their obligations under FATCA?


115.     Has Taiwanese non-compliance with FATCA been assessed as a possibility and, if so, to what extent?


116.     Has FATCA been raised in discussions between Taiwan and countries other than the U.S. and, if so, (i) with which countries, (ii) at what level(s) did the discussion occur (iii) on what dates (iv) in what forum (v) and with which individuals from Taiwan participating?


117.     Have any studies or analysis taken place with respect to FATCA’s impact on immigration to Taiwan by persons subject to this legislation and, if so, with what conclusion?


118.     Has the Taiwanese Ambassador to the U.S. raised the issue of FATCA in any discussions and if so, (i) which discussions, (ii) on what dates, (iii) with what desired goal?  And if not, why not?


119.     Has the American Ambassador to Taiwan raised the issue of FATCA in any discussions and if so, (i) which discussions, (ii) on what dates, (iii) with what outcome?


120.     Has the government considered the correspondence of Peter Hogg regarding FATCA and if so, (i) with what impact on policy development, (ii) with what conclusion?


121.     Has Taiwan considered that China is also watching what Taiwan does in respect to FATCA, and that someday China may implement a similar policy requiring all people who have any Chinese heritage to pay taxes to Mainland China? How will the Taiwanese public respond to this?


Any proposed IGA with the US will severely affect my family, our freedom of privacy and human rights as well for millions of other Taiwanese citizens and foreign nationals living in Taiwan!


Knowing all of the answers above, I would appreciate a prompt reply and how you think FATCA could benefit Taiwan? 



CC: Financial Supervisory Commission

Ministry of Finance

Ministry of Interior

Ministry of Foreign Affairs

Ministry of Justice

Bureau of Foreign Trade

Business Weekly

China Post Newspaper

American Chamber of Commerce