Anybody Know About Impact of "Hire Act" 30 % Withholding on U.S. Expats' Funds?

Read about this law on an International Living publications. Naturally, they are selling an international workshop to address this topic, but I did wonder how it might affect ex pat U.S. citizens who are hoping to relocate to Nicaragua on a pensioners visa, relying on their social security payments to meet the requirements.

"The provisions are found in a jobs' bill, H.R. 2847 (also known as the HIRE Act), which became law in March 2010. Title V of the law largely encompasses the Foreign Account Tax Compliance Act of 2009, or FATCA, also referred to as the 'Offset Provisions' of the bill.

"On their face, these provisions appear intended to force U.S. tax compliance with regard to foreign accounts and transactions between the United States and individuals in countries that are considered to be tax havens (meaning the banks and financial institutions in those countries do not share account information with U.S. authorities).

"Section 1474 refers to 'withholdable payments' to Foreign Financial Institutions that don't meet U.S. standards for information sharing. The law requires that any financial institution (U.S. or foreign) remitting any foreign payment to a bank in such a country withhold 30% of the amount of such payment and remit that percentage to the Internal Revenue Service (IRS) as a tax.

"A withholdable payment is defined as any payment of interest, dividends, rents, salaries, wages, premiums, annuities, compensation, enumerations, emoluments, and other fixed or determinable annual or periodical gains, profits and income, if such payment is from sources within the United States.

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Is there an identifiable "victim" of the 30% take, expat or otherwise, per a pension or SS payment?

Two pieces

I see two pieces to the question: getting pensionado residency and does one really lose 30%.

For residency, the statement from the SSA currently shows whatever your pension is. That is, gross amount minus any non-free Medicare payments you elect to make. It seems unlikely that document will change. So, at least on paper, you will have something which shows your full pension.

As for the 30% I cannot see any way that can really be implemented. Or, more accurately, any way it can be implemented where it is more than a tax on the poor or stupid. Now, as the US economy gets worse, I expect to see real exchange controls but that is then a much bigger issue.

At the moment there is just too much trade going on between the US and Nicaragua for someone's SS check to not be able to be laundered. For example, you have your check deposited in a US bank account. You then buy things in the US using that account that are shipped to Nicaragua. This doesn't need to be things for you—you simply buy things for businesses or people here where they pay you in Nicaragua.

Or, here is a worst case. Assuming you can continue to travel with up to $10,000 without having to declare it, you just fly to the US, get $10,000 and fly back to Nicaragua. Even if the flight costs $500, that is only a 5% tax.

I am sure the assortment of loopholes will continue to get closed. I mainly want to illustrate that this law, as it stands, doesn't seem workable. Until the US government seriously implements export controls, there will be ways around it. And exchange controls will, of course, be a bigger disaster.

Does Anyone Deposit

SSI or other pension payments to a Nicaraguan bank directly (as opposed to first depositing the funds in a US bank and then transferring the money via bank card, etc) ? I'm not aware of any Nicaraguan bank failures but there was a CR bank failure while I was there. There HAVE been some odd "happenings" associated with Nicaraguan banks like the ATM issue where your account is charged but funds are not disbursed, and the incident where thieves somehow knew of a $10K transfer to an individual's account (and subsequently robbed him of his money).

Can a simple online transfer relationship be set up between a US bank and a Nicaraguan bank (as we can simply do between two accounts at the same or different banks in the US)? This would seem to meet most needs while keeping the bulk of your funds safe in a US bank with FDIC protection, and the other fraud protections associated with credit and debit cards in the US.

Repetitive transfers, or transfers of large amounts ARE reported to the IRS, but that doesn't necessarily trigger any additional scrutiny.

The 30% rule for non-residents has been around for quite a while . . .

I think

Bac said they could do it but I didn`t want to fool with any more Nicaraguan paperwork than necessary. It seems better to have things deposited in the US and just use my Nica account on a pass-through basis. I can deposite a check to my account with no service charges or I can suck $400 from the ATM at Maxipali for $1 fee.

During construction, I shipped down money $9000 at a time. On a bigger project, just bite the bullet and do the paperwork to bring down more money. It`s just a 1 page form and a stamp to send it.

"You can avoid reality, but you cannot avoid the consequences of avoiding reality." Ayn Rand