Mauritius - We Are Not A Tax Haven (FATCA Post)

Although most countries have not yet signed on to FATCA – the Foreign Account Tax Compliance Act – more and more countries are in serious negotiations with the U.S. Treasury. Designed to combat tax evasion and raise tax revenues, FATCA requires foreign financial institutions to review accounts and report those with ties to the United States. The law is scheduled to be implemented in 2014.

FATCA has been controversial since enacted several years ago. While it will certainly identify hidden offshore accounts, foreign banks and hedge funds say the cost to implement is huge. Many such institutions are simply closing accounts that belong to Americans. Other critics say that only a small percentage of foreign account holders are attempting to evade taxes. They say most people simply don’t understand the complex reporting requirements. (The government’s GAO and the IRS National Taxpayer Advocate are both critical of the IRS’ education and outreach efforts.)

Mauritius is the one of the newest countries to signal its intent to cooperate with FATCA. Although not very popular among Americans, Mauritius does have a vibrant offshore banking business. Switzerland and the Caribbean nations seem to be the destination of choice of Americans, Cyprus was the destination of choice of Russians and Mauritius is popular among Indians. That could have an impact on the millions of Indian Americans, many of whom are American resident aliens (green card holders) or dual nationals.

Indian tax authorities have long been concerned with their citizens hiding money in Mauritius. According to a report carried by the Wall Street Journal, Mauritius central bank governor Rundheersing Bheenick disagrees. “Mauritius stoically shrugs off these attacks as it does not practice a culture of opacity. Mauritius has always been more than willing to share information with the banking and tax authorities of partner countries,” said Bheenick.

Bheenick recently confirmed that his country is in talks with the United States over FATCA. In comments made to a banking group, he said the country has no intention of becoming a “sunny place with shady finances.”

The announcement from Mauritius is significant. In recent years the country has worked hard to build its reputation as a banking center. Although not yet as significant as Singapore or Switzerland, the country has made inroads into the Indian and African communities. With so many Indians living in the U.S., we suspect there are thousands of unreported accounts located there.

Beginning next year, FATCA requires foreign financial institutions including banks, hedge funds, brokerage firms and even some insurance companies to report accounts suspected of having ties to the U.S. Although there is nothing illegal in having an offshore account, failing to annually disclose such an account is a felony and could subject the account holder to massive civil penalties.

Foreign accounts are reported on both Schedule B of one’s individual income tax return and on a separate Report of Foreign Bank and Financial Accounts also known as an FBAR or by its form number, TD F 90-22.1. (Important note: FBAR filing date for this year is June 30th.)

If you have not reported your foreign account, there is hope. The IRS is offering an amnesty plan for those with unreported accounts. The plan offers a one time penalty and no audit or criminal prosecution. Better options are available for taxpayers with small balances, inherited accounts and those that can prove that the failure to file FBARs was not intentional.

For more information about FATCA, FBARs and unreported offshore accounts, contact attorney Bethany Kroes at or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence. Most cases, including traditional voluntary disclosures and opt outs, can be handled for a flat fee.

Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.

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Written by Brian Mahany, Esq.