2015 - 2016

Investment

Term deposit

Mr J’s family trust opened a bank term deposit. Due to the United States (US) recently passing the Foreign Account Tax Compliance Act (FATCA), the bank was required to ask whether any trustees were US residents for tax purposes. This aims to identify US citizens who use offshore financial accounts to evade their US tax responsibilities. It requires US persons worldwide to report their income to the Internal Revenue Service (IRS), whether or not they live in the US. This has been implemented by the New Zealand Government through legislation, and banks are legally required to comply with FATCA.

Mr J declared that all the trustees were New Zealand-born residents and citizens, filing New Zealand Inland Revenue tax returns. The bank later provided Mr J with a detailed questionnaire requiring more information on whether he was a US citizen.

Mr J felt this was unnecessary as he had already explicitly given his US tax status. He also felt it was too complex for the average person to complete, and required legal advice. The questionnaire also said that if the form wasn’t completed and returned, account information may be passed to Inland Revenue (NZ). Mr J felt harassed and threatened.

We acknowledged that the average customer may struggle to complete the form and may need legal advice incurring cost. However, the bank hadn’t done anything wrong or requested the information incorrectly, and hadn’t breached any obligations or duties in sending the form to customers.

We closed the case after putting Mr J in contact with a FATCA operations Senior Manager at the bank to further discuss FATCA forms issues, and potential ways to change its operation in the future to be more effective.