Has your bank recently asked for your “tax identification number (TIN)” in the U.S.? Are they asking tax questions, account questions, or other residency questions? Don’t worry, it’s completely normal!
A question that is appearing online recently very frequently is around whether your bank asking you for your foreign tax information is normal, and I’m here to assure you that it’s completely normal and life is going to be easier if you just tell them!
I’m going to refer to the Commonwealth Bank of Australia in this article because my banking has always been with them, and therefore it’s easier for me to call on information that I’ve been looking for. This applies to everyone though.
Why are banks asking for foreign tax identification numbers?
In short, the U.S., and other countries, are cracking down on illegal banking practices, fraud, tax avoidance, and criminal activity that is being routed through their banking system. This is why in the U.S. you will have to declare all of your foreign assets and investments when you file your tax (“Report of Foreign Bank and Financial Accounts – FBAR”) because they want to make sure that you’re not hiding something from them!
Your bank from your home country is asking as part of a number of international bank agreements (basically reciprocal FBAR to make sure you’re not smuggling cash and using those foreign banks to hide things).
Therefore, in short:
New laws require you to tell us about your tax residency on account opening and to let us know if this changes;
CommBank will need to report certain account information to the Australian Taxation Office (ATO).
And in a slightly longer format:
The Australian Government has committed to a new global standard on the automatic exchange of financial account information…
This requires financial institutions from around the world, including the Commonwealth Bank group, to collect tax residency information from their customers. This is known as the Common Reporting Standard (CRS) and it follows on from the Foreign Account Tax Compliance Act (FATCA).
This applies to both customers who are opening new accounts in their home countries:
CRS requires us to capture tax residency information for customers before they open an account.
As well as those who have existing accounts, but the bank (or tax office) believes that their residency has changed.
We also need to review existing accounts and monitor changes to customer information for indicators that the customer might be a tax resident in another country. If we think we need further information from you, we will contact you asking you to complete our Tax Residency Self-Certification Form.
Now. You’re going to find a whole array of people online who are basically saying that they don’t want to give “the Government” all of their information, and therefore just don’t do it. This might work in the short term, but here’s the fun bit:
The tax laws authorise the ATO to impose administrative penalties
Not to mention, if you’re not complying with the bank’s rules and standards, they can limit your access to your accounts, and/or make it very difficult to do any banking in your home country.
The long story short: If you think that the ATO and your bank aren’t already fully aware of your residency status, you’re underestimating their knowledge. If your bank asks for your foreign tax identification: Don’t lie to them, don’t pretend that you’re actually in your home country still, and don’t be silly. Tell them what they want to know, and get on with your life knowing that you’ve not committed any federal crimes.