How will the “Panama Papers” Affect U.S. Citizens and LPRs Abroad?

Posted on April 30, 2016

There has been a media frenzy around the world since the story broke of the so-called “Panama Papers.”  It’s not clear, to date, what will become the underlying consequences for U.S. citizens (“USCs”) and lawful permanent residents (“LPRs”) residing around the world, outside the U.S.  Indeed, there is now a Wikipedia website dedicated to identifying famous people linked to the “Panama Papers”.  See, List of people named in the Panama Papers

So far, that Wikipedia list does not identify USCs or LPRs, as far as I can tell.

I have read numerous international articles, but none (that I have found) have articulated that USCs and LPRs have been engaged in large scale U.S. tax evasion and fraud; unlike the stories of UBS, Credit Suisse, Julius Baer, Wegelan Bank (that went bankrupt) and other Swiss banks.  See, for instance, How will USCs and LPRs living overseas be affected? Credit Suisse is reportedly in talks to pay well over $ 1 billion to resolve tax transgressions with the U.S. Department of Justice, posted 11 May 2014.  Of course, Credit Suisse ended up paying over US$2 billion to the U.S. federal government.

There is bound to be a major response by various countries about how is the best way to respond to their taxpayers from their countries who are not complying with their laws.  The Panama Papers might become the U.S.’s version of the Swiss bank fiasco that largely started in 2009?  Only time will tell.

For any USC or LPR, they simply need to be aware of the obligations of U.S. law regarding reporting and identifying assets located throughout the world, including their country of residence (e.g., their normal bank accounts), including any ownership in companies that may be formed in any particular jurisdiction outside the U.S., whether that be France, UK, Mexico, Colombia, Panama, South Africa, BVI, Hong Kong, Taiwan, Canada, Spain, etc.

For a primer for USCs and LPRs residing outside the U.S, the following blog  posts identify various U.S. legal obligations reporting non-U.S. assets:

1.  Why Most U.S. Citizens Residing Overseas Haven’t a Clue about the Labyrinth of U.S. Taxation and Bank and Financial Reporting of Worldwide Income and Assets, 2 Nov 2015;
2.  USCs and LPRs Living Outside the U.S. – Key Tax and BSA Forms , 17 March 2014;
3.  USCs and LPRs residing outside the U.S. – and IRS Form 8938, 2 April 2014;
4.   Nuances of FBAR – Foreign Bank Account Report Filings – for USCs and LPRs living outside the U.S, 3 April 2014;
5.   U.S citizens (USCs) and Lawful Permanent Residents (LPRs): Caution When Making Gifts. US Tax Court Recently Ruled a 1972 Gift by Sumner Redstone Still Open to IRS Challenge, 26 Dec 2016.