If you are a US citizen or green card holder living abroad, your local bank may have asked you to provide a US taxpayer identification number before opening an account. This is a consequence of FATCA, a US law that requires foreign banks to identify their American clients. Here is what is happening.
Table of contents:
What is FATCA and why does it affect my foreign bank? Why does my foreign bank need my US tax ID number? What if I have never had a Social Security Number?
What is FATCA and why does it affect my foreign bank?
FATCA, the Foreign Account Tax Compliance Act, took effect in 2014. It requires foreign financial institutions worldwide to identify their US account holders. This obligation extends to financial institutions worldwide.
A “US account” includes an account held by a US citizen who has lived all or almost all of their life outside the United States. The US Treasury has summarized FATCA’s purpose as obtaining information on accounts held by US taxpayers in other countries, as well as accounts held by certain foreign entities with substantial US owners, needed to detect and deter offshore tax evasion.
To enforce this, US financial institutions are required to withhold a portion of certain payments made to foreign financial institutions that do not agree to identify and report information on US account holders. This withholding regime acts as a backstop to FATCA’s main focus. The details and complexity of FATCA are significant, involving hundreds of pages of regulations.
Why does my foreign bank need my US tax ID number?
When you open a new account, your foreign bank must determine whether you are a US person. If you are a US citizen or lawful permanent resident (green card holder), it must collect your US taxpayer identification number (TIN). Under US tax law, a US citizen has no choice but to obtain a Social Security Number (SSN) as their TIN. Your bank will ask you to provide it, typically through IRS Form W-9 or a substitute form provided by the bank.
What if I have never had a Social Security Number?
Here is the catch-22. A US citizen who has spent virtually all of their life outside the United States will typically have no SSN. This includes people who were born in the US but raised abroad, and those who acquired citizenship through a US citizen parent, known as derivative citizenship. The bank asks for a TIN, but you do not have one to give.
The same problem arises for lawful permanent residents (green card holders) who have lived outside the United States for most of their lives. An LPR who never worked or filed taxes in the US may have no SSN or ITIN on record, yet their foreign bank now demands one under FATCA. The process of obtaining an SSN or ITIN as someone living outside the United States is particularly complex and will be addressed in a separate post.
This post provides general information only and is not legal advice. Consult an experienced attorney for guidance specific to your situation.