Physical gold storage offshore is in some cases being sold on the basis that the USA person does not need to report it to the IRS. There must be some risks in the purchase of physical gold that many people would not want to accept. Here’s is what one offshore advisor had to say about Offshore Gold Storage and U.S. Taxpayers.
Dodd-Frank Law effective July 15, 2011 eliminated some types of gold trading for USA residents. Keep in mind that in a Life or Annuity Policy the institution is making the purchase. The client holds a policy in exchange for the Insurance Company holding the assets and valuing his policy based on the value of those assets…which means that trading in anything on a registered exchange anywhere in the world would be done in the name of the Insurance Company and not the name of the policyholder. Therefore, purchasing through a insurance policy eliminates PFIC (passive foreign investment company), and any other USA person restriction.
The important FATCA (Foreign Account Tax Compliance Act) issue for those currently holding foreign life policies are 3 things:
a) The insurance company may decide to be FATCA compliant and in that case the name of USA persons are given to the IRS.
b) The insurance company may decide to not be FATCA compliant and in that case the policy holder would need to report the annual gains as a PFIC and pay 39.6% tax and further penalties, interest and tax if he failed to report it, and if he never reported it then he exposes himself to Criminal prosecution for income tax evasion. Discovery while he holds it or when his beneficiary reports receiving funds from a foreign life company, and the IRS measures every banking transaction of 3,000 USD so for sure if the money ever came into the USA the IRS would be asking questions. Bottom line: not reporting it is a bad idea for someone eventually.
c) A 1035 transfer to a 953(d) is not reportable and then in having rehoused this money he eliminates the problem in (b). He eliminates the problem in (a) because IRS form 8938 reporting life policy cash values to the IRS does not occur until this April’s tax filing. Therefor reporting a value that was not required to be reported before is not going to cause any interest.
Note: The above information was written prior to the past tax year. Expert advisers are available to assist you with issues related to reporting of offshore assets.
Our top recommendation for offshore gold storage in Hong Kong is Gold Money.