Non-bank safe deposit boxes and IRS reporting
International, automatic data exchange of customer data is standard nowadays in many cases
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Do precious metals held in non-bank safe deposit boxes have to be reported to the IRS or equivalent authorities?
The Foreign Account Tax Compliance Act (FATCA) is designed to ensure American individuals and companies investing, operating and earning taxable income abroad do so responsibly and in compliance with their obligations as US taxpayers. While such legislation is clearly meant to act as a deterrent to those who might otherwise choose to break the law, it is not intended to confuse, or even penalize, those who simply aim to develop a prudent offshore asset protection strategy.
Thus the primary purpose of this article is to explain particular aspects of the legislation applicable to the use of safe deposit boxes for the storage of precious metals in order to help clarify the IRS (Internal Revenue Service – United States) reporting rules.
FATCA reporting formats (NB: See also non-bank exception below)
Those with clear reporting obligations under FATCA must generally report to the IRS using either an FBAR (Foreign Bank and Financial Accounts Report) form or Form 8938 (Statement of Specified Foreign Assets).
The difference between these two options is as follows:
- An FBAR report must be filed when a US citizen holds foreign bank accounts with an aggregate maximum value for the combined accounts which exceeds $10,000. FBAR reporting is triggered if this value is exceeded ‘at any time during the calendar year’. So, for example, one instance would be enough to require a report.
- Form 8938 is relevant for U.S. taxpayers who live outside the U.S. and hold foreign assets with a total combined value in excess of $300,000 at any time during the calendar year (or a combined value of $200,000 on the last day of the year).
Three offshore precious metal storage options
1. Foreign bank safe deposit boxes
When offshore gold or other precious metals are stored in a foreign bank safe deposit box, the investor is usually required to at least open a linked bank account. Under FATCA reporting rules, the bank itself must report the existence of such an account. This is usually achieved via an automatic exchange of a customer’s banking data, which FATCA rules demand.
2. Dealer/broker safe deposit boxes
Precious metal dealers or brokers often offer customers safe deposit box facilities for newly acquired holdings inside their own vaults. This arrangement can often seem more convenient than a bank safe deposit box, especially as it avoids the need to pay for transport costs. Nevertheless, these premises are treated much like other financial institutions (because of the precious metal trading element). Once again, under FATCA rules, that means there will be a customer reporting requirement for such holdings.
3. Professional non-bank independent storage
Taking the example of offshore safe deposit box gold stored in Switzerland, there are several commercial providers of storage facilities for physical gold and other precious metals offering a professional service. As a typical example, Swiss Gold Safe Ltd can offer state-of-the-art, privately owned and managed storage facilities which are entirely independent of national and international banking systems. For those seeking to secure and protect their offshore assets, this legitimate non-bank status is important, because it means there are absolutely no reporting obligations to any third parties.
This crucial distinction arises due to the fact that Swiss Gold Safe and similar providers simply offer storage facilities. There is no dealing or trading element, nor any brief to offer financial advice – otherwise their own commercial operation would be deemed a financial service akin to that provided by banks, brokers and precious metal dealers.
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Swiss Gold Safe safe deposit box storage
Naturally, Swiss Gold Safe can offer clients far more than just access to its independent, non-bank storage. As a long-established business with a highly respected reputation, the company is the asset-protection provider of choice for many commercial institutions and private individuals. Absolute discretion is assured; physical precious metal assets are protected in secure, modern vaults; insurance cover is standard; and clients have full control of safe deposit box keys.
Read more about Swiss Gold Safe’s offshore safe deposit box facilities.
Client obligations
Whilst this article offers specific guidance about IRS reporting requirements for US citizens as regards non-bank safe deposit boxes, it is not intended to be a definitive interpretation of US law.
In addition, this general guidance cannot take into account the personal circumstances of every client wishing to use Swiss Gold Safe storage facilities.
For these reasons, Swiss Gold Safe Ltd. would respectfully advise potential customers that they remain responsible for complying with all relevant local and international laws concerning the storage of gold and similar precious metal assets.
Summary:
- In many instances, US citizens must use FBAR and Form 8938 reports to notify the IRS or similar authorities about their offshore precious metal holdings stored in safe deposit boxes.
- Bank safe deposit boxes, and similar storage facilities offered by both brokers and precious metal dealers, are all subject to FATCA reporting obligations.
- Non-bank storage of physical gold and other precious metals by Swiss Gold Safe and similar providers is not subject to any requirement to report information to third parties – because storage-only provision does not constitute a financial service.
- Nevertheless, potential customers must always ensure they act in full compliance with FATCA legislation and all other applicable local and international laws.