U.S. Tax Filing Requirements

“Kathleen, we purchased property in Belize several years ago and have recently sold it for a large profit. We wanted to put the money into Atlantic Bank in Belize. This bank has U.S. dollar accounts. If we do this, will we have to file a FBAR? I do not even know what that is? The account will be in my name (I am a U.S. citizen).

“Will the U.S. want taxes from our property sale? I am guessing they would if we have the funds come to a U.S. bank.

“We also have an HSBC bank account in Panama, but now with the change in Panama laws allowing the U.S. government to see what funds we have, would it be advisable to have the funds transferred to the HSBC bank in Panama or not?

“Please provide your knowledge and information on the above issues. We are to receive the funds soon and would like to know where the best place to put them would be.

“Thanks very much for your assistance. I am sure glad we latched on to your e-mails because they have brought us to Panama, and we are now moving there when I retire next year.”

–Barbara J., United States

As an American, you must report the sale of any piece of property anywhere in the world no matter where you have the funds from that sale sent. And, as a U.S. citizen, you are liable for tax in the States on any capital gains you yield. However, you can offset those U.S. capital gains taxes due by the amount of any taxes you pay in Belize on the profits from the sale. (This is true anywhere, not only in Belize.)

Please be careful putting the funds into a local bank account at Atlantic Bank. That bank may allow U.S. dollar accounts, but that does not mean you’ll be able to get your U.S. dollars out of Belize when you decide you’d like to. This has been a problem for other people I know. To wire U.S. dollars out of Belize, if you don’t have what’s referred to as a “foreign” U.S. dollar account, you will have to get approval from the Central Bank of Belize, and that can be difficult to obtain.

While the Panama government did, indeed (and unfortunately), sign an exchange-of-information treaty with the United States last year, that fact does not mean they are actively reporting on your (or anyone else’s) bank accounts in this country. It’s not as though Panama banks are now sending daily reports to the U.S. IRS.

The treaty allows the U.S. government to request information on particular account holdings in Panama and for Panama then to be obliged to send that particular requested information. It’s not a blanket directive but allows for a case-by-case exchange of, again, specific information.

Furthermore, note that, whether you hold the funds in a bank account in Belize, Panama, Uruguay, or anywhere else outside the States, as an American, you are meant to report that fact. That is, as an American, you are obligated to report on all non-U.S. bank accounts you hold if the aggregate balance at any point during the year is US$10,000.

You do this on the FBAR.