It’s no surprise that Puerto Rico residents may have a financial account outside of Puerto Rico and the United States. But did you know that simply having a bank account in a foreign country, such as Spain and the Dominican Republic, might trigger reporting requirements both in the United States, and most recently in Puerto Rico?
Puerto Rico resident individuals that have a financial interest in financial accounts held outside of Puerto Rico (or the United States) with a balance over $10,000 during the previous taxable year must report such foreign financial accounts in their Puerto Rico income tax returns, commencing with the return due on April 17, 2023. A taxpayer complies with this requirement by completing and filing Schedule CFF for each foreign financial account with a maximum value exceeding $10,000, along with his or her tax return.
It should be noted that this new Schedule CFF is similar to FinCEN Form 114 (formerly known as Report of Foreign Bank and Financial Accounts – FBAR) required to be filed by United States persons (including Puerto Rico residents) under the Bank Secrecy Act.
Financial accounts include:
– bank accounts
– investment accounts
– crypto asset accounts
– certain insurance policies
– future or options contract accounts
An individual is considered as having a financial interest in an account when:
– the individual is the owner;
– the owner is a third party acting on behalf of the individual;
– the owner is an entity in which the individual directly or indirectly owns at least 50% of all their value or voting power;
– the owner is a grantor trust for the individual’s benefit; or
– the individual has signature authority over the foreign financial account.
Failure to report foreign financial accounts will be subject to a $10,000 penalty and is classified as a misdemeanor.
