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FATCA

The Foreign Account Tax Compliance Act

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The Foreign Account Tax Compliance Act (FATCA) was enacted by the US Congress on 18 March 2010. FATCA provides the US Internal Revenue Service (IRS) with a new tool which strengthens the information and compliance reporting process used to identify US persons who have money invested outside of the US.

The aim of this US legislation is to ensure that US persons are ultimately taxed, by securing the participation of non American financial institutions to the FATCA program, whereby these institutions report identified US accounts to the IRS and withhold a 30% penalty on US source payments to undocumented US accounts and non participating Foreign Financial Institutions. For most Foreign Financial Institutions (FFIs), FATCA compliance is a significant challenge.

The statute delegated much of the implementation detail to the US Treasury Department and IRS. On 8 February 2012 those departments issued proposed regulations for FATCA implementation, clarifying a number of FATCA requirements, as well as a Joint Statement with the UK, Spain, Germany, France and Italy addressing an intergovernmental approach to implementing FATCA. While there is some good news, the challenge of FATCA implementation remains substantial for most FFIs.

The proposed regulations lay out the process for US account identification, information reporting, and withholding requirements for Foreign Financial Institutions (FFIs), other foreign entities, and US withholding agents. They address many, but not all, of the major items requiring further clarification following the three prior notices issued on FATCA.

Find out more about FATCA by visiting the FATCA section on our Global website.


FATCA news

European Council extends the scope of Automatic Exchange of Information
European Council extends the scope of Automatic Exchange of Information, adopts the OECD Common Reporting Standard and plans a repeal of the Savings Directive.On 14 October 2014, the European Council of Economic and Financial Affairs (ECOFIN) agreed to an amendment of the text of the Directive on Administrative Cooperation in the Field of Taxation 2011/16/EU (DAC).
 

IRS updates procedures for withholding foreign partnerships and withholding foreign trusts; coordinates rules with FATCA
The IRS has issued updated procedures [Revenue Procedure 2014-47, 2014-35 IRB 1 (released and effective 8 August 2014)] for “withholding foreign partnerships” (WPs) and “withholding foreign trusts” (WTs) that elect to assume certain US withholding tax responsibilities.
 

OECD issues Standard for Automatic Exchange of Information in Tax Matters
On 21 July 2014, the Organisation for Economic Co-operation and Development (OECD) published the Standard for Automatic Exchange of Information in Tax Matters (the Standard).
 

OECD publishes Standard for Automatic Exchange of Financial Information in Tax Matters
On 21 July 2014, the Organisation for Economic Co-operation and Development (OECD) published the first edition of the Standard for Automatic Exchange of Financial Account Information in Tax Matters (The Standard).