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FATCA

The Foreign Account Tax Compliance Act

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The Foreign Account Tax Compliance Act (FATCA) is a US law aimed at foreign financial institutions (FFIs) and other financial intermediaries to prevent tax evasion by US citizens and residents through use of offshore accounts. The FATCA provisions were included in the HIRE Act,  which was signed into US law on 18 March 2010.

FATCA will have a far-reaching impact on US-based companies as well as foreign companies with US assets or clients. Under the new provisions, a FFI may enter into an agreement with US tax authorities (a.k.a. the Internal Revenue Service, or IRS) requiring it, among other things, to report information on the FFI's US accounts. A FFI that enters into such an agreement becomes a "participating FFI."

If a FFI does not enter into an agreement with the IRS, all relevant US-sourced payments, such as dividends and interest paid by US corporations, will be subject to a 30% withholding tax. The same 30% withholding tax will also apply to gross sale proceeds from the sale of relevant US property.

All FFIs must comply with FATCA or be subject to withholding. Given the significant lead times large companies may need to comply with FATCA requirements — particularly for IT system changes — financial leaders are strongly encouraged to act now.

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


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Council of the European Union agrees to extend the automatic exchange of information
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IRS updates procedures for withholding foreign partnerships and withholding foreign trusts; coordinates rules with FATCA
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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).

Australia releases discussion paper Common Reporting Standard for the automatic exchange of tax information for comment
On 19 June 2014, the Australian Treasury released a discussion paper (DP) Common Reporting Standard for the automatic exchange of tax information for comment.