In March 2010, the US government introduced the Foreign Account Tax Compliance Act (FATCA), part of a major drive to counter offshore tax evasion and ensure US taxpayers’ compliance with their obligations. The new laws aimed to introduce an international reporting regime for US persons with non-US financial assets.
The legislation requires all non-US financial institutions, and certain non-financial entities to identify their US clients, ultimately to the US government.
If an entity falls within the scope of FATCA, direct registration may be required with the IRS although there are sponsoring and grouping options available that may reduce the initial burden.
Institutions or individuals who fail to comply with the new provisions risk heavy withholding taxes on payments from US sources, and potential penalties from their home jurisdiction.
The level of compliance imposed on a non-US institution will depend on whether it is classed as a:
The impact of FATCA will vary according to the circumstances of each entity, with detailed analysis required to determine full levels of exposure. Importantly, however, trusts and corporate trustees can be considered FFIs which can lead to significant FATCA compliance requirements.
Specific intergovernmental agreements (IGAs) may introduce differing compliance dates, which you will need to be aware of.
We will continue to post FATCA updates, but if you have any questions or concerns about the effect of FATCA on your business, or have been asked to provide information on your US taxpayer status to your bank or other financial institution, our tax professionals will be glad to be of assistance.
Since 2004, the IRS has had the statutory authority in cases where a US person willfully fails to disclose balances… twitter.com/i/web/status/1…
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