What is FATCA?

The Foreign Account Tax Compliance Act (FATCA)

FATCA is the Foreign Account Tax Compliance Act. It aims to identify U.S. persons, in order to ensure that they meet their U.S. tax obligations, while placing their assets in foreign (non-U.S.) accounts - either directly or indirectly, through foreign entities such as corporations and trusts.

FATCA is part of the Hiring Incentives to Restore Employment (HIRE) Act, signed into law on March 18, 2010 in the United States (U.S.).

FATCA focuses on reporting:

  • By U.S. persons about certain foreign financial accounts and offshore assets;
  • By foreign financial institutions, about financial accounts held by U.S. persons; or
  • By Foreign entities in which U.S. persons hold a substantial ownership interest.

WHO DOES FATCA AFFECT?

FATCA affects persons/entities classified as U.S. persons/ entities. This classification includes:

  • A citizen of the U.S. (including an individual born in the U.S. but resident in another country, who has not renounced U.S. citizenship);
  • A lawful resident of the U.S. (including a U.S. green card holder);
  • A person residing in the U.S.;
  • A person who spends a significant number of days in the U.S. based on the Substantial Presence Test;
  • U.S. corporations, estates and trusts.

WHEN WILL FATCA COME INTO EFFECT?

FATCA will take effect on July 1, 2014 and will affect new and existing clients of financial institutions.