The Foreign Account Tax Compliance Act
In 2010 the U.S. passed a law that has gone largely unnoticed, but which will be important for financial institutions worldwide – the Foreign Account Tax Compliance Act (FATCA).
With this new legislation, the Internal Revenue Service (IRS) is “inviting” all financial entities outside the U.S. to provide information about their American clients regarding their investments and savings. Required to “voluntarily” supply said information, many non-U.S. private entities will become collection agents for information that interests the IRS.
This new rule concerns not only banks, but also any entity that deals with the investment and negotiation of securities, commodities and derivatives, such as stockbrokers, central custodians, insurance companies and investment funds. It applies to every type of client, be it an individual or a legal entity, who is or who should be a U.S. taxpayer and who is a proprietor or beneficiary of assets outside the U.S. That is, it applies to any U.S. citizen, including people who were born in the U.S. but live in another country and haven’t renounced their U.S. citizenship, people with a dual citizenship, and permanent U.S. residents or green card holders. If you plan to spend a good amount of time living in the U.S. during a calendar year, you could also be considered a potential taxpayer.
Not accepting this invitation to voluntarily participate is not an option for financial institutions. Those who opt out will have to face financial isolation and a serious accusation of lack of transparency, among other penalties which would seriously affect their reputation.
Each country will have to meet new challenges. Guatemala, and its banking system specifically, will soon have to resolve conflicts with its local laws and its constitution in order to be able to provide that information to Uncle Sam. Many will discuss how laws that are unilaterally dictated by one country violate sovereignty. Many will also discuss the injustice of imposing obligations on a number of entities without offering them any compensation. The U.S. will not cover the cost of implementing these measures or compensate in any other way.
In most cases, for those who are not American, FATCA will have no impact. If someone opens a new account or has an existing one, it is almost inevitable that his or her financial institution will ask for some additional information or documentation to prove that he or she is not American. If you do not feel like providing said documentation, your account will be labeled as recalcitrant, which could have serious implications.
FATCA will be one more element that the affected entities will have to keep in mind when dealing with financial transactions.
Those who think they will be affected should speak with an expert. A good first step to learn more is to visit the website of the IRS.
With this new legislation, the Internal Revenue Service (IRS) is “inviting” all financial entities outside the U.S. to provide information about their American clients regarding their investments and savings. Required to “voluntarily” supply said information, many non-U.S. private entities will become collection agents for information that interests the IRS.
This new rule concerns not only banks, but also any entity that deals with the investment and negotiation of securities, commodities and derivatives, such as stockbrokers, central custodians, insurance companies and investment funds. It applies to every type of client, be it an individual or a legal entity, who is or who should be a U.S. taxpayer and who is a proprietor or beneficiary of assets outside the U.S. That is, it applies to any U.S. citizen, including people who were born in the U.S. but live in another country and haven’t renounced their U.S. citizenship, people with a dual citizenship, and permanent U.S. residents or green card holders. If you plan to spend a good amount of time living in the U.S. during a calendar year, you could also be considered a potential taxpayer.
Not accepting this invitation to voluntarily participate is not an option for financial institutions. Those who opt out will have to face financial isolation and a serious accusation of lack of transparency, among other penalties which would seriously affect their reputation.
Each country will have to meet new challenges. Guatemala, and its banking system specifically, will soon have to resolve conflicts with its local laws and its constitution in order to be able to provide that information to Uncle Sam. Many will discuss how laws that are unilaterally dictated by one country violate sovereignty. Many will also discuss the injustice of imposing obligations on a number of entities without offering them any compensation. The U.S. will not cover the cost of implementing these measures or compensate in any other way.
In most cases, for those who are not American, FATCA will have no impact. If someone opens a new account or has an existing one, it is almost inevitable that his or her financial institution will ask for some additional information or documentation to prove that he or she is not American. If you do not feel like providing said documentation, your account will be labeled as recalcitrant, which could have serious implications.
FATCA will be one more element that the affected entities will have to keep in mind when dealing with financial transactions.
Those who think they will be affected should speak with an expert. A good first step to learn more is to visit the website of the IRS.