‍‍‍Foreign+Account+Tax+Compliance+Act+(FATCA)

=Foreign Account Tax Compliance Act (FATCA)=

FATCA is a US law designed to collect information about US tax payers holdings outside of the US. FATCA requires US taxpayers that have assets with a aggregated value of more than 50,000 US$ in foreign holdings to report to the IRS on the form 8938. Also FATCA requires foreign financial institutions to report directly to the IRS certain information of US tax payers holding financial accounts or a substantial ownership in a company abroad. By FATCA the IRS outsource the collecting of information of assets and holdings that US tax payers have invested abroad. FATCA was passed in 2010, and will be applied as of the 1st of January 2014. A more detailed schedule can be found in the links down below.

Countries
Governments can sign a treaty with the US to simplify the FATCA requirements for financial institutions in the country concerned. Some countries as Great Britain and Norway have signed the treaty, China on the other hand have informed that their banks are not allowed to share the required information. When signing a treaty with the US there is to possible options;

ALERT: [|Notice 2013-69]: FFI agreement for Participating FFI and Reporting Model 2 FFI ||
 * * ===Model 1 IGA:=== ||
 * |||| * The partner jurisdiction agrees to report to the IRS specified information about the U.S. accounts maintained by all relevant FFIs located in the jurisdiction. ||
 * |||| * FFIs identify U.S. accounts pursuant to due diligence rules contained in Annex I of the IGA. ||
 * |||| * FFIs report specified information about their U.S. accounts to the partner jurisdiction. ||
 * |||| * The partner jurisdiction, in turn, reports such information to the IRS on an automatic basis. ||
 * |||| * The exchange of information under a Model 1 IGA may be on a reciprocal or nonreciprocal basis. ||
 * |||| * Safeguarding Data: Jurisdictions signing a reciprocal Model 1A IGA with the United States will be asked to complete a Data Safeguards/Infrastructure Workbook. The information in this workbook will facilitate the evaluation of safeguards and provisions regarding confidentiality, use, and infrastructure effectiveness prior to exchanging information. The United States’ response to data safeguards is included in this workbook. See [|Safeguarding Data] ||
 * * ===Model 2 IGA:===
 * |||| * The partner jurisdiction agrees to direct and enable all relevant FFIs located in the jurisdiction to report specified information about their U.S. accounts directly to the IRS. ||
 * |||| * FFIs identify U.S. accounts pursuant to due diligence rules contained in Annex I of the IGA. ||
 * |||| * FFIs report specified information about their U.S. accounts to the IRS. ||
 * |||| * FFIs also report to the IRS aggregate information with respect to holders of pre-existing accounts who do not consent to have their account information reported, on the basis of which the IRS may make a “group request” to the partner jurisdiction for more specific information. ||

FFI (Foreign Financial Institutions) and NFFE (Non Financial Foreign Ententities
For foreign financial institutions FATCA will be a huge extra cost. Gathering information and providing the information will be a daunting task and might affect US customers as there might be significant costs for the bank to comply with FATCA. This can lead foreign banks not to be willing to open accounts to US tax payers abroad.

Some of the tasks for FFI:s are;


 * * "Under FATCA, to avoid being withheld upon, foreign financial institutions (FFIs) may register with the IRS and agree to report to the IRS certain information about their U.S. accounts, including accounts of certain foreign entities with substantial U.S. owners ||
 * * FFIs that enter into an agreement with the IRS to report on their account holders may be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA ||
 * * The FATCA regulations exempt many categories of FFIs from the requirement to register and report, including ||
 * || * Most governmental entities ||
 * || * Most non-profit organizations ||
 * || * Certain small, local financial institutions ||
 * || * Certain retirement entities ||
 * * FFIs include, but are not limited to: ||
 * || * Depository institutions (for example, banks) ||
 * || * Custodial institutions (for example, mutual funds) ||
 * || * Investment entities (for example, hedge funds or private equity funds) ||
 * || * Certain types of insurance companies that have cash value products or annuities ||
 * * Unless otherwise exempt, FFIs that do not both register and agree to report face a 30% withholding tax on certain U.S.-source payments made to them." ||

US Tax Payers
Us Tax Payers basically needs to provide more information. US Tax Payers need to inform the IRS about assets abroad with a aggregated value of more than 50,000 US$. All concerned tax payers need to fill in the form 8938 on an annual basis. If this requirement is not met, the IRS will issue large penalties.

Critique on FATCA
FATCA has met a great amount of disbelief and wonders about the effects of FATCA. The FATCA will create a lot of costs to different stakeholders, as the main part of the law, the information gathering is up to to the FFI:s, NFFE:s and US tax payers. All this information gathering is mandatory, otherwise the IRS will withdrawOne site repealing FATCA is the site RepealFATCA. Some of the disadvantages of FATCA according to the site is:

" the effect of:

FATCA has had some interesting implications. As an example Tina Turner resigned her US citizenship.
 * - violating Americans’ constitutional protections;
 * - overstepping the limits of Executive power at the expense of Congressional authority, especially the Senate’s advice and consent to the ratification of treaties;
 * - disregarding the mutual respect of sovereignty among nations;
 * - draining money from the federal treasury under the guise of replenishing it;
 * - punishing Americans who work abroad bringing business to the U.S.;
 * - setting up a global financial fishbowl, with personal financial information “shared” among governments worldwide;
 * - leading to higher taxes and, eventually, international taxation;
 * - imposing expensive regulatory mandates on foreign and U.S. business, with costs passed on to consumers;
 * - threatening American jobs and the American economy by scaring off foreign investment in the United States;
 * - violating trade agreements; and
 * - injuring America’s global competitiveness."

Links to two pages that presents FATCA further with nice time schedule animations
ey.com FATCA Info Deloitte; FATCA Key Dates Animation

FATCA US Information pages
US Treasury IRS