Grow FATCA, Grow!
A decision from the U.S. to recognize those with agreements “in substance” changes the number of countries with IGAs from 22 to 48.
Jeffrey S. Freeman, J.D., LL.M
If you notice money missing from your bank account you start asking questions and find a way to get that money back. The same thing happened back in 2010 when it was estimated that the U.S. loses $500 billion annually due to tax evasion on foreign source income and assets hidden outside the country. Congress created the Foreign Account Tax Compliance Act (FATCA) and in the four years since the creation of this law, it is remarkable to see the wide acceptance among other nations. There still exist several organizations that openly oppose FATCA and are hoping that the July 1, 2014 effective day will not come. But regardless of those opposing FATCA, it is here to stay and its participating countries are growing daily.
Originally the deadline for foreign financial institutions (FFIs) to register was April 25th, but due to the increased interest the U.S. Treasury has extended the deadline to May 5th providing an additional 10 days to register. These financial institutions will be required to provide the details of U.S. account holders that have deposited over $50,000 or be frozen out of U.S. markets. Institutions may not like the terms, but they are complying. FFIs must initially report account numbers, balances, names, addresses, and Tax Payer Identification numbers (TIN). Under FATCA FFIs will be responsible for imposing a 30% tax on those account holders that do not get into full U.S. tax compliance. FFIs are currently working to identify their U.S. account holders and determining if they are in compliance or seeking to become compliant.
FATCA is now larger than anyone could have imagined. Soon the IRS will be drinking from a fire hose as all the information provided under FATCA enters their systems. The U.S. has established Intergovernmental Agreements (IGAs) with 26 countries so far and many more are under way. There was some confusion in countries where IGAs are in the works, but have not been signed on what the impact will be to financial institutions. The U.S. now states that it does not need immediate signatures on IGAs, but countries that have FATCA agreements “in substance” with the U.S. will be treated as complying with FATCA. This decision increase the number of countries that have IGAs with the U.S. from 26 to 48, a huge overnight change.
As the number of countries participating in FATCA grows beyond the standard Swiss accounts your concerns about your own tax situations may be growing. Please contact a tax professional today to assist you in coming into compliance today.