9 things you should know about FATCA
The final version of Foreign Account Tax Compliance Act (FATCA) was released in January 2013 by US Department of the Treasury and Internal Revenue Service. Intended mainly to combat tax evasion in the country, FATCA brings many new regulatory and reporting standards to compliance. It’s no small thing to be ignored, as non-compliance could result in grave consequences. With that in mind, here are nine things you should know about FATCA.
- The lack of something like FATCA costs billions
Tax evasion is a major problem in a lot of countries. It’s estimated that people hiding their money in offshore accounts costs the US economy about $100bn a year. That makes it clear why FATCA is as important as it is.
- FATCA aims to reclaim vast amounts of money
The US expects FATCA to raise around $7.6bn for the IRS in tax revenue over a period of ten years.
- The mandates of FATCA are thorough
FATCA requires foreign financial institutions to register themselves with the IRS, and to collect and report information on the accounts of the US clients offshore. It operates by receiving information relevant to taxing, on US citizens that hold accounts offshore.
- Its purview is extensive
FATCA applies to any financial institution globally that has associated itself with clients from the US with over fifty thousand dollars in their account. This includes banks, fund managers, and custody banks, and covers any entity whose books have US clients.
- It has severe consequences
In December 2013, the penalties for non-registration in December 2013 included withholding thirty percent tax on new accounts or contracts. The general withholding requirements came in January 2014, with non-compliance of rules resulting in the withholding of thirty percent of any US client’s income.
- Who exactly does it apply to?
Account holders of offshore institutions who are associated with US taxpayers or clients from the US required to pay taxes in the country fall under the purview of FATCA.
- What does it need to operate?
Inter-Governmental Agreements (IGAs) are signed between countries and the US government to simplify compliance for financial institutions. There are two IGA models; one where the institutions report directly to the IRS, and the other where institutions report to their country’s government, which in turn will subsequently share the information with the IRS.
- What does it say about sub-funds?
As of now, there are no clear, distinct guidelines regarding sub-funds: whether the umbrella fund will suffice, or if each sub-fund has to be registered individually. Consultants say that the IRS and the Treasury haven’t offered much clarity on the matter.
- What does it mean for gold values?
Censuring offshore accounts could have a long-term effect on the market because of the potential removal of US securities from foreign institutions. Such large drops in investment dollars can cause a crash, devaluing the USD. This will likely see a rise in the value of gold.
If you need any sort of help with FATCA compliance DataTracks has just what you need. With features ranging from flexible data entry to version history and audit trails, no matter what you’re looking for concerning FATCA or CRS regulations, DataTracks can help.