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What is FATCA?


Foreign Account Tax Compliance Actisthe provisions commonly known as the Foreign Account Tax Compliance Act that became law in March 2010.The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.

 

Who are affected by FATCA?

FATCA focuses on reporting :

1. By U.S. taxpayers about certain foreign financial accounts and offshore assets.

 

U.S. citizens, U.S. individual residents who own certain foreign financial accounts or other offshore assets must report those asset (usually if the value of the assets are over $50,000) using the form 8938.


1. By foreign financial institutions (FFIs) about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest. These FFI are :

a) Depository institutions (banks)
b) Custodial institutions (mutual funds)
c) Investment Entities (hedge funds, private equity funds)
d) Insurance companies

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Requirements for FATCA

Individuals

  • use Form 8938 to report the assets

  • attach Form 8938 to the annual income tax return (usually Form 1040)

  • the requirement for Form 8938 is separate from the reporting requirement FBAR. An individual may have to file both forms.

 

Foreign Financial Institutions (FFIs)

  • enter into an agreement with IRS and register on the FATCA Registration Webpage

  • receive a Global Intermediary Identification Number (GIIN) from the IRS,

  • comply with any required due diligence/verification procedures

  • annually report information on US accounts (name, address and US TIN of each account holder, the year-end account balance, gross receipts and gross withdrawals)

  • attempt to obtain from US accounts a waiver of applicable bank secrecy or disclosure limitation, if a waiver is not obtained close the US accounts.

  • FFIs may be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA

 

US Financial Institutions (USFI)

  • USFI is generally not required to register under FATCA, regardless of whether it maintains a foreign branch

  • USFI must register if the USFI seeks to maintain QI (qualifying intermediary) status with respect to one or more of its foreign branches. Intermediary is a US branch of certain foreign banks that has control, receipt, custody or payment of any withholdable payment.

  • USFI must register as a sponsoring entity for FFIs and agree to perform all the FATCA activities

  • reporting on accounts owned by US owned foreign entities

  • do not report on accounts owned by individuals at the year-end but issue form 1099 and 1042-S non FATCA reporting

 

How we can help to be prepared to FATCA

To help you prepare, Accelero Corp. has knowledge of the intricacies of tax law as well as local rules and regulations.

We can provide many services to help individuals and FFIs to comply with FATCA

  • Filing the form 8938 to report foreign asset

  • FBAR Filing

  • Register and receive a Global Intermediary Identification Number (GIIN) from IRS

  • Enter into an agreement with the IRS to identify  U.S. account holders and to disclose the account holders' names

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