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Foreign Account Tax Compliance Act (FATCA)

Foreign law with local impact


Foreign Account Tax Compliance Act (FATCA)The Foreign Account Tax Compliance Act (FATCA) is US. legislation enacted by the US Congress to improve tax compliance involving foreign financial assets and offshore accounts. FACTA is part of the Hiring Incentives to Restore Employment (HIRE) Act passed into law on 18 March 2010.

The legislative intent of FACTA is to ensure that there is no gap in the ability of the US government to determine the ownership of US assets in foreign accounts. This revenue raising provision is expected to significantly impact the systems and operations of both US and non-US companies. It will require foreign banks to report and disclose US interest in foreign financial institutions (FFIs). FACTA amongst other aims, seeks improve the general tax compliance level of US tax payers while also combating offshore tax evasion/avoidance through tax havens.

Companies will need to make modifications to their internal systems, control frameworks, processes and procedures for timely compliance with these regulations on or before the effective date of 1 January 2012. Banks will need to modify their KYC process to capture all the required information. Chief compliance officers, tax reporting heads and other key players will need to evaluate the potential impact of these regulations and develop a plan for managing and remeditating any potential risk associated with FATCA non-compliance.

Tax Newsletter - Foreign Account Tax Compliance Act (FATCA)

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