Here is a good article from Tax-News.com on FACTA or the Foreign Account Tax Compliance Act. My favorite part comes at the end where it states “We have already heard how compliance costs may well outweigh tax revenues, while many financial services companies, especially in Europe, are simply having nothing more to do with US clients, concluding that to do so would be more trouble than it’s worth. What’s more, it will be interesting to see how the IRS does cope with the information tsunami that is headed its way.” Gotta love our government looking out for us.
The Foreign Account Tax Compliance Act is seen by some as a necessary tool to combat unacceptable tax avoidance by US citizens placing money in foreign bank accounts at a time when more ‘patriotic’ taxpayers are paying their fair share towards reducing the federal deficit, and by others as an unlawful incursion by the US government into the legal affairs of sovereign states and another nail in the coffin of individual privacy. Like it or not, however, FATCA, as it is more popularly known, is here to stay.
While FATCA may not have occupied the thoughts of the average US taxpayer over the past couple years – indeed, it is only likely to affect a relatively small percentage of the US population – the fact is that this far-reaching piece of legislation will have implications not only for US investors with interests abroad, but also for banks and other foreign financial institutions all over the globe which deal with US clients.
FATCA was enacted by the US in March 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act and is intended to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest, at foreign financial institutions (FFIs). Failure by an FFI to disclose information would result in a requirement to withhold 30% tax on US-source income.