Foreign Account Tax Compliance Act (“FATCA”)
President Obama signed Foreign Account Tax Compliance Act (“FATCA”) in March 2010 requiring all foreign financial institutions (FFI) must disclose all the foreign bank account information hold by U.S. persons. Recently, the Treasury Department and the Internal Revenue Service recently issued the reporting guidance for Foreign Account Tax Compliance Act (“FATCA”), which is included in the Hiring Incentives to Restore Employment (“HIRE”) Act.
According to the new provision, starting from January 1, 2013, all foreign financial institutions are required to report to IRS about financial accounts hold by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest, or subject to 30 percent tax withholding on U.S. source of income. For those non-financial institutions (regular companies), if they have at least one U.S. shareholders who have more than 10% shares and 51% capital, such companies must report to IRS those shareholders information.
In order to comply with FATCA, some foreign banks have started to change the procedures for opening new account, update computer system, and request detail client information, for example, if they have U.S. green card or passport.
Timeline for Participating FATCA
- January 1, 2013 – IRS start to accept FFI electronic applications
- June 30, 2013 – must enter into the agreement to be identified as participating FFI
- January 1, 2014 – withholding on payments
- January 1, 2015 – withholding on payments and gross proceeds
For more information, please visit IRS website: http://www.irs.gov/businesses/corporations/article/0,,id=236667,00.html
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