Foreign Account Tax Compliance Act (FATCA)
Under newly proposed U.S. Treasury Code Sections 1471 through 1474, effective for payments after December 31, 2012, all foreign financial institutions (FFIs) will be required to enter into disclosure compliance agreements with the U.S. Treasury, and all non-financial foreign entities (NFFEs) must report and/or certify their ownership or be subject to the same 30 percent withholding. This new reporting and withholding regime will ultimately impact current account opening processes, transaction processing systems and “know your customer” procedures utilized by foreign banks. Chief compliance officers, tax reporting heads and other key players within your organization will need to evaluate the potential impact of these regulations and develop a plan for managing and remediating any potential risk associated with Foreign Account Tax Compliance Act (FATCA) non-compliance.
The intent of FATCA is to ensure the ability of the U.S. government to determine the ownership of U.S. assets in foreign accounts. FATCA’s impact will affect individual investors, account holders and smaller foreign entities in addition to U.S. and foreign companies. The FATCA provisions further tighten the tax loopholes that some may have been exploiting. As such, we expect the U.S. government to find and collect otherwise undetected taxes.