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Foreign Account Tax Compliance Act (US indica (A person identified as a US…
Foreign Account Tax Compliance Act
Designed to limit the evasion of US taxpayers holding offshore accounts by placing reporting requirements on forge in financial institutions
FATCA was implemented further the Hiring Incentives to Restore Employment Act
Foreign Financial Institutions (FFIs) are required to report information about financial accounts held by US taxpayers, or held by forge in entities in which US taxpayers hold a substantial interest
FFIs report directly to the US IRS
Some jurisdictions have entered into an intergovernmental agreement with the U that allows FFIs to report directly to her national tax authorities who in turns will report to the IRS
FFIs include non-US entities such as banks, brokers, dealers, insurance companies and trust or fiduciary services business
FATCA provides that a withholding tax will be applied on any US-sourced income and gross proceeds paid to non-participating FFIs
A non-reporting FFI is one that has not yet signed an agreement with the IRS to undertake due diligence on the accounts held within its organisation and to report on the relevant US persons each year
FFIs that have entered into an agreement are referred to as participating FFIs, these entities can avoid the withholding tax
Offshore service providers have invested considerable resources into improving their systems and general administration to comply with the FATCA requirements and provides information such as
Name
Address
Tax identification number of the US taxpayer in receipt of income
US indica
A person identified as a US citizen or permanent resident of the US
A US address
A US place of birth
A US telephone number
Standing instructions to transfer funds to an account maintained in the US
A power of attorney or signatory authority granted to a person with a US address
A US hold mail address
Offshore centres' privacy legislation will not protect a US taxpayer from the requirements of FATCA. The FATCA rules provide that any US customers must be asked to waive their rights under privacy legislation
The FFI is required to close their account if they refuse to provide this waiver
The UK and other jurisdictions have entered into a FATCA intergovernmental agreement with the US. Many offshore centres, including Jersey, Guernsey, the Isle of Man and the Cayman Islands have also sought to negotiate such agreements in order to facilitate the reporting of relevant financial information held in their jurisdiction