The controversial US Foreign Account Tax Compliance Act (FATCA) was introduced around the world on the 1st July 2014.
As part of the Act’s “withholding stage”, all foreign financial institutions (FFIs) will now have to disclose all US related information about new and existing clients to the US Internal Revenue Service (IRS).
In the event that an FFI fails to comply, a 30% tax will be imposed by US authorities on withholdable payments made to FFIs.
Qualifying payments can include items such as interest or dividends from US sources, or sale proceeds from property that can produce US interest or dividends, such as those frequently made by expat US citizens and US businesses operating internationally.
Labelled equal parts “unhealthy” and “revolutionary”, FATCA is the IRS’s ambitious attempt to crack down on global tax avoidance by US citizens who work abroad or hold their money in offshore accounts without declaring it to the US authorities.
Passed in 2010 by Barack Obama, the act requires FFIs to identify and report the financial details of their American clients, whose tax duties still apply when they move either themselves or their money from the US.
FATCA could lead many companies to drop American clients because of the cost and effort they will now encompass.
A lot of institutions are shrinking their US investments and reviewing whether they offer their products to US clients at all. A lot of Americans will be asked to move on, this has happened in Switzerland and in the UK.
The large size of the US will place passport holders into a predicament. The US has such long arms it is hard to hide from the authorities.
Alconbury Trust works with FCA and SEC registered and regulated Fund Managers that comply to FATCA rules.