6 Things you may not know about FATCA
As of January 1, 2013, foreign banks have been forced to report information about US clients directly to the US authorities. However, becoming FATCA compliant hid numerous legislative challenges that required extensive compliance standards and procedures. This required an in-depth understanding of the regulation which could still be rather confusing to clients.
Here are some essential facts:
- Individuals that hold $50,000 or more are subject to FATCA compliance requirements.
- FATCA is beyond personal. Individuals and foreign financial institutions alike will be subject to a 30% tax on their income if they fail to become FATCA compliant. This means foreign banks, brokers/dealers, insurance companies, hedge funds, securitisation agencies and private equity funds that have business with US citizens or organisations.
- If a US citizen living abroad falls into FATCA compliance category and has not been reported to the US authorities, the bank’s compliance offer could be personally charged with perjury.
- Reciprocal agreements between countries meant that authorities are able to ask US financial institutions to reciprocally disclose information about the holdings of their citizens.
- FATCA also applies to life and pensions insurance in markets where there is a savings element to the policy.
- Financial firms that have tax-efficient vehicles for US clients that are still FATCA compliant stand to gain a competitive edge.