FATCA Characterizations And Reporting Requirements

Congress enacted the Foreign Account Tax Compliance Act (FATCA) to better detect tax evasion and ultimately deter U.S. citizens and residents from concealing money outside the United States. Many other governments have since entered Intergovernmental Agreements (IGAs) with the United States to rationalize conflicts of law and simplify the reporting and compliance burdens on their financial institutions.

Under FATCA as well as IGAs, a foreign entity must determine whether: (i) it is a financial institution, (ii) it maintains financial accounts, (iii) it is required to register with the IRS, and (iv) it needs to report any information to the IRS.

FATCA and IGAs require that a foreign financial institution and nonfinancial foreign entity identify and disclose specified U.S. account holders or become subject to a 30 percent U.S. withholding tax.

This complicated piece of legislation has a broad scope and affects not only the financial services sector, but also entities with multinational operations. Provisions also require individuals with an interest in or control over certain foreign accounts to file additional disclosure forms.

Ensuring FATCA Compliance

Financial institutions, nonfinancial foreign entities, flow-through entities and individuals need to ensure that they are in compliance with FATCA/IGAs or run the risk of reputational exposure and/or serious civil penalties.

Our FATCA/IGA practice includes:

  • Advising foreign financial entities and banking associations on how to deal with FATCA.
  • FATCA/IGA classification of an entity to determine whether it is a foreign financial institution (FFI), deemed compliant FFI, nonfinancial foreign entity or other type of foreign entity.
  • Advising FFIs in the financial services, insurance, funds or private client areas as to their FATCA obligations and how to comply with FATCA/IGAs.
  • Advising how an entity can exploit the sponsored/sponsoring FATCA/IGA classification status.
  • Due diligence protocols.
  • Advising with respect to miscellaneous questions relating to FATCA or IGAs.
  • Advising U.S. and foreign persons on how to fill out the numerous FATCA-related forms and the creation of substitute documentation.

FATCA Experience Worldwide

Our experienced team of international tax lawyers collaborates from offices in Tampa, Florida; San Francisco, California; Washington, D.C and Zurich, Switzerland, to serve our clients worldwide.