The question to answer when deciding whether the FATCA legislation imposes any obligations on you is to is whether you are a US citizen. This may be simple enough if you hold a green card or US passport. However, the IRS are also interested in people born in the US but who have lived overseas all of their lives or achieved citizenship elsewhere, or have dual citizenship.
The problem here is that there are penalties imposed on individuals whether or not they knew, intended or believed that they are breaching the rules. So if your citizenship is under question, getting professional advice and erring on the side of caution could be the best way to avoid a fine.
What do you have to do?
As an individual, this depends on the value of your investments held in offshore institutions. So if your offshore portfolio is more than $50,000, the obligation to disclose this to the IRS kicks in and you must complete an extra form with your tax return.
Not only will you, as an individual, have to make reports about your own assets; you will have to give you bank or investment house further information about yourself to enable them to meet their own disclosure requirements about you.
You may also need to consider whether the FFIs (Foreign Financial Institutions) you use are FATCA compliant. This is because the consequences of failure to comply with the disclose provisions adequately can include a 30% “withholding tax” on US derived income for that organisation. A 30% charge can and will have a significant impact on any organisation, and you may need to ask whether the FFIs you use could withstand such a charge and continue to give you the service you are used to from them. Commentators have suggested that the compliance costs in this piece of legislation are so high that they will outweigh the taxes it is expected to generate. Some FFIs are bound to suffer, and you need to make sure that, as a customer, you are not going to bear the extra costs involved.