Agree or disagree with the Foreign Account Taxation Compliance Act (FATCA), the tax network between America and more than 100 other countries is going strong.
US expats have had to live with the consequences since 2014 and although the Republicans promised to repeal FATCA as part of their election campaign that saw President Donald Trump elected in 2016, no action has been taken so far to remove the law.
What is FATCA?
FATCA is designed to identify US taxpayers controlling bank accounts and investments overseas who are avoiding tax on their income or chargeable gains.
The IRS cross-checks financial data from foreign tax authorities and banks against US tax returns to make sure US taxpayers with overseas assets are paying the correct amount of tax.
In return, the IRS offers reciprocal data to foreign tax authorities about the financial affairs of their nationals with bank accounts and investments in the USA.
Banks failing to comply with FATCA data notification rules face heavy fines and other sanctions that could stop them trading in the US.
FATCA countries – Model 1 agreements
Here’s the latest US Treasury list of 94 countries complying with FATCA with Model 1 agreements:
- Antigua and Barbuda
- British Virgin Islands
- Cabo Verde
- Cayman Islands
- Costa Rica
- Czech Republic
- Dominican Republic
- Holy See
- Isle of Man
- New Zealand
- Saudi Arabia
- Slovak Republic
- South Africa
- South Korea
- St. Kitts and Nevis
- St. Lucia
- St. Vincent and the Grenadines
- Trinidad and Tobago
- Turks and Caicos Islands
- United Arab Emirates
- United Kingdom
A Model 1 agreement requires the government of the country signing the agreement to collect and check financial data about US citizens before forwarding the information to the US Internal Revenue Service.
In most cases, the IRS also exchanges tax information with the tax authority.
FATCA countries – Model 2 agreements
These 14 countries have Model 2 FATCA agreements:
- Hong Kong
- San Marino
A Model 2 agreement applies to countries where parliamentary approval is needed to relax legal restrictions about financial data sharing. Some Model 2 agreements include tax information exchange.
Foreign Financial Institution list
The IRS publishes a list of foreign financial institutions that comply with FATCA each month.
The list adds around 2,000 FFIs each month and stands at more than 300,000 institutions across 230 financial jurisdictions.