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What is the FATCA law?


Question

What is the FATCA law? What obligations does this law have? Who is affected by the FATCA law? Who has to report information to the IRS and the US Treasury Department? When will the FATCA law come into force? What are the consequences of not complying with the FATCA law?

Answer

FATCA is an American tax law that entered into force on July 1 of 2013 and means the Foreign Account Tax Compliance Act. The IRS and the Treasury Department drafted the FATCA Act to oblige all banking entities in the world to report on the movements that Americans have in foreign banks. The FATCA law requires natural and / or legal persons of American nationality to inform the IRS and the treasury department through the Form W-9 declaring a bank account opened abroad, either in an offshore or onshore jurisdiction. In the event that the physical or legal person considered FATCA does not complete the W-9 form, the bank will be responsible for breach of the law and could be sanctioned for not cooperating with the United States. The bank is responsible for sending an annual report to the IRS with the movements of the American residents. The consequence of not complying with the FATCA LAW is a penalization by the IRS and the American Treasury Department. The banking and insurance entities that do not comply with the FATCA law are not able to carry out any activity on American territory. 

The FATCA law affects people who are considered American and fall under art least one of these categories: 

  • Any person born in the United States and its territories: Puerto Rico, Northern Mariana Islands, US Virgin Islands, Guam and American Samoa. 
  • The FATCA law does not affect those who have renounced their nationality. 
  • Temporary or indefinite American residents including those who have the Green Card and peopel who spent more than 183 days in the United States in the last 3 years. 
  • Companies that are incorporated under the laws of the United States. 
  • American trusts.

FATCA Obligations for banks 

  • Banks are required to provide the American client with W-9 forms to file taxes with the IRS. 
  • To inform about the name, address, US TIN, account numbers, balances and payments made or collected in account. 
  • They can make retentions of 30%, if the transfer is made to an account that does not comply with the FATCA law such as Venezuela, Iran, North Korea or Russia. 

FATCA is a law impelled by the American government to collect taxes from considered American residents around the world. The numerous scandals of the bank UBS in Switzerland and the millions in fines imposed by the IRS have managed to intimidate all the financial entities of the world to comply with this law. Currently many entrepreneurs who are not Americans or residents of the United States and have formed an American company, are seeing how the banking entities are declining and canceling their bank accounts for possible legal actions by the IRS and the treasury department. 

Form FATCA W-9 in English

You can read and download the free W-9 FATCA form in English to submit to the IRS in the event that you are considered American, according to the points described above.



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