“Uncle Sam wants to ensure that he collects his taxes wherever his nieces and nephews reside”. I overheard one of my bankers explaining this reasoning to another client in response to a query about the FATCA questionnaire. In accordance with one of our favorite superheroes in the Book of great Parables and Fables, we must render unto Caesar the taxes that are due unto him. This explanation resonated with me and I want to present you herein with some facts about FATCA .
What is FATCA?
FATCA is an acronym for Foreign Account Tax Compliance Act and it was introduced by the United States Government in 2009 to ensure that U.S. persons with financial assets outside of the United States are paying U.S taxes.
What is the rationale behind introducing FATCA legislation?
The main objective is to obtain information on U.S. persons who may have financial assets outside of the U.S, or those U.S. persons who may be investing and earning income through financial institutions outside the United States.
Who is affected by FATCA?
U.S. citizens or U.S. registered businesses such as limited liability companies, trusts, partnerships, estates;
US individual residents, including US Green Cardholders;
US individuals who own certain foreign financial accounts or other offshore assets;
Local businesses/companies that have U.S. ownership;
FFIs- any non U.S. financial institution (an institution that accepts deposits, invests, trades securities).
What are financial Institutions required to do with respect to FATCA?
Undertake certain identification and due diligence procedures involving new customers desirous of opening new accounts;
Report annually to the Internal Revenue Service (IRS) information on customers who are U.S persons or foreign entities with substantial U.S. ownership;
Close accounts of certain customers who do not wish to cooperate with the new FATCA requirements including:
(a) Non-participating financial institutions or ;
(b) Customers who fail to provide sufficient information to determine whether or not they are a U.S. person.
Who is a U.S. person for the purposes of FATCA?
A citizen or resident of the United States, including a green card holder;
A partnership, corporation, estate, trust incorporated or created under US law (US incorporated entity);
A non U.S. incorporated entity having substantial ownership held by –an individual who was born in the US or is a US citizen/resident (including a green card holder) or has a US address or a US mailing address;
A U.S. incorporated entity.
How would I know if I am a U.S. Person under FATCA?
The following are captured in this definition:
U.S. resident or citizen including US Green Card holders;
U.S. Place of Birth;
U.S. home or mailing address;
Only address is a U.S. PO Box, C/O mail address
Power of attorney or signing authority having U.S. address
A U.S. telephone number;
Standing order to transfer funds to an account in the U.S.
What are the FATCA forms?
There are various FATCA forms that are to be completed by the Applicant:
U.S. Person Status Form (Individuals only);
Non US Person Declaration;
Non US Person /Letter of Explanation of US Address;
Waiver of Confidentiality/Data Protection for US Person.
The Internal Revenue Service forms are:-
Different documents are required for individuals and for companies. There are various classification for business and companies for the IRS forms.
The content herein is provided for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney at law to obtain advice with respect to any particular issue or problem.
 The King James Version: Mathew Chapter 22 Verse 21
About the Author:
A.Sydney is an attorney at law in Trinidad and Tobago. She specializes in AML/CFT/FIU Compliance, Taxation and provides Corporate Secretarial Services. Feel free to explore the website for her portfolio of companies: http://asydneygroup.com