US Compliant Options

Foreign Account Compliance Act (FATCA)


FATCA was adopted by the U.S. congress in January 2013 with the aim of preventing the incidence of tax evasion by U.S. individuals. According to the FATCA, Foreign Financial Institutions (FFIs) are required to conclude an agreement with the Internal Revenue Service (IRS) by 31 December 2013 at the latest and from then on are obliged to regularly report extensively on US persons. If such institutions fail to meet these obligations, they will become subject to a 30% withholding tax.


What is new in FATCA?

U.S. taxpayers holding foreign assets with an aggregated value exceeding $50,000 have to report certain information about those assets in a new form (Form 8938) along with their annual tax report. Failure to report Form 8938 will result in penalty from $10,000 to $50,000. Undisclosed assets will be subject to an additional understatement penalty of 40%.


Who is a FFI?

  • Any Entity that accepts deposits from customers like a Bank, Credit Union, Savings & Loans.
  • Entities that as their main course of business manage financial assets for third parties like Broker-Dealers, some Trusts.
  • Any foreign Entity that trades securities or commodities like Hedge funds, Private Equity Funds, Mutual Funds, Investment Firms.
  • FFIs include Insurance Companies that offer annuities and life insurance with an investment component.


Exceptions include:

  • Retirement Plans.
  • Small FFIs (Family Trusts).
  • Certain Insurance Companies.
  • Charity Organizations.
  • FFIs with small accounts or with only local activity.
  • Investment funds, if they include non-taxable persons.
  • Holdings or Non-Financial Groups treasuries.
  • Newcos or in chapter 9 or 11 that aren’t FFIs.


Foreign Bank Account Report (FBAR)

Under the IRS’s FBAR rules, any US person (not necessarily a US resident) who has a financial interest in or signature authority, or other authority, over any financial account in a foreign country, if the aggregate value of these accounts exceeds USD10,000 at any time during the calendar year, is required to file a return.