The Foreign Account Tax Compliance Act

Dr. Trudy Marie Attard | 18 Jun 2012

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The Foreign Account Tax Compliance Act (FATCA) is set to have a global impact unless understood and planned for. In essence FATCA obliges foreign financial institutions (FFIs) to provide detailed information about U.S. account holders to the U.S. tax authorities.

FATCA Timeline

  1. 18th March, 2010 - enacted in 2010 as a part of the Hiring Incentives to Restore Employment Act (Pub. L. No. 111-147)
  2. 2010/2011 – Publication of FATCA guidelines.
  3. 2012 – Issue of FATCA proposed regulations; final regulations expected later in the year.
  4. 31st December 31, 2012 - Qualified Intermediary and Other Withholding Agreements expiring on this date will be automatically extended until December 31, 2013.
  5. 1st January, 2013 – FATCA becomes effective to U.S. institutions. This means that U.S. Withholding Agents are to carry out due diligence and the necessary systems must be operational. The withholding is not applicable to obligations outstanding on 1 January 2013 unless materially modified.
  6. 1st July, 2013 – Existing Foreign Financial Institutions Agreements will have a July 1, 2013 effective date. This is the date used to determine the account balance to apply the $50,000 de minimis rule for individual accounts and $250,000 for entity accounts.
  7. 1st January, 2014 – Commencement of 30% withholding on fixed or determinable annual or periodical U.S.-sourced payments to non-participating FFIs.
  8. 30th September, 2014 – Reporting deadline for participating FFIs to report balances and identifying information of all classified U.S. account holders.
  9. 1st January, 2015 - Commencement of withholding on the gross proceeds from the sale of property that can produce U.S.-sourced interest or dividends to all non-participating FFIs.
  10. 1st January, 2016 (previously July 1, 2013) - Limited FFIs previously exempt from FATCA compliance to become participating FFIs to avoid other participating FFIs within the expanded affiliated group from losing their participating FFI status.
  11. 15th March, 2016 – Additional reporting requirement of income paid or credited to specific U.S. accounts.
  12. 1st January, 2017 (previously January 1, 2015) – Proposed withholding on foreign pass-through payments.
  13. 31st March, 2017 – Additional reporting requirement of gross proceeds.


As of 1st January 2014, U.S. entities are obliged to withhold 30% on certain payments to Foreign Financial Institutions (FFIs) except where the FFIs have entered into an agreement with the U.S. tax authorities. The agreement obliges FFIs to carry out due diligence on U.S. account holders, to report balances and identifying details on U.S. tax authorities and to make withholdings on payments, where applicable. Taxpayers may incur penalties (40%) for undisclosed overseas assets and underpayments.

U.S. account holders are obliged to report foreign-held assets on their U.S. tax returns if, in the case of individuals, the value exceeds $50,000, or in the case of entities, $250,000. A higher reporting threshold applies to overseas residents. The reporting requirement commences from the tax return due for 2011 income. Failure to report will result in a penalty of $10,000 and a penalty up to $50,000 for nondisclosure following notification).

France, Germany, Italy, Spain, and the United Kingdom have already consented to co-operate with the U.S. 


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