Foreign Account Tax Compliance Act (FATCA) Resource Center


FATCA stands for the "Foreign Account Tax Compliance Act."
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On March 18, 2010, the Hiring Incentives to Restore Employment (HIRE) Act of 2010 was enacted into law. The Act added a new chapter 4 (sections 1471 - 1474) to the Internal Revenue Code. Chapter 4 expands the information reporting requirements imposed on foreign financial institutions (FFIs). These rules are commonly referred to as the Foreign Account Tax Compliance Act rules or "FATCA." The FATCA provisions impose a 30 percent withholding tax on payments to a foreign financial institution (FFI) of U.S. source interest, dividends, rents, salaries, or gross proceeds from the sale of U.S. assets. The tax can be avoided, but only if the FFI enters into an agreement with the IRS to comply with information reporting requirements with respect to U.S. accounts and the FFI agrees to withhold on certain payments to non-participating FFIs and individual account holders.  

The U.S. Department of Treasury released several model intergovernmental agreements (IGAs) to facilitate FATCA compliance in certain countries. Under the "Model I" IGA approach, FFIs based in the signatory country are not required to sign an FFI agreement and report directly to the IRS. Instead, the Model I country promulgates its own rules mandating that in-country FFIs should report to the local revenue authority, and the revenue authority agrees to share relevant information with the IRS. Under the "Model II" IGA approach, in-country FFIs are still required to sign FFI agreements with the IRS, but they are relieved of certain FATCA requirements, such as the obligation to close the accounts of recalcitrant account holders. More than 100 countries have signed Intergovernmental Agreements (IGAs) with the U.S. or have reached "agreements in substance" and are being treated by the Treasury as having an IGA in effect. These agreements are expected to enable FATCA compliance by overcoming obstacles in local law that may prevent FFIs from entering into FATCA agreements with the IRS. 

FATCA is a key component of the federal government's push for heightened tax compliance among U.S. taxpayers with foreign accounts. On January 17, 2013 the Department of Treasury issued final regulations under FATCA. 

FATCA generally became effective on January 1, 2013, and withholding took effect for individuals on July 1, 2014. FATCA withholding began for non-compliant banks and broker-dealers in non-IGA jurisdictions starting in January, 2015.



Date   Event  

Mar. 18, 2010

HIRE Act enacted into law- adding FATCA to Internal Revenue Code

Feb. 8, 2012

IRS issued proposed regulations to implement the new law

Mar. 8, 2012

RFP Bidders Conference

Jan. 17, 2013

Treasury Department issued final regulations under FATCA

Aug. 19, 2013

FFI registration opens; however, information entered into the portal prior to January 1, 2014 will not be treated as a final submission.   

Jan. 1, 2014

Financial institutions may now finalize and submit registration.

Jun. 2, 2014

IRS will publish the FFI list

Jul. 1, 2014

Begin FATCA withholding

January 1, 2015

Begin withholding on non-compliant banks and broker-dealers in non-IGA jurisdictions.


FATCA is one of the most comprehensive statute ever passed to enhance compliance by Americans with U.S. tax laws through information reporting and withholding. Virtually the entire burden for implementing the new law falls on U.S. and foreign financial services firms. SIFMA member firms, at a cost of hundreds of millions of dollars have made and continue to make significant modifications to their internal systems, control frameworks, processes and procedures to prepare for FATCA withholding. SIFMA appreciated the Department of Treasury's decision to delay FATCA withholding until July, 2014 to give our members sufficient time to develop such systems and for foreign governments to sign FATCA-related intergovernmental agreements to ease compliance.  

SIFMA supports the objective of Congress and Treasury to improve offshore tax compliance. SIFMA has submitted extensive comments to assist the Department of the Treasury and the IRS in crafting regulations that are effective in accomplishing FATCA's goals that are commercially viable, and that will not unnecessarily disrupt the operation of the financial markets. Recently, SIFMA provided Treasury with extensive information about how various markets work in practice in order to facilitate the development of sound regulatory policies. 

SIFMA will continue to work with the Department of Treasury and IRS and with members of Congress and their staffs to ensure that FATCA is implemented in a manner that achieves these objectives. Due to the very significant costs that U.S. banks and their foreign counterparts are now incurring to implement FATCA, SIFMA does not believe this is the right time to consider expanding FATCA legislatively.  



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