US: Foreign Account Tax Compliance Act (FATCA)—summary
Produced in partnership with John Narducci (Partner) and Stephen C Lessard (Associate) of Orrick, Herrington & Sutcliffe LLP
US: Foreign Account Tax Compliance Act (FATCA)—summary

The following Tax guidance note Produced in partnership with John Narducci (Partner) and Stephen C Lessard (Associate) of Orrick, Herrington & Sutcliffe LLP provides comprehensive and up to date legal information covering:

  • US: Foreign Account Tax Compliance Act (FATCA)—summary
  • What is FATCA?
  • What is the FATCA withholding tax?
  • What are passthru payments?
  • What are withholdable payments?
  • What is a financial account?
  • What is an intergovernmental agreement?
  • What are the effective dates for implementation of the FATCA rules?

The Hiring Incentives to Restore Employment Act (the HIRE Act) include provisions that give the US Internal Revenue Service (the IRS) administrative tools to:

  1. detect, deter and discourage offshore tax abuses, and

  2. encourage improved foreign account tax compliance

These provisions are based on legislation originally introduced in the House of Representatives and Senate in October 2009 as the Foreign Account Tax Compliance Act of 2009 (FATCA). The proposals are, therefore, generally (and in this Practice Note) referred to as FATCA or the FATCA regime.

The HIRE Act, and with it the FATCA regime, was signed into United State (US) law by President Obama on 18 March 2010.

The US FATCA regime is contained in:

  1. Chapter 4 (Taxes to enforce reporting on certain foreign accounts) of Subtitle A (Income taxes) of Title 26 (Internal Revenue Code) of the United States Code (USM), and

  2. Final Regulations, TD 9610, TD 9657 and TD 9809 (regulations relating to information reporting by foreign financial institutions and withholding on certain payments to foreign financial institutions and other foreign entities) published on 28 January 2013, 6 March 2014 and 6 January 2017 respectively (the FATCA Regulations)

Correcting amendments to the FATCA Regulations were published on 10 September 2013 and 30 June 2017.

What is FATCA?

FATCA represents an effort by the US to tackle perceived tax evasion by US citizens