A6.1205A Foreign Account Tax Compliance Act (FATCA)
United States legislation, known as the Foreign Account Tax Compliance Act (FATCA), requires financial institutions outside the US to pass information about the accounts of US persons to the US tax administration, the Internal Revenue Service (IRS). Any financial institution that fails to comply with this legislation is subject to a 30% US withholding tax on any US source income. The withholding and account due diligence requirements by foreign jurisdictions commenced on 1 July 2014 (extended from the previous start date of 1 January 2014)1, and the first report of information under FATCA, due in 2015, should include information about accounts maintained during the 2014 calendar year. The IRS opened its online registration system for FATCA on 19 August 20132.
UK data protection law previously precluded financial institutions from complying with the US requirements, but the UK has introduced legislation which enables UK financial institutions to provide the data the US requires without breaching such restrictions (by requiring financial institutions to first pass the information to HMRC, who will then exchange it with US).
See below for commentary on the regulations.
HMRC have issued guidance for account holders on why their account provider may ask for information about their tax residence status in order to comply with automatic exchange of information agreements3.
Where UK financial institutions are required to obtain self-certification for a new customer, HMRC apply these obligations from 1 July 20144.
Further FATCA-style agreements on international tax compliance have been implemented between the UK and Isle