FATCA Lawyers | Non IGA Agreement Country Banks Report to the IRS – International Tax
FATCA is the Foreign Account Tax Compliance Act and It is causing major fear amongst US citizens, Legal Permanent Residents and expats worldwide who maintain foreign accounts.
The reason for the immense fear is that foreign banks have already begun complying with FATCA, which means these foreign banks will be reporting the names of US taxpayers to the Internal Revenue Service.
Once the IRS does a cross check and learns that you may not have been reporting or disclosing foreign account and foreign financial information on your tax return and FBAR, the IRS may pursue action against you.
Depending on the facts and circumstances surrounding your failure to disclose, the penalties can reach 100% of the value of the foreign account. Even though only 100+ countries have entered into FATCA Agreements ( or agreements in substance), thousands of FFI’s (Foreign Financial Institutions) have agreed to comply.
FFI in a non-IGA Country
When a country enters into a FATCA agreement they signed one of a few different types of IGA (Intergovernmental Agreements) – depending on the terms of the agreement between the two countries.
Even if a country does not enter into an IGA, that does not prevent FFIs located in the country from reporting. In fact, it is simply easier for FFI’s worldwide to report instead of dealing with certain withholding requirements. For example, if a large Multinational Foreign Financial Institution has branches in countries which both entered into IGAs and countries which did not, it is simply easier for the bank or FFI to report all the accounts that are US account holders (U.S. Citizens, Legal Permanent Residents, Foreigners subject to the Substantial Presence Test), instead of implement costly protocols for parsing our the different classifications of taxpayers.
The following is a summary of FATCA: