The Foreign Account Tax Compliance Act (FATCA)

The Foreign Account Tax Compliance Act (FATCA) makes it compulsory for all financial institutions in the world to report to the US Government comprehensive details of all transactions involving these ‘US persons’. From April this year onwards, under this new US law, it has become extremely onerous for any financial institution around the world to deal with ‘US persons’, which includes US citizens, green card holders and some other types of people and entities.

If a financial company doesn’t collect and report this data to the US government, and it has any assets in the United States, then the US Government will confiscate 30% of those assets as a withholding tax. This also applies to any connected business — what we would call a group company. Of course a confiscation of 30% of assets would utterly destroy any financial business.

The complexity and cost of compliance with FATCA is considerable, and the punishment for making a mistake is huge. Therefore, what FATCA boils down to is that if you have any intention of ever having any financial dealings in the United States, then you need to work as an unpaid tax collector for Uncle Sam, chasing down its citizens around the world. Take it or leave it. Read more of this post