FATCA stands for Foreign Account Tax Compliance Act (FATCA), which was introduced by the US Government in October 2009, but became law as part of the Hiring Incentives to Restore Employment (HIRE) Act on March 18, 2010. FATCA is aimed at ensuring that US persons with financial assets outside of the US are pay US tax.
Under FATCA, Foreign Financial Institutions (FFIs) have to report accounts of US persons to the US Inland Revenue Service (IRS) either directly or indirectly. They have the option of entering into agreements directly with IRS, or through the Inter-Governmental Agreements (IGA’s) signed by their home countries.
Government of India has signed an Inter-Governmental Agreement (IGA) with the Internal Revenue Service, Government of U.S.A.
The objective of FATCA is to detect, deter, and discourage offshore tax evasion by U.S. citizens or residents by requesting information about U.S. persons to increase transparency for the U.S. Internal Revenue Service (IRS) and imposing a withholding tax where the applicable documentation and reporting requirements are not met. FATCA’s provisions are designed with incentives for FFIs and USWAs to provide information to the IRS on financial accounts held by U.S. persons:
FATCA requires US persons including individuals who live outside the United States, to report their financial accounts held outside of the United States, and requires non- US financial institutions to report details of their US clients to the relevant tax authorities.
A U.S. person is:
An FFI is a foreign financial institution, which is any non-U.S. entity that:
Generally non-U.S. entities such as banks, broker/dealers, insurance companies, hedge funds, securitization vehicles, and private equity funds will be considered FFIs
The Government of India has entered into an Inter-Governmental Agreement (IGA) with Internal Revenue Service (Government of US) for implementation of FATCA. In view of this all banks and other financial institutions in India will be required to identify, establish and report information on financial accounts held directly or indirectly by US persons.
FATCA legislation will affect both personal and business customers who are treated as ‘US Person’ for US tax purposes. The FATCA legislation will also affect certain types of businesses with US owners.
The Bank must:-
If you are a US person you may have to submit some additional information and documentation. Please visit the IRS web site in this regard.
In general FATCA does not apply to non- US persons. However, if any one of the indicators mentioned below is found, you may be required to provide additional information/documentation to determine if you are a US Person under FATCA.
A joint account that has one US owner is treated as a US account and the entire account is subject to reporting as US person.
Yes. FATCA covers a wide range of entities and not just US incorporated entities
FATCA is an ongoing process. If there is a change in the account information, we may be required to contact you to obtain additional information/documentation.