FATCA Full Form | What is the Full Form of FATCA
FATCA Full Form - Foreign Account Tax Compliance Act
- FATCA stands for Foreign Account Tax Compliance Act. This tax requires U.S. persons reception or abroad with financial assets outside of the US to file annual reports of their foreign account holdings and accordingly pay U.S. tax.
- As per this tax, the U.S. taxpayers need to report yearly all of their assets held outside of the country.
- We will say that it promotes cross-border tax compliance through the international standard for the automated exchange of data associated with U.S. taxpayers.
- FATCA aims to extend the transparency for the Interior Revenue Service (IRS) with reference to U.S. persons who may have invested and earned profits through overseas non-US institutions.
- Non-U.S. Foreign Financial Institutions (FFI) and Non-Financial Foreign Entities (NFFE) also are required to comply to the present law by disclosing the identities of U.S. citizens and therefore the value of their assets held in their banks to the internal Revenue Service (IRS) or the FATCA Intergovernmental Agreement (IGA).
- FFIs, which don't follow the IRS, are supposed to be excluded from the U.S. market and also required to pay 30% of the amount of any withhold able payment as a tax penalty.
- The FFIs and NFFEs that suits the law are required to report the name, address, and tax number (TIN) of every account holder, which may be a U.S. citizen.
- They also provide the account number, the account balance and deposits and withdrawals in a financial year.
- The U.S. Tax Department launched FATCA in 2010 as a part of the HIRE Act to encourage transparency within the global financial services sector and to market tax compliance and stop evasion.
- It's different from CRS, which may be a more advanced version of FATCA and is applicable for citizens of each registered country.
- So, FATCA is a measure to prevent tax evasion by americans and businesses that are earning taxable income in other countries.
- However, it's not illegal to invest, operate or earn income outside the country, but it's illegal if someone doesn't disclose account because the US taxes all income and assets of its people whether in or outside the country.