India Agrees to Implement FATCA
Posted in Offshore Account Update on November 27, 2015 | Share
The Foreign Account Tax Compliance Act (FATCA) requires all U.S. citizens to file annual reports of their financial accounts held outside of the United States. This is true even of people who live outside of the U.S. and have accounts in the country they currently consider home. The goal of FATCA is to make sure that U.S. accountholders are reporting all income and complying with all U.S. tax obligations.
FATCA also has an additional component as well. Other countries sign intergovernmental agreements with the United States for the implementation of FATCA provisions that require Foreign Financial Institutions (FFIs) to search their records for suspected U.S. accountholders. These FFIs must provide reports to the U.S. Treasury of U.S.-connected individuals with foreign accounts.
The UK, France, Italy, Spain, Switzerland, South Africa, Japan and Germany agreed to cooperate with FATCA implementation in 2012. The U.S. has also been in negotiations with other countries. In July of 2015, for example, the revenue secretary of India signed an agreement signaling that India would help facilitate FATCA implementation. Under the terms of this agreement, the exchange of information between India and the United States was scheduled to begin on October 1.
As more and more locations throughout the world enter into agreements with the United States, there will be fewer places throughout the world where U.S. citizens can keep money and assets without the government becoming aware of their accounts. The exchange of information also gives U.S. authorities the ability to identify suspected tax evaders and conduct investigations. Individuals with money offshore that they may not have reported should consult with a Washington DC tax evasion attorney about participation in amnesty programs allowing the voluntary disclosure of accounts in exchange for reduced penalties and a guarantee of no criminal charges.
INDIA WILL HELP WITH FATCA COMPLIANCE
According to Times of India, “FATCA is a mutual effort to combat tax evasion and it would be mutually beneficial for both countries” to exchange details about accountholders. Revenue Secretary Shaktikanta Das and the U.S. ambassador both signed the agreement in which India agreed to facilitate FATCA compliance. Upon signing, Das told reporters the agreement reassured authorities within the United States about India's commitment to “fight the menace of evasion and bring transparency in the matters of the payment of taxes which are legitimately due to the government.”
Indian financial institutions will now need to provide details about U.S. taxpayers and can face significant penalties for failure to provide the necessary information. A non-cooperative financial institution could face a 30 percent penalty tax on all U.S. revenues, including fees, taxes, sales and dividend payments.
The United States will also be providing information to India, and starting in 2017, India will begin receiving information from other countries under a system allowing for the automatic exchange of information (AEOI).
FATCA is controversial because U.S. citizens living abroad can end up having accounts closed by financial institutions that do not want to deal with burdensome reporting requirements. FATCA is also a powerful tool for governments, which arguably encroaches upon the privacy of accountholders. If you have accounts offshore, you need to understand how FATCA impacts you and you need to make provisions for protecting your assets in light of more countries signing on for FATCA implementation. Contact Kevin Thorn, a DC tax evasion attorney, today to find out more.
