Foreign Account Tax Compliance Act (FATCA)
What is FATCA?
The Foreign Account Tax Compliance Act (FATCA) is a statute of the United States of America (US), geared at combatting tax evasion by US persons who utilize such means as holding investments in offshore accounts and or entities. In order to lessen the some of the requirements of FATCA, the Government of Jamaica entered into an Inter-Governmental Agreement (IGA) with the US Government.
FATCA requires all non-US financial institutions [foreign financial institutions(FFIs)] around the world to:
- each enter into an agreement with the US Internal Revenue Service (IRS), - collect certain information on all new and existing accounts they hold for their customers - report information to the IRS in relation to:
- certain Specified US persons
- Passive Non-Financial Foreign Entities with Controlling Persons who are U.S. persons and
- Non-Participating FFIs (which are foreign financial institutions that have not entered into an FFI agreement with the US Internal Revenue Service and therefore refuses to comply with the requirements of the FATCA legislation).
Who will be affected?
In addition to foreign financial institutions, specified US persons will be affected. This includes:
-U.S. Citizens residing in the US or overseas
-Green card holders
-U.S. Passport holders
-U.S. “Tax residents”, which are persons who have stayed in the US for several consecutive days during the past three years. To meet this test, one must
be physically present in the United States on at least:
1. 31 days during the current year, and
2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
- All the days you were present in the current year, and
- 1/3 of the days you were present in the first year before the current year, and
- 1/6 of the days you were present in the second year before the current year.
Information to be provided to the Tax Administration Jamaica (TAJ)
The Inter-Governmental Agreement between Jamaica and the US, provides for Jamaican FIs to transmit the required information to Tax Administration Jamaica (TAJ) which will in turn submit the information received to the US Internal Revenue Service.
Information to be reported to the TAJ includes:
- Name, address, and US tax identification number of each Specified US Person/Recalcitrant Customer;
- Account number;
- Account balance/value as at the end of the calendar year or immediately before closure if the account was closed during the calendar year,
- Gross interest/dividends, and interest and other income credited to the account.
Talk to us today or visit the Internal Revenue Services website at www.irs.gov for more information. You may also read more here.
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