What is FATCA the foreign account tax compliance act by IRS

What is FATCA -foreign-account-tax-compliance-act-for-us-citizen-by-IRS

Foreign Account Tax Compliance Act also known as FATCA, is a independent US tax law. The main aim of this law is to curtail the potential evasion of the tax by the US taxpayers. FATCA aims for all the financial institutes around the globe. It requires all the institutes to provide the information about the supposed US accounts to the tax authorities of the US. There is a pressure to comply due to the penalty of 30% withholding tax on the income that is earned from the US securities.

Agreement of FATCA

Switzerland along with other countries has completed an agreement that is intergovernmental with US to asset implementation of the FATCA. This agreement is known as Swiss FATCA agreement and a Swiss FATCA law was also enacted with the support of this agreement. The Swiss FATCA law came in action in 2014. Due to this FATCA agreement, the implementation cost is reduced for the Swiss Financial institutes.

Currently, the FATCA agreement between US and Switzerland is based on Model 2. As per this so-called model, financial institutes of Switzerland provides US tax authorities with account information that is the main subject to the reporting with consent of concerned client. In cases with no consent, an aggregated anonymous report that contains all the information of the account is provided. Using the aggregated report, the tax authorizes of the US can ask for the disclosure of the client and information to his account by requesting for some administrative assistance.

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