• Clare Summerfield

The Foreign Account Tax Compliance Tax Act (FATCA)

FATCA became law in the US in 2010. Governments across the world have signed intergovernmental agreements which gives effect to FATCA in their countries. The drive by the US government to track down and capture the estimated $ 345 billion in tax revenues that were held in offshore accounts has transformed the international financial landscape. This gives the Internal Revenue Service (IRS) a window into the financial accounts of US tax payers across the world. The problems however that FATCA presents have been overwhelming and transforming to non-US foreign Financial Institutions (FFIs) and for US tax payers living abroad. FFIs holding US person accounts must now prepare detailed reports for submission to the US Inland Revenue Service (IRS). In addition US persons have a duty to report to the IRS their worldwide income no matter where they live and are tax resident.  

The impact of the act has changed the financial needs of Americans living abroad. The IRS now has full transparency of the assets of US persons who live overseas. Any US persons who are invested in non-US domiciled funds are subject to punitive, complex taxation at the highest rate. The IRS classify these funds as Passive Foreign Investment Companies (PFICs). In addition, a US person who owns a PFIC must submit form 8621 for each PFIC they hold every year no matter if distributions were made or not. This adds to the filing burden and the related costs. Taxes are the key reason that Americans should avoid non US registered investments.

Foreign Financial Institutions (FFIs) are required to give detailed reports on the accounts held by US persons to the IRS. There are fines in place if institutions are found to have failed to comply. As a result many banks and investment companies have refused to service US persons. For US tax payers who are tax resident overseas they are left without local financial planning services, solutions or advice. 

At Elliot Lloyd International we aim to reverse this trend by offering local financial advice and compliant investment solutions.


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