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Frequently Asked Questions (FAQ)

What You Need To Know About the Foreign Account Tax Compliance Act (FATCA)

General FAQs

What is FATCA?

FATCA is the Foreign Account Tax Compliance Act. Its objective is to identify U.S. persons who may evade U.S. taxes by investing through foreign (non-U.S.) accounts -- either directly or indirectly through foreign entities such as corporations and trusts. FATCA is part of the HIRE Act, signed into law on March 18th, 2010 by President Obama. Final FATCA regulations were released in January 2013.

FATCA rationale

The objective of this legislation is to identify U.S. persons who may evade U.S. taxes by placing assets in foreign (non-U.S.) accounts -- either directly or indirectly through certain foreign entities such as corporations or trusts.

Who or what is a U.S. person for U.S. tax purposes?
  • A citizen of the U.S., including an individual born in the U.S. but resident in another country, who has not renounced U.S. citizenship;
  • A lawful resident of the U.S., including a U.S. green card holder;
  • A person residing in the U.S.
  • Certain persons who spend a significant number of days in the U.S. each year.
  • U.S. corporations, U.S. estates and U.S. trusts.
FATCA fundamentals and international tax compliance

In its original form, FATCA would have required foreign (non-U.S.) financial institutions (FFIs) to either:

  • enter into agreements with the IRS and report information about financial accounts held by U.S. taxpayers -- or held by foreign entities in which U.S. taxpayers hold an ownership interest -- directly to the IRS, or
  • face punitive U.S. withholding tax on U.S.-source payments.

To address privacy and regulatory concerns related to FATCA, many countries are negotiating intergovernmental agreements (IGAs) with the U.S. These IGA "partner countries" will enter into one of two standard model agreements, and implement laws to require financial institutions to collect and report information required by FATCA.

FFIs will comply with FATCA in one of three ways:

1)       In countries with a Model 1 IGA, FFIs will comply under local legislation and report to their local tax authority; in turn, the local tax authority will exchange information with the Internal Revenue Service (IRS);

2)       In countries with a Model 2 IGA, FFIs will comply with local legislation to enter into agreements with, and report directly to, the IRS;

3)       In countries without an IGA, FFIs will enter into agreements with, and report directly to the IRS. (A 30% withholding tax will be deducted from U.S. source payments received by FFIs in non-IGA countries if they do not enter into agreements with the IRS.).

ECAB is carefully analyzing the final regulations and IGAs and moving towards compliance globally starting in July 2014. ECAB will continue to update its FATCA information for clients as details are known.

Note: the term U.S. Reportable Account is an account owned by a U.S. individual (person), U.S. entity, or a non-U.S. entity that has U.S. owners -- regardless of the currency of the account itself. FATCA applies to all types of financial accounts, including insurance, investments and business accounts.

What are the consequences to a Foreign Financial Institution of not complying with FATCA?

In countries with intergovernmental agreements (IGAs), FFIs will be required under local legislation to comply.

In non-IGA countries, a 30% U.S. withholding tax will be deducted from U.S.-source payments (and potentially non-U.S. source payments in future) received by foreign financial institutions (FFIs) if they do not enter into FFI Agreements with the IRS. This includes payments received by FFIs either on their own account or on account of their clients.

When will FATCA apply?

FATCA takes effect on July 1st, 2014

Will ECAB comply with FATCA?

ECAB is working through the Antigua Barbuda Bankers' Association and the Eastern Caribbean Central Bank, other industry organizations and local governments to share issues and concerns with the U.S. Treasury and the IRS. This effort is aimed at managing the implementation and ongoing compliance burden of FATCA and moving towards compliance beginning in July 2014. ECAB's internal FATCA Project team is mobilizing people, processes and technology across the enterprise to meet FATCA requirements. We will provide further information to our impacted clients as required. 

Client FAQs

I am not a U.S. person. What does FATCA mean for me?

In most cases, FATCA should have little impact. If you have an existing account and there is an indication that you may be a U.S. person, or if you are opening a new account, ECAB may ask you to provide additional information, documentation and to sign a disclosure to demonstrate that you are not a U.S. person.

I am a U.S. person. What does FATCA mean for me?

If you are a U.S. person, you may be asked to complete IRS Form W-9 (Request for Taxpayer Identification Number and Certification) which will be kept on file at ECAB. Information about you and your account will be reported to the local tax authority or the IRS on an annual basis. If you have complied with all of your U.S. reporting obligations, reporting by ECAB should not result in any increased U.S. tax liability, but you should discuss your personal tax situation with your tax advisor.

I am a U.S. citizen but have not lived in the U.S. for years and do not pay U.S. taxes. Why does this apply to me?

A U.S. citizen who lives outside the U.S. falls within the definition of a U.S. person for U.S. tax purposes, and must file U.S. tax returns. U.S. taxpayers may also have other U.S. reporting obligations. Foreign (non-U.S.) financial institutions will be required to identify the accounts of U.S. persons and report them to their local tax authority or the IRS annually. It is important that you consult with a tax advisor to understand your U.S. reporting obligations.

Where can I find FATCA information provided by the IRS?

For more information about FATCA, please visit the IRS website:

www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-(FATCA)

Are other financial institutions complying with FATCA?

All financial institutions around the world are subject to the provisions of FATCA.

What authority does ECAB have to provide my account information to the local tax authority or directly to the IRS?

ECAB will only disclose account information where you’ve provided your consent or where required by law, such as disclosure for tax purposes to the local tax authority (e.g. Inland Revenue Department).