FATCA stands for the Foreign Account Tax Compliance Act which is used to reveal tax cheats hiding money and assets, thus helping to recover lots of money in the form of taxes owed by the housing assets present abroad apart from the United States. Here people from the United States must report a few foreign assets to the IRS if they are on the verge of exceeding a certain limit. The main purpose of the FATCA law in Singapore comprises of the U.S. law which requires all financial institutions outside America to regularly convey information on the financial assets held by the U.S. people to the U.S. internal revenue services (IRS). And if the people fail to comply with the norms and conditions, then a 30 percent tax will be imposed on the gross payments made from the U.S. to the foreign institutions by the U.S. government.
In December 2014, the foreign account tax compliance act came into action in Singapore (FATCA Compliance Singapore) where financial institutions in Singapore carry out reviewing procedures and reveal the financial data of account holders who are American citizens to the Inland Revenue Authority of Singapore (IRAS). It will also help to identify and report the financial accounts of American nationals residing in Singapore.
It is important to know about FATCA tax Singapore based financial institution:
Singapore based financial institutions are those which are organized and are deemed to follow the laws of Singapore who have the authority to perform a necessary check on the person’s financial account and submit the necessary data and information to Inland revenue authority of Singapore(IRAS), which again will transfer the information to the American internal revenue service.
Prominent features of FATCA Singapore include: –
- Identification– FATCA Singapore helps in the identification of the account holder as an American citizen, thereby containing all the details like name, address, telephone number, residence, or mailing address of the respective person.
- Foreign relations– It has also helped the U.S. to establish a link with Singapore, enabling diversity. It is of great help to the American citizens of Singapore who have been refused by the foreign banks to open accounts for them, making it easy for Americans to work and stay abroad.
- Revenue- FATCA has also helped the IRS to receive an amount of 8 billion dollars from the FBAR (Foreign account bank report) penalties. However, the United States joint congress committee on taxation estimated that FATCA would produce additional tax revenue of 8.7 billion over the few years.
FATCA consists of two models: –
- Model 1– Here foreign institutions outside America report information on the U.S. ex-pats to IRAS or relevant domestic undertaking which in turn provides information to the American internal revenue service.
- Model 2– It provides a network chain for the financial institutions to directly provide data about the U.S. ex-pats to the U.S. IRS upon some initiation from the financial officials.
One of the prominent features of FATCA is that it helps to protect the rights of U.S. ex-pats in Singapore, helping them to reside and work outside America. The U.S. ex-pats are identified by the FATCA indicium which includes all the details of the people after which the foreign financial institutions have the authority to question and interview them. So, in all, the account holders of the foreign financial institutions will have to adhere to the norms and conditions of the FACTA reporting requirements.