To combat the tax evasion in the country, US Department of the Treasury and Internal Revenue Service introduced FATCA (Foreign Account Tax Compliance Act) in January 2013. With the introduction of this new act, many new regulatory and reporting standards come into compliance. It’s no small thing to be ignored, as avoidance of US FATCA compliance in Singapore could result in grave consequences which cost you to the fortune. Considering such vital importance in mind, here are few crucial you should know about FATCA compliance.
- Hiding income in offshore accounts, FATCA can cost billions
Tax evasion is a serious problem in many countries. It’s estimated that people hiding their income in offshore accounts cost the economy billions in a year. This is why following the FATCA compliance is a must for everyone holding different accounts in foreign banks. And according to the World Bank estimates, tax evasion costs around $300bn per year- this is one of the driving forces behind FATCA compliance.
- Who falls under the compliance?
FATCA is usually applicable to account holders of offshore financial institutions who are categorized under the US taxpayers list or clients from the US required to pay American tax Singapore fall directly under the purview of FATCA.
- FATCA mandates over FIIs
FATCA requires Foreign Financial Institutions (FIIs) to register themselves with the IRS because this is the only source through which the information of the US citizens offshore accounts can be collected and report directly. IRS is accountable for maintaining a list of non-participating financial institutions to encourage compliance.
- Non-compliance of FATCA can have severe consequences
In 2013, the penalties for non-registration implies for withholding of 30% tax on new accounts. As a result of this non-compliance of FATCA, a number of people would lose their banking relationships and their holding over their accounts.
- Limitation of FATCA control
FATCA compliance will apply to any financial institution globally that has the accounts of US citizens with over fifty thousand dollars in their account. These institutions include banks, custody banks, fund managers, and cover any entity whose books have recorded the transactions from US clients.
- Requirements of FATCA for withholding
A withholding agent is required to withhold 30% on a withholdable payment made to the FFI. Furthermore, FFI is also required to withhold 30% on pass-through payments made to a recalcitrant account holder, as well as to another FFIs.
- Way to overcome FATCA challenges
Planning and executing strategies to face FATCA complications may not be enough to handle the increasing volume of tax. To deal with it, financial institutions are required to expand their tax operations capabilities to meet increasing and challenging FATCA regulatory demands.
Do Get Compliant With FATCA
Whether you are a US citizen, legal permanent resident, or foreign national otherwise subject to US tax and maintain accounts in Singapore, its must for you to get compliant with FATCA to serve its compliance in your best favor.