The Associated Press and Reuters both reported on Monday that approximately 77,000 foreign and US banks and financial institutions have registered with the United States to comply with the Foreign Account Tax Compliance Act (FATCA).
Enacted by Congress in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act, FATCA, which goes into effect on July 1, is meant to fight offshore tax evasion by American citizens. The law requires foreign financial institutions (FFIs) to report information about accounts held by US taxpayers directly to the IRS, even if the accounts hold only foreign assets.
The list includes 515 Russian financial institutions, the AP reported. Russian banks had to apply directly to the IRS because the United States broke off negotiations with Russia over an information-sharing agreement because of Russia's actions in Ukraine.
Reuters reported that more than 500 US businesses also registered, including Citibank NA, JPMorgan Chase & Co., various hedge funds, and exchange company CME Group Inc.
In a statement cited by both news organizations, Robert Stack, deputy assistant Treasury secretary for international tax affairs, said, “The strong international support for FATCA is clear, and this success will help us in our goal of stopping tax evasion and narrowing the tax gap.”
Under the law, FFIs must report information on accounts held by foreign entities in which US taxpayers have a substantial ownership interest. If a bank refuses to disclose the information, it can be assessed a 30 percent withholding tax on certain US source payments, whether or not the recipient is a US taxpayer.
To improve compliance within the global community, the US Treasury Department has been negotiating a series of intergovernmental agreements (IGAs) with countries to help the US implement the law. As of May 30, the Treasury had signed 33 IGAs, and had agreements in substance with 35 other jurisdictions.
Participating countries include all the world’s financial giants, as well as many places where Americans have traditionally hid assets, including Switzerland, the Cayman Islands, and the Bahamas, the AP reported.
Even though the law is slated to go into effect next month, the IRS recently released new guidance that allows 2014 and 2015 to be treated as a transition period for foreign banks that have shown “good faith efforts” in complying with FATCA provisions.
FFIs that have made good faith efforts to comply with the FATCA requirements will be given relief from IRS enforcement during the transition period, the IRS and the US Treasury Department announced on May 2.
Publication 5147, FATCA Foreign Financial Institution (FFI) List/Search and Download Tool, explains the system requirements and instructions on how to launch, download, and search the FFI list and how to download FFI list search results.
The tool has three main functions:
- Download the entire FFI list.
- Search the FFI list.
- Download a partial FFI list (the search results).
The document also explains that the search tool may be used when there is a need to narrow down results by Global Intermediary Identification Number, financial institution name, and/or country of an FFI or its branch.
About Jason Bramwell
Jason Bramwell is a staff writer and editor for AccountingWEB. He has nearly 20 years of experience in print and online media as a journalist and editor.