With FATCA set to take effect on July 1, financial institutions around the world have been lobbying to delay implementation of the law, citing concerns about costs and potential disruptions to global markets.
Over the weekend of May 3rd, the Treasury Department announced that it would not strictly enforce many of the law's provisions during 2014 and 2015, provided that banks are making a good-faith effort to comply.
Passed by Congress in 2010, the Foreign Account Tax Compliance Act requires foreign financial institutions to provide information to the Internal Revenue Service regarding American clients, including their name, taxpayer identification number, and account balances. Banks that do not comply with these requirements will face a 30 percent withholding penalty on all U.S. source payments.
The Treasury Department has scrambled over the past year to negotiate Intergovernmental Agreements with foreign governments to implement FATCA and agreements have been either signed or agreed to in substance with more than fifty countries. However, agreements still have not been reached with China or Russia.
FATCA is a key part of recent efforts by U.S. authorities to crack down on the use of offshore accounts to hide assets and evade taxes. The European Union has long sought to implement a similar agreement providing for the exchange of tax information across the EU, but they have thus far been unsuccessful.
In 2013, the Department of Justice prosecuted Wegelin & Co., one of Switzerland's oldest banks, in a United States District Court. The bank pleaded guilty and paid a fine of $58 million, leading it to shut its doors. Since then, the Department of Justice has reached non-prosecution agreements with 106 Swiss banks, requiring them to turn over information related to their U.S. clients. Charges are still being weighed against other banks, including Credit Suisse AG and French bank BNP Paribas SA.
The IRS has offered U.S. taxpayers with previously undisclosed offshore accounts an opportunity to come into compliance without the risk of criminal prosecution under the Offshore Voluntary Disclosure Program. Since the program was first offered in 2009, tens of thousands of U.S. taxpayers have voluntarily disclosed their accounts and paid additional taxes, interest, and penalties.
If you have a previously undisclosed offshore account and would like to discuss your compliance options, contact an experienced offshore account compliance attorney as soon as possible to ensure that all options will be available to you.Print this Page