The full scope of the law doesn’t come into force until 2017.
The Act requires foreign financial institutions to report to the Internal Revenue Service information related to the ownership of assets held overseas by United States persons.
The law penalizes banks who fail to supply the information. Any payment coming to non compliant financial institutions from the U.S. would be subject to a 30% withholding tax. The financial institution would also be frozen out of U.S. capital markets and markets that have contracts in U.S. dollars.
On January 12, 2015 the IRS announced it had opened a data exchange service for enrollment by financial institutions and countries to use for complying with a U.S. tax law. The International Data Exchange Service will provide the IRS with information on financial accounts held by United States persons.
More than 145,000 financial institutions have registered through the FATCA registration system. The U.S. also has more than 110 intergovernmental agreements, either signed or agreed in substance, to implement the law.
In the cases where a country has a reciprocal intergovernmental agreement with the U.S. the IRS will use the exchange service to send similar information to that country’s tax authorities on accounts held in the U.S. by its residents.
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