Taxes are not only perspective which US Government track when it comes to expats. In fact, foreign financial accounts of expats are also tracked and reported due to FATCA- Foreign Account Tax Compliance Act. However, there are many rumors and myths spread around regarding the FATCA law in Singapore, so here is the detailed breakdown- how to comply with FATCA laws.
What is FATCA?
Foreign Tax Compliance Act or FATCA in simple, was brought into the existence in March 2010 as a part of HIRE Act. This act designed to enforce the requirements of US persons and citizens (including those living abroad) to file yearly reports on their non-US financial accounts to the IRS. FATCA is a US legislation which affects two groups, including:
US taxpayers who need to report on foreign financial accounts and offshore assets.
- Foreign Financial Institutions (FFIs) to register with the US Internal Revenue Service (IRS) and report detailed information about US account holders to the IRS, either directly or through the home country tax authority.
- The federal law also requires non-financial foreign entities reveal the identities of their US owners to the IRS. In addition to individual reporting, FFIs also required to report on the assets of their American clients to avoid 30% withholding on payments from the US.
FATCA can have adverse tax consequences if not adequately addressed; including 30% withholding tax on the gross proceeds. However, many jurisdictions have signed an intergovernmental agreement (IGA) and transposed federal tax Singapore. To meet the requirement, some follow local reporting provisions while some direct IRS reports, model I and model II.
FATCA compliance Solutions
There are many professional who have been at the forefront of tracking development in FATCA tax Singapore. The expertise and deep domain knowledge of such FATCA professionals empower to integrate custom solutions for financial institutions and US citizens, to comply with FATCA provisions effectively.
- FATCA Classification
Before filing, it is a must to determine whether the entities or US citizen count under the FFI and required to meet the provisions of FATCA law. The FATCA tax expertise developed a comprehensive classification tool to evaluate the same.
- Account Identification
FATCA law professionals in Singapore enables the financial institutions to identify the accounts of US citizens. This will enable them to apply various business rules for identifying FATCA reportable accounts while taking into the consideration the ones exempted from FATCA.
FATCA taxation law professionals help the financial enterprise to link accounts of an individual as well as entity across different business units. This will then aggregate the balance or value of accounts held by the person, to determine whether the evaluated value is above the threshold and the accounts are reportable under FATCA compliance.
According to the provision, entities are required to submit the information either to their local tax authority or directly to the US authorities. To reduce the burden, tax professionals have set up a service line on behalf of their clients to prepare and transmit reports for each FATCA reportable account, as per the guidelines of IRS or tax authority of the home country.
Tax professionals are well-versed with the FATCA law filing requirements, so let the expert help you become FATCA compliant.