FATCA
The Foreign Account Tax Compliance Act (FATCA) is a U.S. law that requires financial institutions, including mutual funds, to report details of financial accounts held by U.S. persons to U.S. tax authorities. This regulation helps ensure that U.S. taxpayers do not avoid taxation on income and assets held outside the United States. Individuals who are tax residents of the U.S. must disclose key personal and tax-related information as part of FATCA compliance.
Who Needs to Comply with FATCA
FATCA applies to individuals who are considered U.S. persons—this includes U.S. citizens, tax residents, or anyone born in the U.S. To comply, these individuals must provide details such as their country of tax residence, Tax Identification Number (TIN), country of birth, and citizenship status. These disclosures allow mutual funds and other financial entities to report account holdings and financial transactions to the relevant tax authorities.
Purpose and Impact of FATCA
The main goal of FATCA is to prevent U.S. persons from evading taxes by holding assets in foreign accounts. By mandating information sharing between global financial institutions and the U.S. government, FATCA increases transparency and accountability. This regulation affects both individual investors and institutions, encouraging full disclosure of offshore income and financial assets.
