This exchange of information is designed to cut back on formerly undetected tax evasion. It will allow the US Government to recover tax from previously non-compliant tax payers by requesting the participating jurisdiction to report financial account information held by non-resident individuals.
This act was made effected in 2010 and requires non-US (foreign) financial institutions to enter into an agreement with the Inland Revenue Service to provide financial account details of US citizens living outside the US to the local tax authorities.
Financial institutions have been tasked with identifying their account holders that are US Citizens and send their financial details to the local tax authority.
Failure by the financial institution to report this information to the local tax authority will incur and 30% withholding tax on certain payments from the US.
The local tax authority must have a technical software solution in place to allow reception of returns from the financial institution and are required to forward this information annually to the IRS.
Giant Software have developed a solution for Tax Authorities to be fully FATCA compliant. Financial institutes can register with their Global Intermediary Identification Number (GIIN) which is issued to the financial institute after they have registered via the IRS website.
During registration the financial institute GIIN number is validated against the latest release of approved GIINs supplied monthly from the Inland Revenue Service.
Once a registration has been received by the financial institute, the system will alert tax officers to approve or reject the registration, with the outcome of the registration being emailed back to the financial institution.
If the registration has been accepted, the financial institution will be sent an activation code in the registration email so they can activate their FATCA service.
When the account has been activated, the financial institute can use the return upload screen to validate and submit FATCA returns that contain the financial account details of all their US citizens.
The solution is currently in use by the Tax authority in Jersey (Channel Isalnds).
Solution Key Stages
The simplicity of the solution makes delivery so much quicker - days rather than weeks.