FATCA stands for the Foreign Account Tax Compliance Act. The FATCA legislation is part of the U.S. HIRE Act, signed into law on March 18th, 2010 by President Obama.
You are on: What is FATCA?
The objective of this legislation is to identify U.S. persons who may evade U.S. taxes by investing through foreign (non-U.S.) accounts -- either directly, or indirectly through foreign entities such as corporations and trusts.
In its original form, FATCA would have required foreign (non-U.S.) financial institutions (FFIs) to either:
To address privacy and regulatory concerns related to FATCA, many countries are negotiating intergovernmental agreements (IGAs) with the U.S. These IGA "partner countries" will enter into one of two standard model agreements, and implement laws to require financial institutions to collect and report information required by FATCA.
FFIs will comply with FATCA in one of three ways:
1) In countries without an IGA, FFIs will enter into agreements with, and report directly to the IRS;
2) In countries with a Model 1 IGA, FFIs will comply under local legislation and report to their local tax authority; in turn, the local tax authority will exchange information with the IRS;
3) In countries with a Model 2 IGA, FFIs will comply with local legislation to enter into agreements with, and report directly to, the IRS.
On January 17th, 2013, the U.S. Treasury and Internal Revenue Service released final FATCA regulations. These define the detailed requirements for U.S. financial institutions, and for foreign (non-U.S.) financial institutions that will enter into agreements directly with the IRS.
Foreign financial institutions in countries entering into IGAs with the U.S. will still require their local governments to release local legislation and guidance before they can fully finalize their requirements. When the final regulations were released, the U.K., Mexico, Denmark, Ireland, Switzerland, Spain and Norway had signed or initialled IGAs. The U.S. Treasury indicated it was engaged with more than 50 countries and jurisdictions globally to complete agreements.
RBC is carefully analyzing the final regulations and IGAs and moving
towards compliance globally starting in Jan. 2014. RBC will continue
to update its FATCA information for clients as details are known.
It's expected that most major countries around the world will negotiate an IGA with the U.S. by the end of 2013 – and that most of those agreements will be the Model 1 version.
U.S. financial institutions are automatically required to comply with FATCA.
Virtually every financial institution in the world will be affected by FATCA requirements.
Note: the term "U.S. Reportable Account" used in the FAQs describes an account owned by a U.S. individual (person), U.S. entity, or a non-U.S. entity that has U.S. owners -- regardless of the currency of the account itself.
You are on: RBC's Approach
RBC understands the objectives of the FATCA legislation and the U.S. government's concerns about tax evasion.
RBC is working with industry associations, governments and regulators to carefully analyze and make recommendations related to emerging FATCA requirements, and move towards compliance starting in 2014.
RBC earns the right to be our clients' first choice. We take our clients' privacy seriously and comply with privacy rules in all jurisdictions. We are carefully reviewing FATCA regulations and intergovernmental agreements (IGAs) to minimize the impact of new rules on client service and privacy.
You are on: The Road Ahead
The first phase affects new clients of all U.S. and non-U.S. financial institutions and includes new account opening procedures to identify U.S. Reportable Accounts.
The second phase affects existing clients and is expected to be completed during 2014 and 2015. This phase includes the identification and reporting of U.S. Reportable Accounts, and withholding procedures.