We discussed earlier whether an American expatriate has to file an overseas tax return. FATCA is one of the latest forms introduced by the IRS. Some big news is finally coming to the U.K. American expatriates living in the UK must realize that FATCA is the fact of life in the UK due to the bilateral agreement between the USA and UK.
On September 14, 2012 the U.S. Treasury Department announced that a bilateral agreement has been signed between the USA and the United Kingdom to implement tax provisions and information reporting under FATCA or so called the Foreign Account Tax Compliance Act. This is one of the first agreements that provide an opportunity to share information about taxpayers from the UK and the USA.
What is FATCA?
FATCA was originally introduced as a part of the HIRE Act of 2010. The purpose of this new law is to find U.S. taxpayers who hide overseas tax accounts. The Internal Revenue Service does not go directly after U.S. taxpayers. Rather the IRS requires various foreign financial institutions like hedge funds, banks etc disclose information about the foreign bank accounts and assets of American expatriates living abroad.
How many bilateral agreements are in the near future?
This bilateral agreement is based upon the model that was originally developed during negotiations with five countries like France, Italy, Germany, Spain and the United Kingdom. The Treasury made a statement that this agreement also marks a very important step in establishing a common approach to investigating and preventing the cases of overseas tax evasion by American expatriates based on the automatic exchange of information.
“Today’s announcement marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion,” said Treasury Assistant Secretary for Tax Policy Mark Mazur in a statement. “We are pleased that the United Kingdom, one of our closest allies, is the first jurisdiction to sign a bilateral agreement with us, and we look forward to quickly concluding agreements based on this model with other jurisdictions.”
The Treasury Department also indicated that several other governments have expressed an interest in developing and signing a similar bilateral agreement to implement FATCA. The Treasury is quite optimistic that new bilateral agreements that will help to crack down on tax evaders will be signed in the near future. The IRS and the Treasury Department continue to finalize the regulations that will allow successfully implement FATCA in the near future.
American expatriates living in the UK must file FATCA with an overseas tax return if they meet filing requirements.
If you need help or have questions about FATCA and how it affects your situation, international tax experts at Artio Partners are here to help you.