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FATCA, the Foreign Account Tax Compliance Act, finally became effective last week. The Treasury Department had repeatedly delayed implementation of the legislation which was enacted in 2010. Beginning July 1, payments made to foreign banks who don’t comply are subject to a 30 percent withholding tax.
FATCA requires foreign banks and foreign branches of U.S. banks to file information returns with the IRS disclosing the accounts of U.S. citizens and residents. Rather than report to the IRS directly, many countries have signed agreements to have the banks file the information with their home governments which will then share it with the IRS.
Although FATCA has many critics and some lawmakers have voted to repeal it, the global community has lined up to comply with the law. Over 77,000 banks and 80 countries, even China and Russia, have registered and many countries are considering enacting similar laws. Someday soon, having a Swiss bank account will no longer suggest mystery and intrigue—or tax evasion.