The Vatican Bank is the latest to join the ranks of a hundred other countries worldwide that have agreed to the terms of the FATCA. Since its enactment in 2010, the Foreign Account Tax Compliance Act or FATCA, has seen American Tax Law extend its reach further than ever before. Under the new American global tax law, all countries cooperating with FATCA will need to declare the presence of any accounts of more than $50,000 held by American taxpayers.
Countries play it safe
Non-compliance would attract the unfavorable attention of U.S. Treasury who can then debar the institution from transactions in U.S. markets. This risk has prompted even otherwise difficult countries like Russia and China to join in. Tax havens which have traditionally been secretive of their account holders are now being forced to disclose details under the FACTA.
Foreign Financial Institutions will need to share the names, addresses, account numbers, balances as well as U.S. identification numbers for these accounts. There is a voluntary disclosure system in place, but even this will attract a 50% penalty as of August 4, 2014.
FACTA came into existence to enable America to zero in on taxpayers who were holding money in accounts overseas to evade taxation. The United States taxes all its permanent residents and citizens on their income wherever in the world they may live. Failure to share this data will allow FACTA to be enforced to cut off that institution’s access to U.S. markets. In addition, they expose themselves to a 30% tax.
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