FATCA (Foreign Accounts Tax Compliance Law) was enacted in May 2010 and entered into force in July 2014.
It forces US taxpayers, namely US passport holders and owners of US social security numbers, to report foreign financial accounts, worth more than $ 10,000, and offshore assets to the IRS (Internal Revenue Service). It also requires foreign financial institutions to report financial accounts whose value exceeds $ 10,000 held by US taxpayers or foreign entities in which US taxpayers have a substantial ownership interest. This binds American taxpayers even if they do not reside in the US and even if they have an Israeli citizenship.
FATCA was enacted as part of the United States’ fight against tax noncompliance. By applying it, the US wants to tax all the international income of its appraisers. More specifically, the IRS wants to collect taxes on your appraiser accounts.
Disclosure procedure
Banks must locate the bank accounts of US customers and sign them on a W9 form. This is a Request for a Taxpayer Identification Number (TIN) and Certification Form. The form must be submitted to the IRS by June 30 of the following tax year.
Story
Banks have been required to disclose information about foreign accounts to the IRS as early as the 1970s, when the Foreign Transaction and Currency Information Act of 1970 was passed (commonly referred to as the “Bank Secrecy Act”). or “BSA”) enacted. Financial institutions are required by law to maintain records of cash purchases of negotiable instruments, file reports of cash transactions in excess of $ 10,000, and report suspicious activities that may signify money laundering, tax evasion, or other criminal activity. The BSA is sometimes referred to as the “anti-money laundering” law.
Over the years, several other “anti-money laundering” laws have been enacted to amend the BSA, including the provisions of Title III of the USA PATRIOT Act of 2001, until Congress passed FATCA in 2010 which, as demonstrated, it imposes additional reporting requirements on separate and distinct taxpayers. of the Bank Secrecy Law.
Bank of Israel cooperation
Many countries that have strong relations with the United States have instructed their local banks to follow FATCA, as has the Bank of Israel.
In early 2014, the Bank of Israel directed banks to prepare for the implementation of FATCA. Israel has agreed to provide the US with information on US taxpayer accounts. The United States, in return, will provide Israel with information on Israeli taxpayer accounts.
These decisions influence an estimated 100,000 US citizens residing in Israel.
Penalties
A bank that fails to provide the requested information about its US customers is subject to penalties, ranging from heavy fines to being excluded from the US Several Swiss and Israeli banks have already been fined large sums in the past. for not disclosing information. about your American customers. For example, in 2009, UBS bank was fined $ 780 million. Bank Leumi fined 270 million dollars.
Sanctions could also be imposed on US taxpayers; They can be fined up to $ 100,000 or up to 50% of their account value.