FATCA
Foreign Account Tax Compliance Act
A US law: every bank in the world is required to report to the IRS about the accounts of US citizens and residents. A bank that does not comply is cut off from the dollar system. That is why when opening an account they ask are you connected to the US.
- What it is
- A US law: banks worldwide report Americans’ accounts to the US tax authority
- Where it applies
- Any bank where an account is held by a person with a US connection
- Who it concerns
- Citizens, green card holders, US place of birth, US address or phone
- Difference from CRS
- FATCA concerns only the US and reports to the IRS; CRS is a multilateral exchange
- Can you prepare
- Yes: establish any US connection in advance and prepare the forms
In plain words
FATCA (Foreign Account Tax Compliance Act) is a US law that obliges banks all over the world to report to the US tax authority (IRS) on Americans’ accounts. Put simply: wherever in the world a US citizen or tax resident opens an account, their bank is obliged to report it to America.
The mechanism is tough: a bank that refuses to comply with FATCA risks losing access to the dollar system — for an international bank that is effectively a death sentence. So banks err on the side of caution and, when opening an account, almost always ask: “Do you have a US connection?” — citizenship, a green card, place of birth, a US address or phone number. FATCA is, in essence, “CRS before CRS”, only for one country — the United States.
The conclusion for the client: any US connection — even a place of birth in an American city — will come up when an account is opened, and it is better to state it frankly from the outset. The United States taxes its citizens worldwide regardless of where they live, and FATCA is the tool that enforces this.
Where FATCA comes up
Indicators of a US connection under FATCA
- US citizenship
- Green card
- Place of birth in the US
- A US address
- A US phone number
- A power of attorney to a person in the US
- SSN/ITIN tax number
- Form W-9
- Confirmation of status
- The bank’s report to the IRS
- Account refused without the forms
- US tax worldwide
How FATCA works
- 01The bank asks about a US connection
- 02Checking indicators (place of birth, etc.)
- 03Collecting forms (W-9, tax number)
- 04The bank’s report to the IRS
- 05The account is opened taking the status into account
What you need to know
- Any US connection comes up when an account is opened
- Even a US place of birth is an indicator for FATCA
- The US taxes its citizens worldwide, wherever they live
- A bank that ignores FATCA risks its access to the dollar system
- It is better to state a US connection frankly from the outset than to hide it
Common mistakes
- Concealing a US place of birth or a past green card
- Assuming an “inactive” US passport means nothing
- Not preparing Form W-9 and a tax number in advance
- Ignoring tax obligations to the United States
- Learning of the problem only when the account is refused
What this means for a BRIDGES client
BRIDGES GLOBAL establishes in advance whether you have a US connection under the FATCA criteria and prepares you for the bank’s questions: we tell you which forms and documents will be needed so that a US connection (if there is one) does not become a reason for refusing an account.
Frequently asked questions
01 /I do not have a US passport, but I was born there — does FATCA concern me?
Yes. A US place of birth is one of the indicators of a connection with America. Under FATCA the bank will most likely ask you to confirm your US tax status or your renunciation of citizenship.
02 /How does FATCA differ from CRS?
FATCA is a US law on the accounts of persons with a US connection, and the report goes to the IRS. CRS is a multilateral exchange between 100+ countries. The United States operates under FATCA and does not take part in CRS.
03 /What does the bank require if there is a US connection?
As a rule, a US tax number (SSN or ITIN) and Form W-9. Without them the bank may refuse to open an account or close one already open.
04 /Can FATCA obligations be shed?
Only through formal renunciation of US citizenship, with the tax procedures observed. It is a separate and lengthy process that is worked through individually.
05 /Does FATCA concern green card holders?
Yes. A green card holder is regarded as a US tax resident, so their accounts abroad also fall under FATCA.
06 /What happens if you conceal a US connection?
Sooner or later it will come up (place of birth in documents, IP address, transfers), and that risks the account being closed and problems with the IRS. Frank disclosure from the outset is safer.
See also
Read next
This material has undergone editorial review by BRIDGES.
Have a US connection? We will get through FATCA calmly
We will establish your FATCA status in advance and prepare the forms, so that a US connection does not become a reason for refusing an account.