The latest update on the US Foreign Account Tax Compliance Act (FATCA) shows how the tax landscape across the world is changing.
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The progress of governments signing and negotiating FATCA pacts with the US is tracked by financial information firm Thomson Reuters.
The organisation has just released a FATCA map of the world quoted as accurate until February 2014.
The map lists the countries which have signed up to FATCA, are in various stages of negotiation with the US Treasury or are considering their options.
The big blanks on the map are Africa, the Middle East and many former Soviet states, leaving little room for US expats and taxpayers to shelter their cash and investments offshore.
Who has signed up to FATCA?
The current FATCA nations are:
- Cayman Islands
- Costa Rica
- Isle of Man
- United Kingdom
Countries about to sign FATCA are the Bahamas, Estonia, Finland, Jamaica, Mauritius, Singapore and Slovenia.
Sixteen other nations are negotiating FATCA inter-governmental agreements with Washington – they are Argentina, Australia, Belgium, Cyprus, Israel, Korea, Liechtenstein, Luxembourg, Malaysia, New Zealand, Russia, the Slovak Republic, South Africa, Sweden, Thailand and the United Arab Emirates.
When all these nations have signed a FATCA agreement, 45 countries plus the USA will be part of the international tax reporting network.
Additionally, another 15 nations are considering whether to sign up to FATCA. These are Bahrain, Brazil, British Virgin Islands, China, Curacao, the Czech Republic, Gibraltar, India, Lebanon, Peru, Romania, the Seychelles, St Maarten and Taiwan.
FATCA is an automatic tax information swapping agreement between countries. The arrangement demands foreign financial institutions report information about bank accounts and investments of more than $50,000 held or controlled by US taxpayers to the Internal Revenue Service (IRS) each year.
In return, US financial institutions will provide the same financial information about the reciprocating countries taxpayers.
Failing to comply with FATCA comes with stiff financial penalties.
Financial institutions in countries without inter-governmental agreements are still subject to FATCA, but must register on the IRS portal and report financial about US customers direct to the IRS.
The US government is expecting at least 770,000 financial institutions to register on the portal during the next few weeks.
FATCA starts from July 1, 2014.
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