Glossary · Investors & Compliance
Foreign Account Tax Compliance Act (FATCA)
FATCA is a US law requiring foreign financial institutions, including most offshore funds, to identify and report accounts held by US persons to tax authorities.
The Foreign Account Tax Compliance Act was enacted in 2010. It requires foreign financial institutions (FFIs), a category that includes most non-US investment funds, to register with the IRS, obtain a Global Intermediary Identification Number (GIIN), perform due diligence on investors, and report US accounts. Non-compliant FFIs can face a 30% withholding tax on certain US-source payments.
Most jurisdictions implement FATCA through an intergovernmental agreement (IGA) with the US. Under a Model 1 IGA, funds report to their local tax authority, which exchanges the information with the IRS. Investor self-certifications, such as Forms W-9 and W-8, are collected at onboarding and reviewed for consistency with other KYC information.
Pitfalls include incomplete or expired investor tax forms, failing to reclassify investors after a change in circumstances, missing registration or reporting deadlines, and treating FATCA separately from CRS when a combined investor tax-status process is more efficient.
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