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Hong Kong Compliance News Update
Frequently Asked Questions about FATCA
By Patrick Lee on 15 October 2014
Background
The full name of FATCA is Foreign Account Tax Compliance Act which is effective from 1 July 2014. It is a new piece of US legislation to prevent tax evasion by US taxpayers.
Banks and other financial organisations which are FATCA-compliant will be required to report information on financial accounts held directly or indirectly by US Persons to US government.
Who are affected
FATCA affects both personal and business who are treated as a "US Person". US Person includes the following but not limited to:
US citizen;
US green card holders;
Certain persons who spend a significant number of days in the US each year;
US corporations, partnerships, estates and trusts.
Classification as either a US Person or Non-US Person may also be determined by banks according to:
US residence
US place of birth
US address including PO boxes
US telephone number
Payment instructions to pay amounts to a US address or account
Signatory authority granted to a person with US address
Significance
Banks will advise US Person of FATCA documentation requirement, e.g. US tax forms or self-declaration of FATCA status. US Person will need to respond to request for FATCA documentation from time to time.
Banks may also be required to withhold tax on certain US source payments coming into the bank account.
For more information regarding FATCA, please visit the IRS website or contact your tax professional.
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