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About the Foreign Account Tax Compliance Act

This page outlines:

  • What is the Foreign Account Tax Compliance Act
  • Who FATCA applies to

What is the Foreign Account Tax Compliance Act

The Foreign Account Tax Compliance Act (FATCA) is specific United States (US) legislation that aims to reduce tax evasion by US citizens, tax residents, and entities. US citizens and tax residents are required to report their worldwide income to the Internal Revenue Service (IRS) whether they live in the US or not.

Who FATCA applies to

FATCA is a reporting regime that ensures US persons (and New Zealanders with accounts in the US) meet their tax obligations. It requires all foreign financial institutions that are not exempt, including New Zealand financial institutions (NZFIs), to register with the IRS. They must report on US citizens and tax residents who have specified foreign financial assets that exceed certain thresholds.

Unless the US exempts them from FATCA reporting, this includes foreign financial institutions such as:

  • banks
  • insurance companies
  • custodial institutions
  • hedge funds
  • mutual funds
  • superannuation funds, and
  • private equity firms.

These financial institutions are required to report to the IRS on details of financial account held by:

  • US citizens
  • US tax residents
  • US entities that are specified US persons
  • certain non-US entities that are controlled by US tax residents or US citizens, and
  • certain "non-participating" financial institutions.

As FATCA doesn't change any basic tax rights that the US or New Zealand have in respect of its citizens or residents, US citizens or green card holders who are also New Zealand tax residents will generally remain liable for New Zealand income tax on their worldwide income, including from sources in the US.

FATCA for individual taxpayers

FATCA doesn't change any basic tax rights that the United States or New Zealand has in respect of its citizens or residents. Nor does it require us to act as a tax collection agent for the United States Internal Revenue Service.

FATCA is a reporting regime to ensure that US persons (and New Zealanders with accounts in the US) meet their US tax obligations.

US citizens or tax residents concerned about complying with any US or New Zealand tax laws that might apply to them, should contact a trusted tax advisor to advise them of their tax obligations.

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