With the evolution of FATCA law in Singapore, it is continually stirring a wave of confusion and queries among US expats around the world. However, it is important to note here that in today’s age of globalization, where new markets and businesses are emerging at a much faster pace, it is extremely important to have policies that can prevent tax evasion. And this is the reason why FATCA law holds importance, as it is introduced as a government initiative to prevent offshore investors from tax evasion and invest unaccounted cash overseas.
There is detailed information available about the Foreign Account Tax Compliance Act (FATCA), and its agreement. It is a matter of fact that the implementation of FATCA in Singapore extensively brings about an emotional reaction from expats in particular- many feel that they are unfairly signed out and labeled as tax evaders because they hold accounts and financial assets abroad. Besides this, there are many questions taxpayers have in their minds related to FATCA and it is important to clear all their queries and make them understand about what FATCA is and how it impacts.
FATCA FAQ- Update Details Of Important Frequent Asked Questions
What exactly is FATCA Law In Singapore? Why does it exist?
In short and simple terms, FATCA stands for Foreign Account Tax Compliance Act. Under FATCA, banks in Singapore are required to report account information in detail owned by US citizens to the IRS.
Coming to its existence, then it is introduced to increase transparency for the IRS by uncovering all those tax cheats who are hiding money and assets offshore. With the compliance of FATCA in Singapore, the IRS i.e. Internal Revenue Service has recovered billions of dollars in taxes owed from those holding assets overseas- in short those who are avoiding US taxes. The primary goal of FATCA is to gain financial information about US persons and imposing tax withholding regulations where the required documentation and reporting requirements of the US person doesn’t meet.
I have a local bank account in Singapore so how does FATCA law affect me?
If you have an account, then you are required to report the foreign earned interest on your US income tax return. With the compliance to FATCA tax in Singapore, the IRS will receive your account information and will reconcile it against your tax return. In addition, the identification of delinquent taxpayers will be an automated process.
My bank is asking me to complete the W-9 form. What will be the implications of filing this form?
The general information captured on the W-9 is one’s social security number (SSN). With the SSN, the IRS authority intends to match the information of a foreign bank account with a US tax return report. However, there is no legal requirement to file the W-9 form, but yes, your bank may definitely hold the authority to close your account if you do not comply.
What are the other important reporting requirements?
Besides reporting the foreign earned interest, you may need to file informational reports: FBAR (FinCEN 114) and Form- 8938.
What are the withholding requirements under FATCA?
In order to compliance with FATCA in Singapore, a withholding individual is required to withhold only a proportion of 30% of withholdable payment made to a foreign financial institution (FFI) or a non-financial foreign entity (NFFE), only when both the the FFI or NFFE meets certain legal requirements as proposed in the law.
Lastly, when in doubt or have other queries related to the imposition of FATCA law in Singapore, it is best to consult directly with a tax professional experienced in US expatriate tax matters.