FATCA Reporting Countries & Your Tax Obligations

The Foreign Account Tax Compliance Act (FATCA) is a U.S. law from 2010 designed to combat tax evasion by increasing transparency for the Internal Revenue Service (IRS). The law mandates that foreign financial institutions (FFIs) report information about financial accounts held by U.S. taxpayers, including accounts in foreign entities where U.S. taxpayers have a substantial ownership interest. These institutions, such as foreign banks, mutual funds, and certain insurance companies, must register with the IRS and perform due diligence to identify U.S. account holders. Failure to comply can result in a 30% withholding tax on certain U.S.-source payments made to the non-compliant institution.

The Role of Intergovernmental Agreements

To facilitate the implementation of FATCA, the U.S. Department of the Treasury developed model Intergovernmental Agreements (IGAs). These agreements address foreign laws, such as data privacy or bank secrecy, that might otherwise prevent FFIs from reporting client information directly to the IRS. IGAs create a formal partnership that establishes a legal framework for the exchange of taxpayer information.

There are two primary types of IGAs: Model 1 and Model 2. Under a Model 1 IGA, FFIs in a partner country report U.S. account information to their own national tax authority, which then automatically exchanges the information with the IRS. This government-to-government exchange is the defining feature of the Model 1 approach.

Model 1 IGAs are further divided into two sub-types. A Model 1A agreement is reciprocal, meaning the U.S. also provides certain account information to the partner country. A Model 1B agreement is non-reciprocal, involving a one-way flow of information to the IRS. In contrast, a Model 2 IGA requires FFIs to report information directly to the IRS, and the partner government’s role is to direct and enable its FFIs to comply with FATCA.

Countries with FATCA Agreements

A vast network of countries has entered into Intergovernmental Agreements (IGAs) with the United States to implement FATCA. The list of participating jurisdictions is not static and evolves as new agreements are signed. For the most current information, individuals should consult the official list maintained by the U.S. Department of the Treasury.

When reviewing the Treasury’s list, you will find jurisdictions categorized based on the status and type of their agreement, such as “Model 1 IGA in Force” or “Model 2 IGA in Force.” The Treasury list also includes jurisdictions that have reached an “Agreement in Substance.” This designation means that while a formal agreement has not yet been signed, the country has committed to the terms and is treated as compliant. This status allows financial institutions within those jurisdictions to register with the IRS and comply with FATCA without facing penalties.

Information Reported by Foreign Financial Institutions

Under FATCA, foreign financial institutions are required to collect and report specific details about the financial accounts of their U.S. clients. This reporting provides the IRS with the data needed to verify that U.S. taxpayers are meeting their obligations to report all worldwide income. The core data points that FFIs must report for each U.S. account holder include:

• The account holder’s full name, address, and U.S. Taxpayer Identification Number (TIN), which allows the IRS to match the foreign account data with an individual’s U.S. tax return.
• The account number and the name and identifying number of the reporting financial institution.
• The account balance or value as of the end of the calendar year.
• The gross amount of interest, dividends, and any other income credited to the account during the year.

This transactional data helps the IRS confirm that a U.S. person has accurately reported all foreign-sourced income.

Reporting Obligations for US Persons

The existence of a FATCA agreement and reporting by foreign institutions do not absolve U.S. persons of their own reporting duties. Holding foreign financial assets above certain thresholds triggers a personal filing requirement with the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an individual’s annual income tax return. The requirement to file Form 8938 depends on the total value of your specified foreign financial assets, with thresholds varying by filing status and residency.

For unmarried individuals living in the U.S., the threshold is met if assets exceed $50,000 on the last day of the tax year or $75,000 at any point during the year. For married couples filing jointly in the U.S., these thresholds are doubled to $100,000 and $150,000, respectively.

Taxpayers living abroad have higher reporting thresholds. An unmarried individual residing overseas must file Form 8938 if their specified foreign assets are valued at more than $200,000 on the last day of the year or more than $300,000 at any time. For married couples living abroad and filing a joint return, the thresholds increase to $400,000 and $600,000, respectively.

It is important to distinguish the Form 8938 filing from the separate requirement to file a Report of Foreign Bank and Financial Accounts (FBAR), also known as FinCEN Form 114. The FBAR is filed with the Financial Crimes Enforcement Network (FinCEN), not the IRS. The FBAR has a lower reporting threshold, requiring U.S. persons to file if the aggregate value of their foreign financial accounts exceeds $10,000 at any time during the calendar year. Because the forms are filed with different agencies and have different thresholds, you may be required to file one, both, or neither.