n Business Tax and Company Law Quarterly - The Foreign Account Tax Compliance Act (FATCA) - what is all the fuss about?

Volume 3, Issue 2
  • ISSN : 2219-1585


The purpose of this article is to give the reader an overview of a complex piece of legislation signed into law in the United States called the Foreign Account Tax Compliance Act ('FATCA'). In terms of FATCA, foreign financial institutions (which will include South African banks, asset managers, private equity funds, long-term insurers and other participants in the financial system) will be required to enter into an agreement with the Internal Revenue Service of the United States by June 2013, failing which a 30% withholding tax will be applied on certain payments out of the United States to the foreign financial institution. The article will explore the main concepts of FATCA, that is, what a foreign financial institution will be agreeing to do when entering into the contract with the Internal Revenue Service and why South African financial institutions are left with very little choice but essentially to agree to act as a United States withholding agent for United States persons. In so doing the article highlights certain considerations of which most financial institutions in South Africa would need to take note. The article furthermore deals with the important dates of implementation in terms of FATCA.

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