The U.S. and Mexico Sign an Intergovernmental Agreement to Simplify FATCA Compliance

In 2010, the U.S. enacted the Foreign Account Tax Compliance Act (“FATCA”) to combat unreported cross-border financial transactions.  Under FATCA, U.S. taxpayers who own specified foreign financial assets with an aggregate value that exceeds certain thresholds must report those assets to the IRS.  In addition, FATCA also requires foreign financial institutions to report certain information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.  Under FATCA, the financial institution must report the information directly to the IRS unless modified by an intergovernmental agreement.  If a foreign financial institution fails to comply with the disclosure requirements under FATCA, it will be subject to automatic withholding of 30% on its U.S. source income and sales of U.S. securities.

READ: The U.S. and Mexico Sign an Intergovernmental Agreement to Simplify FATCA Compliance