The FATCA regulation or Foreign Account Tax Compliance Act is a 2010 US regulation that seeks to force foreign financial entities to collaborate with the North American administration in its fight against tax fraud, being in 2013 when the Agreement was signed between the Kingdom of Spain and the United States of America for the improvement of international tax compliance and the implementation of the FATCA agreement.
The main objective of the FATCA Law is to enforce the obligation of report on foreign accounts supported by American taxpayers.
The FATCA agreement establishes two types of obligations for Spanish financial entities: customer information and account reporting. That is, on an annual basis, the obligated financial institutions must send the informative declaration of financial accounts of certain US persons to the State Tax Administration Agency, using form 290 electronically.
This obligation is applicable to those financial institutions that maintain the following accounts with the owner or natural persons who exercise control over them in the case of legal entities that are US residents or citizens:
- Deposit accounts.
- Investment accounts.
- Custodial accounts.
- Insurance contracts with cash value.
The most relevant information that must be provided in said model is:
- Identification of the account holder: name, address and US NIF.
- The name and identifying number of the Spanish financial institution obliged to communicate information.
- The account number.
- Account balance or value: if it exceeds the minimum thresholds, the IBAN or ISIN code must be identified.
- Balance or value of the account at the end of the year or balance at the time immediately prior to its cancellation.
The deadline for submitting the model must be between January 1 and March 31 of each year in relation to the financial information relating to the immediately preceding year. In order to ensure compliance with FATCA regulations, a penalty for those financial entities that decide not to participate in the system, which translates into a 30% withholding on payments from North American sources that they obtain, either on their own account or from their clients.
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