What is FATCA?
FATCA stands for the Foreign Account Tax Compliance Act. It is a piece of US legislation, the purpose of which is to prevent US persons (both individuals and legal entities) from using foreign financial institutions to avoid taxation on their income and assets.
This applies in Mexico, as the Mexican government has signed an inter-governmental agreement (IGA) with the United States government (see glossary). This will result in the FATCA legislation becoming a local regulation, which means we will be required to request information and report it to the Mexican authorities.
How do I know if I am affected?
FATCA legislation will affect both personal and business customers who are treated as ‘US persons’ for US tax purposes. The FATCA legislation will also affect certain types of businesses with US owners.
The term ‘US person’ includes the following (but is not limited to):
- a citizen of the US, including an individual born in the US but resident in another country or territory (who has not given up their US citizenship)
- a person residing in the US, including those who hold an official identification issued by the United States government
- certain persons who spend a significant number of days in the US each year.
When will the FATCA legislation become effective?
The FATCA legislation became effective on 1 July 2014.
Is HSBC the only bank to be affected by FATCA?
No. Banks and other financial institutions worldwide will be affected by FATCA.