Put simply, it is the commitment by governments to exchange information about financial accounts held by their taxpayers. This includes banks, building societies and life assurance companies and UK Investment platforms.
Governments around the world have become increasingly aware of large amounts of undeclared wealth held by their taxpayers in overseas accounts. Unless voluntarily disclosed, it is possible for individuals to hold overseas accounts without any of the income or profits from such accounts being visible to their domestic tax authorities. Additionally, in recent years there has also been a growing intolerance from governments and the public of tax avoidance and tax evasion. As a result, there has been increasing global effort by governments to provide the relevant tax authorities with information which they may use to assess whether individuals or companies are liable to any taxes which have not been paid.
FATCA is a US law aimed at US tax residents who have placed assets overseas and were not declaring this to the US tax authorities. The law affects non-US financial institutions (also known as Foreign Financial Institutions or FFIs) in countries which have signed agreements with the US. FATCA requires FFIs to introduce measures to identify and report US residents who have accounts with them. This includes life assurance and the Collective Investment Account offered by Quilter. FFIs include institutions carrying out activities such as deposit taking, investment services, custody services and investment-based insurance.
The Organization of Economic Co-operation and Development (OECD) developed the CRS based largely on the FATCA model but involve a far wider range of jurisdictions.
