The following reasons are the primary reasons that a financial service provider’s client may be affected by FATCA directly:
1. The client is a US person and is obligated to file taxes in the USA.
The obligation to file taxes exists for the following reasons:
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Possession of US citizenship (or a US dual-citizenship)
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Possession of a Green Card ("Green Card Test")
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Residence in the USA over a certain period of time ("Substantial Presence Test")
2. A third person who maintains relations with the client is deemed to be a US person and is obligated to file taxes in the US. Examples:
- Management of a joint account or safekeeping account
- Issuing of a power-of-attorney to the third person
- The third person maintains beneficial ownership of the assets
It is to be noted that a person may also be subject to a US tax obligation based on other reasons.
A person affected by FATCA must take the following into consideration: He/She will be asked by his/her bank, insurer or other financial service provider whether all information on assets (e.g. accounts, safekeeping accounts or insurance policies) requested by the American tax authority IRS (Internal Revenue Service) may be forwarded to the IRS. If the affected person does not provide consent, the financial service provider, which has signed an agreement on compliance with the FATCA provisions with the IRS, is required to terminate the entire business relationship.