Foreign Account Tax Compliance Act (FATCA): Overview, Scope & Reporting Requirements

Overview

What is the Foreign Account Tax Compliance Act (FATCA)

The Foreign Account Tax Compliance Act (FATCA) is a United States federal law enacted to combat tax evasion by U.S. persons holding financial assets outside the United States. FATCA requires foreign financial institutions (FFIs) to identify and report information on U.S. account holders to the U.S. Internal Revenue Service (IRS), either directly or via local tax authorities.

FATCA operates globally through a network of Intergovernmental Agreements (IGAs) between the United States and participating jurisdictions. These agreements define local implementation rules, reporting channels, and data exchange mechanisms.

FATCA has been in force since 2014 and remains a core international tax reporting obligation for financial institutions worldwide.

Legal Context

Regulatory Authority

FATCA is administered by the U.S. Internal Revenue Service (IRS) under U.S. federal law.

Outside the United States, FATCA is implemented through two primary types of Intergovernmental Agreements (IGAs):

  • Model 1 IGA – Reporting to local tax authorities, which then exchange data with the IRS

  • Model 2 IGA – Direct reporting by financial institutions to the IRS

National tax authorities are responsible for local supervision and enforcement, while the IRS defines the reporting schemas, validation rules, and transmission protocols.

Although FATCA and CRS are separate regimes, many institutions operate both in parallel due to overlapping data requirements.

Applicability

Who Does FATCA Apply To?

FATCA applies to Foreign Financial Institutions (FFIs), including:

  • Banks and credit institutions

  • Custodial institutions

  • Investment entities and asset managers

  • Certain insurance companies

  • Trusts and similar arrangements (where applicable)

Institutions must determine their FATCA status, identify U.S. reportable accounts, and apply withholding or reporting obligations as defined under applicable IGAs.

Applicability depends on:

  • Entity classification

  • Jurisdiction

  • Account holder characteristics

Obligations

Core Obligations Under FATCA

FATCA introduces obligations across four main areas:

  • Entity classification and registration (where applicable)

  • Due diligence to identify U.S. indicia

  • Data collection and validation

  • Annual reporting to tax authorities or the IRS

These obligations are supported by detailed IRS regulations, IGA guidance, and technical reporting specifications.

Reporting

Reporting & Data Requirements Under FATCA

FATCA reporting requires financial institutions to submit annual information returns containing:

  • Account holder identification details

  • U.S. tax identification numbers (TINs)

  • Account balances or values

  • Income and payment information

Reports must be submitted in IRS-defined XML formats, following strict schemas and validation rules.

Reporting channels, deadlines, and transmission methods vary depending on:

  • IGA model

  • Jurisdiction

  • Reporting entity type

Challenges

Operational Challenges in FATCA Reporting

Common FATCA operational challenges include:

  • Identifying and validating U.S. indicia

  • Incomplete or missing U.S. TINs

  • Data inconsistencies across client and account systems

  • Manual XML generation and validation

  • Managing parallel FATCA and CRS reporting processes

These challenges increase operational complexity and elevate regulatory and reputational risk.

REGREP Solution

How REGREP Supports FATCA Reporting

REGREP supports FATCA as a regulatory reporting infrastructure, enabling institutions to operationalise FATCA reporting requirements efficiently and consistently.

REGREP provides:

REGREP supports the technical preparation and submission of FATCA reports and does not replace due diligence processes, tax determinations, or regulatory responsibility.

Supervisory Authorities Referenced

Links are provided for reference purposes only. REGREP is not affiliated with or endorsed by any regulatory authority.

Related REGREP Resources

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