Foreign Account Tax Compliance Act (FATCA)

Definition:

Provisions of US tax law commonly known as FATCA are intended to address tax evasion by US Persons with offshore investments or accounts. The rules generally require that non-U.S. “financial institutions” (a term broadly defined that includes financial intermediaries) and certain other non-U.S. entities comply with due diligence and reporting requirements (generally relating to ownership by US persons of interests in, or accounts with, those entities). Failure to comply may result in US withholding on income that these non-compliant entities receive. Intergovernmental agreements (IGAs) between the United States and various jurisdictions may modify these requirements. FATCA withholding currently applies to US source income. Withholding by financial institutions on “foreign passthru payments” may apply in the future.

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