FACTA picWe have recently fielded a number of enquiries about FACTA from clients who have received correspondence from their bank, including, in some cases, a detailed FACTA questionnaire to complete.

So what is FACTA?

FACTA stands for The Foreign Account Tax Compliance Act, which is legislation passed by the United States that aims to reduce tax evasion by US citizens, tax residents and entities.

FACTA is a reporting regime to ensure that US persons (and New Zealanders with accounts held in the US) meet their US tax obligations.

US citizens and tax residents are required to report their worldwide income to the Internal Revenue Service (IRS) – regardless of whether they actually live in the US or not.

The New Zealand Government has enacted legislation to require and enable New Zealand financial institutions to comply with FACTA.

FACTA requires all financial institutions to identify customers who may be US persons and report their account information to the IRD. Financial institutions are required to report on details of accounts held by US citizens, US tax residents and other specified US entities.

FACTA is a reporting regime to collect information. It does not change an individual’s or entity’s New Zealand tax obligations, such as New Zealand tax residents generally remaining liable for New Zealand income tax on their worldwide income (including any income derived in the US).

If you have been contacted by your bank and have questions regarding FACTA, please contact us for advice on your specific circumstances.