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Compliance regulations for US tax residences

Foreign Account Tax Compliance Act (FATCA)

FATCA is a U.S. source regulation that was enacted in 2010 to target non-compliance by U.S. taxpayers using foreign accounts. FATCA requires foreign financial institutions to report to the U.S. information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. FATCA has a cross-border effect and as such financial institutions throughout the world will meet its requirements.


The Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) is a US federal law that was passed as a response to financial crisis. It brought significant changes to financial regulation in the U.S. Among its numerous aims were comprehensive regulation of financial markets and strengthened investor protection. The regulation strives to protect U.S. persons. As such it has cross border effect. Financial institutions throughout the world have to adjust to those rules. This may mean limiting access to certain investment services and products to U.S. persons.

FATCA requires US taxpayers to report their foreign financial assets

As of 1 July 2014, financial institutions worldwide must ask their clients whether they are US taxpayers. They must also find out whether the owners of their corporate clients are US tax residents or citizens. All of this is required by the new US law Foreign Account Tax Compliance Act or FATCA. The United States has entered into data collection agreements with many countries, including Estonia.

  • Who is obliged to pay tax in the US?

  • What do clients who are US tax payers have to do?

  • What must be considered by corporate bodies that have at least one beneficial owner (a person who owns at least 25% of the legal entity or who controls at least 25% of such a legal entity in any other manner) who is a US taxpayer or citizen?

  • What happens if a client fails to submit the required data?

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