Foreign Account Tax Compliance Act (FATCA)

The Foreign Account Tax Compliance Act (FATCA) is a U.S. law aimed at preventing tax evasion by American citizens using foreign accounts. It requires foreign financial institutions to report information about accounts held by U.S. taxpayers to the IRS. If these institutions do not comply, they face a withholding tax on certain payments from the U.S. This law helps the U.S. government track foreign investments and ensure that its citizens pay taxes on their worldwide income, thereby improving tax compliance and reducing potential revenue loss.