If you`re an American living in Spain or a Spanish resident with assets in the United States, you may have heard of the Foreign Account Tax Compliance Act (FATCA). This law, which was enacted in 2010, requires foreign financial institutions to report their American clients` accounts and assets to the US government. FATCA also requires individuals and entities to disclose their foreign financial assets and income to the Internal Revenue Service (IRS).
Spain signed a FATCA agreement with the United States in 2013, which means Spanish financial institutions must comply with the law`s requirements. Spanish banks, investment firms, and insurance companies must identify their American clients and report their account information to the IRS. Failure to comply with FATCA could result in hefty penalties for Spanish financial institutions.
Individuals with foreign accounts must also comply with FATCA by reporting their assets and income on their tax returns. The law requires Americans living abroad to disclose their foreign financial accounts and assets if their value exceeds certain thresholds. Failing to comply with FATCA reporting requirements can result in substantial penalties and even criminal prosecution.
If you`re a US citizen living in Spain, it`s essential to ensure that you`re compliant with FATCA. This might involve disclosing account information to your Spanish financial institution or reporting your foreign assets and income on your US tax return. It`s also worth noting that some US citizens living abroad may qualify for the Foreign Earned Income Exclusion (FEIE), which allows them to exclude a portion of their foreign income from their US tax return.
In summary, the FATCA agreement between Spain and the United States means that Spanish financial institutions must comply with the law`s requirements. US citizens living in Spain should be aware of FATCA reporting requirements and take steps to ensure compliance to avoid penalties. If you have any questions about FATCA or your US tax obligations as a resident in Spain, it`s always best to consult with a tax advisor or financial professional.