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The Foreign Account Tax Compliance Act (FATCA) Portugal
Updated: April 26, 2023 | Zahra
The Foreign Account Tax Compliance Act (FATCA) is a US law that was enacted in 2010 to reduce tax evasion by US taxpayers holding assets and accounts abroad. This law requires foreign financial institutions (FFIs) to report information about their US clients to America’s Internal Revenue Service (IRS).
Portugal is one of the countries that has entered into an agreement with the US to implement the Foreign Account Tax Compliance Act. In this blog post, we will explore what FATCA means for real estate in Portugal and the FATCA rules for banks in Portugal.
What are the FATCA rules for banks in Portugal?
Under the Foreign Account Tax Compliance Act, Portuguese banks and other institutions are required to identify and report information about their US clients to the US government. This includes information such as information about financial accounts (such as bank balances), interest and dividend payments, and other financial transactions.
FATCA bank account reporting
FFIs in Portugal are required to comply with FATCA rules by identifying and reporting US account holders to the IRS. They must also withhold a percentage of payments made to account holders who do not comply with FATCA regulations.
To comply with FATCA, FFIs in Portugal must enter into an agreement with the IRS and register with the IRS as a participating FFI. Failure to comply with FATCA reporting requirements can result in significant penalties for the foreign financial institution.
The IRS offshore disclosure program offers a way for individuals to come forward and disclose any income generated overseas.
FATCA bank account
If you are a US citizen or resident of Portugal, you must inform your Portuguese bank that you are a US taxpayer. Your bank may then ask you to provide additional information and documentation, such as your US tax identification number (TIN) or social security number (SSN).
A FATCA bank account is a foreign bank account that is subject to FATCA rules. If you are a US taxpayer with a foreign bank account in Portugal, your account may be subject to FATCA rules. This means that your bank may be required to report your account information to the IRS.
Real Estate Portugal
If you are a US citizen or resident who owns real estate in Portugal, you may be subject to FATCA reporting requirements. This means that your Portuguese bank or financial institution may be required to report information about your real estate holdings to the US government. You may also be required to register this information on your US tax returns.
Foreign individuals and entities investing in Portuguese real estate are subject to FATCA rules. This means that if you are a US taxpayer with a foreign bank account in Portugal that holds funds related to real estate transactions, you may be required to report your foreign accounts to the IRS (i.e., if you have a house for sale in Portugal).
This is because the IRS considers real estate transactions a form of investment.
Portuguese NIF and Portuguese Bank Accounts
Portuguese banks are considered foreign financial institutions (FFIs) under FATCA, and as such, they must comply with the FATCA regulations. This means that if you have a Portuguese bank account, the bank may be required to report certain information about your account to the IRS if you are a US taxpayer.
When you open a Portuguese bank account, the bank will ask you to provide your tax identification number (TIN), known in Portuguese as your “Número de Identificação Fiscal” (NIF) or “Número do Contribuinte.” Your NIF could be compared to the Social Security Number (SSN).
You need a NIF in Portugal to open a bank account or conduct any other financial activity in Portugal, like signing an employment contract, renting a house, paying taxes, doing your tax return, and buying real estate.
We recommend getting a NIF as soon as possible before or after relocating to Portugal as soon as possible. We can help you get your NIF remotely. All you have to do is fill out this online form, and in two to three weeks, we’ll send your NIF straight to your inbox.
When you’re signing up for a bank account and providing your NIF, the bank will use this information to determine whether you are a US taxpayer and if so, they will report your account information to the IRS as required by FATCA.
We can also help you open a Portuguese bank account from anywhere in the world with one of Portugal’s leading banks.
It is important to note that if you are a US taxpayer with a Portuguese bank account or NIF, you may have additional reporting obligations under FATCA. You should consult a tax professional to understand your obligations and ensure compliance with FATCA regulations.
The following blog posts are full of handy tips and the information you’ll need to move to Portugal:
- Living in Portugal as an American
- Getting a NIF Number in Portugal
- How to Open a Bank Account in Portugal
- Working in Portugal as an Expat
- Portugal for Digital Nomads
- What is a NIF, and What is it Used For?
In conclusion, understanding FATCA rules is crucial for American citizens and legal permanent residents living in Portugal. Failure to comply with these rules can result in serious legal issues and hefty fines.
It’s important to stay up-to-date with legal developments in international tax law and to obtain express written consent from any financial institutions sharing your information with the IRS.
The Portuguese Republic is committed to complying with FATCA regulations and ensuring that its institutions are in compliance as well. By staying informed and taking the necessary steps to comply with FATCA rules, American expats in Portugal can enjoy peace of mind knowing that they are meeting their legal obligations.
Frequently Asked Questions about the Foreign Account Tax Compliance Act (FACTA) Portugal
What does FATCA mean for banks?
The Foreign Account Tax Compliance Act places significant compliance burdens on foreign financial institutions. In addition to identifying and reporting information about their US clients, these institutions must also implement due diligence procedures to identify accounts held by US taxpayers.
Failure to comply with FATCA requirements can result in the imposition of a 30 percent withholding tax on certain US-source payments.
What accounts are reportable under FATCA?
Under FATCA, FFIs in Portugal must report all accounts held by US taxpayers. This includes deposit accounts, current accounts, custodial accounts, and certain types of investment accounts. The law also requires reporting certain income earned on these accounts, such as interest, dividends, and capital gains. Other information may also be requested
It is important to note that not all foreign accounts are reportable under FATCA. For example, retirement accounts and some insurance contracts may be exempt from FATCA reporting requirements.
Is FATCA only for US citizens?
No, FATCA applies to US citizens and residents as well as non-US citizens who hold assets or accounts in the US. It also applies to US citizens and residents who hold assets or accounts abroad.
If you think FATCA might apply to you, consult an international tax expert who can help you keep up to date with the most current legal developments.
How can I avoid FATCA?
If you are a US taxpayer with a foreign bank account in Portugal, you cannot avoid FATCA reporting requirements as it is part of US tax treaties.
However, you can ensure you comply with FATCA regulations by properly reporting your foreign accounts to the IRS.
Additionally, you can work with a tax professional who can help you understand your FATCA reporting obligations and help you navigate the process. We would recommend that you obtain advice from a tax professional with FATCA experience.
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