FATCA was voted and passed by the US Congress in 2010 and it is a tool for the Internal Revenue Service (IRS) to control and prevent cross-border tax evasion from citizens of the US through off-shore accounts and with financial assets abroad.
It is recommended that Bulgarian taxable persons analyse their FATCA status to verify whether they belong to the category of the so-called intergovernmental agreements (IGA). The IGAs form the framework between the relevant country's government and the US about the implementation of the rules that will be set up. The IGAs are of two types: according to the first type (Model 1 IGA), institutions report to their governments, and then, the respective governments hand over that information to the IRS, while under the second type (Model 2 IGA) the institutions report directly to the IRS on their clients. If the result of the analysis shows that a certain institution belongs to the category of a reporting Bulgarian financial institution, then the entity should undertake the following measures: register with the IRS system before January 1 2015, review its client list in order to identify financial accounts of US persons and entities that are controlled by US persons, and submit annual reports according to the instructions in the relevant IGA.
It is more than evident that the signed agreement between the governments of Bulgaria and the US will certainly have a positive role with the valuable contribution of enhancing the international banking business and, of course, tax transparency, as well as helping to prevent and effectively fight tax evasion.
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