FATCA is the abbreviated form of the Foreign Account Tax Compliance Act. It relates to a law put in place by the U.S. government on behalf of the U.S. Internal Revenue Service in 2010. The goal of this law is to impose strict tax reporting rules on non-U.S. financial services providers.

Financial services providers which do not engage in a FATCA agreement with the IRS are required to pay a 30% withholding tax on “fixed and determinable annual and periodical payments” (FDAP) originating from a U.S. source.

Rents, salaries, interest earnings and dividends all fall into the FDAP category. Gross revenues from the sale of certain US assets also fall under the FATCA scope.

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