The Foreign Account Tax Compliance Act (FATCA) is a legal framework that mandates U.S. citizens, whether residing domestically or abroad, to annually report their holdings in foreign financial accounts. This legislation aims to enhance transparency and combat tax evasion by ensuring that U.S. taxpayers disclose their offshore financial assets. FATCA obliges foreign financial institutions to share information about the accounts held by U.S. persons with the U.S. government, promoting compliance with U.S. tax laws and reducing the risk of tax avoidance through offshore accounts.
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