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banniere FATCA Expert Corner

FATCA Expert Corner

Meet our Experts!

 

René Wack  Pascal Aerens  YPI
 René Wack  Pascal Aerens  Yannick Pannacci

 

What is FATCA?

The Foreign Account Tax Compliance Act was enacted in 2010 to target non-compliance by US taxpayers using foreign accounts. FATCA requires Foreign Financial Institutions (FFIs) to identify and to report information about accounts held by US taxpayers or by foreign entities in which US taxpayers hold a substantial ownership interest.

 

 

What organizations does it concern?

All Foreign Financial Institutions

All US Financial Institutions

 

 

When does it start?

Due to overwhelming interest, Treasury announced on July 12th, 2013 a six month extension to the FATCA withholding requirement starting on July 1st, 2014.

 

What are the specific obligations of Foreign Financial Institutions?

There are three categories of obligations: identification, reporting and withholding.

 

About Identification:

1. What is to identify?

All accounts held by US taxpayers (US persons and US entities) and by foreign entities in which US taxpayers hold a substantial ownership interest.

 

2. Are there specific identification criteria?

Yes, if a customer is a US citizen or resident, has a US mailing or resident address, or has an unambiguous US place of birth.

 

3. How to identify US accounts?

By electronic search.

For high value accounts, by electronic search and paper search.

 

4. Can the electronic search be done by a third party service provider?

Yes, but the FATCA obligations shall remain the responsibility of the Reporting Financial Institution.

 

5. When do the FFIs have to conduct the search and identification?

For existing accounts now, and before December 31st , 2014 for all participating and reporting FFIs, and by January 1st, 2014 by implementing new account opening procedures.

 

About Reporting:

1. What are the reporting obligations?

  • The name, address and US TIN (Tax Identification Number) for each account held by a US citizen or resident, and by a US entity. The name, address and TIN for each US person having a control in a foreign entity, and also for each foreign entity having one or more controlling persons being a US person.
  • The account number or functional equivalent.
  • The account balance or value and other financial information.

 

2. Who has to report?

All participating and reporting Foreign Financial Institutions.

 

3. When?

For direct participating FFIs before March 31st, 2015, and before September 30th, 2015 for FFIs concerned with a reciprocal Intergovernmental Agreement.

 

4. To whom?

To the Internal Revenue Service (IRS)  for direct participating FFIs concerned or not by a non-reciprocal Intergovernmental Agreement, and to the local competent tax authority in case of a reciprocal Intergovernmental Agreement.

 

About Withholding:

1. What is withholding?

It is a 30% tax on certain payments of US source income when paid to non-participating FFIs and account holders who are unwilling to provide the required information.

 

2. Who has to withhold?

All US withholding agents and all participating FFIs.

 

3. When does the withholding process begin?

  • For Preexisting Accounts of Prima Facie FFIs by December 31st, 2014;
  • By December 31st, 2014 for Preexisting High Value Accounts for Individuals
  • By December 31st, 2015 for Preexisting Accounts of Individuals other than High Value Accounts and of Entities other than Prima Facie FFIs

 

What are the specific obligations of US Financial Institutions?

There are three categories of obligations: withholding, identification and reporting in case of an Intergovernmental Agreement.

 

About Withholding

All US Financial Institutions and generally foreign branches of US FIs are withholding agents.

 

About Identification

1. What is to identify?

All accounts held by taxpayers of a country which signed with the Government of the USA a reciprocal Intergovernmental Agreement.

 

2. Are there specific identification criteria?

Yes, including citizenship or country resident, mailing and resident address, unambiguous place of birth.

 

3. How to identify these accounts?

By electronic record search mainly.

 

4. Can the electronic record search be done by a third party service provider? 

Yes, but the FATCA obligations shall remain the responsibility of the Reporting  US FI.

 

5. When does the US FIs have to conduct the electronic record search?

For existing accounts now, and for the calendar year 2014 before September 30, 2015.

 

About Reporting:

1. What are the reporting obligations?

  • The name, address and Tax Identification Number for each account held by an IGA citizen or resident, or entity
  • The account number or functional equivalent
  • The accounts balance or value and other financial information

 

2. Who has to report?

All US FIs.

 

3. When?

For calendar year 2014 before September 30, 2015 and nine month after each subsequent calendar year.

 

4. To whom?

To the US Internal Revenue Service.

 

FATCA Registration Process:

The Form 8957 for FATCA Registration for participating and reporting FFIs to obtain a Global Intermediary Identification Number (GIIN) will be open from August 19th, 2013 up to May 5th, 2014 to ensure inclusion in the June 2nd, 2014 IRS FFI list, list to be updated on a monthly basis.

 

On October 29th, 2013, IRS issued additional guidance regarding FATCA including a draft of the agreement FFI, other than those under an IGA Model 1, will enter into with IRS. The FFI agreement will be finalised by December 31st, 2013.

 

The IRS published on June 2nd, 2014 the first list of all FFI’s and branches that obtained a GIIN and are in approved status. The list concerns all FFI’s in countries that signed an IGA, in countries that reached an agreement in substance and all Participating FFI’s. For example, 212 Chinese banks are registered, and although IGA discussions with Russia are frozen, 515 Russian Federation banks registered. For more information, please visit http://apps.irs.gov/app/fatcaFfiList/flu.jsf

 

About Intergovernmental Agreements (IGA)

The US Department of the Treasury offers the possibility for countries to sign an IGA in order to facilitate the exchange of FATCA information and to reduce burdens on financial institutions and streamline the reporting process.

 

There are three types of IGA:

  • IGA Model 1A: reciprocal automatic exchange of information between tax authorities
  • IGA Model 1B: automatic exchange of information
  • IGA Model 2: direct reporting by participating FFIs to the US Internal Revenue service.

 

The actual signed Intergovernmental Agreements:

  • United Kingdom  (September 12, 2012 – IGA Model 1A)
  • Denmark (November 19, 2012 – IGA Model 1A)
  • Mexico (November 19, 2012 – IGA Model 1A
  • Ireland (January 23, 2013 – IGA Model 1A)
  • Switzerland (February 14, 2013 – IGA Model 2)
  • Norway (April 15th, 2013 – IGA Model 1A)
  • Germany (May 31st, 2013 – IGA Model 1A)
  • Spain (May 31st, 2013 – IGA Model 1A)
  • Japan (June 11th, 2013 – IGA Model 2)
  • France (November 14th, 2013 – IGA Model 1A)
  • Costa Rica (November 26th, 2013 – IGA Model 1A
  • Cayman Islands (November 29th, 2013 – IGA Model 1B)
  • Isle of Man (December 13th, 2013 – IGA Model 1A)
  • Guernsey (December 13th, 2013 – IGA Model 1A)
  • Jersey (December 13th, 2013 – IGA Model 1A)
  • Malta (December 16th, 2013 – IGA Model 1A)
  • The Netherlands (December 18th, 2013 – IGA Model 1A)
  • Bermuda (December 19th, 2013 – IGA Model 2)
  • Mauritius (December 27th, 2013 – IGA Model 1A)
  • Italy (January 10th, 2014 – IGA Model 1A)
  • Canada (February 5th, 2014 – IGA Model 1A)
  • Hungary (February 4th, 2014 – IGA Model 1A)
  • Finland (March 5th, 2014 – IGA Model 1A)
  • Chile (March 5th, 2014 – IGA Model 2)
  • Luxembourg (March 28th, 2014 – IGA Model 1A)
  • Honduras (March 31st, 2014 – IGA Model 1A)
  • Estonia (April 11th, 2014 – IGA Model 1A)
  • Belgium (April 23rd, 2014 – IGA Model 1A)
  • Australia (April 28th, 2014 – IGA Model 1A)
  • Austria (April 29th, 2014 – IGA Model 2)
  • Jamaica (May 2nd, 2014 – IGA Model 1A)
  • Gilbraltar (May 8th, 2014 – IGA Model 1A)
  • Liechtenstein (May 16th, 2014 – IGA Model1A)
  • Slovenia (June 2nd, 2014- IGA Model 1A)
  • South Africa (June 6th, 2014 – IGA Model 1A)
  • New Zealand (June 12th, 2014 – IGA Model 1A)
  • Latvia (June 27th, 2014 – IGA Model 1A)
  • British Virgin Islands (June 30th, 2014 – IGA Model 1B)
  • Israel (June 30th, 2014 – IGA Model 1A)
  • Czech Republic (August 4th, 2014 – IGA Model 1A)
  • Sweden ( August 8th, 2014 – IGA Model 1A)
  • Lithuania (August 26th, 2014 – IGA Model 1A)
  • Brazil (September 23rd, 2014 – IGA Model 1A)
  • Poland (October 7th, 2014 – IGA Model 1A)
  • Bahamas (November 3rd, 2014 – IGA Model 1B)
  • Hong Kong (November 13th, 2014 – IGA Model 2)
  • Barbados (November 17th, 2014 – IGA Model 1A)
  • Moldova (November 26th, 2014 – IGA Model 2)
  • Turks and Caicos Islands (December 1st, 2014 – IGA Model 1B)
  • Cyprus (December 2nd, 2014 – IGA Model 1A)
  • Bulgaria (December 5th, 2014 – IGA Model 1B)
  • Singapore (December 9th, 2014 – IGA Model 1B)
  • Curaçao (December 16th, 2014 – IGA Model 1A)
  • Qatar (January 7th, 2015 – IGA Model 1B)
  • Kosovo (February 26th, 2015 – IGA Model 1B)
  • Belarus (March 18th, 2015 – IGA Model 1B)
  • Croatia (March 20th, 2015 – IGA Model 1A)
  • Uzbekistan (April 3rd, 2015 – IGA Model 1B)
  • Kuwait (April 29th  2015 – IGA Model 1B)
  • Colombia (May 20th, 2015 – IGA Model 1A)
  • Holly See (June 10th, 2015 – IGA Model 1B)
  • Iceland (May 26th, 2015 – IGA Model 1A)
  • Romania (May 28th, 2015 – IGA Model 1A)
  • South Korea (June 10th, 2015 – IGA Model 1A)
  • United Arab Emirates (June 17th, 2015 -IGA Model 1B)
  • India (July 9th, 2015 – IGA Model 1A)
  • Georgia (July 10th, 2015 – IGA Model 1B)
  • Philippines (July 13th, 2015 – IGA Model 1B)
  • Turkey (July 29th, 2015 – IGA Model 1A)
  • Slovak Republic (July 31st, 2015 – IGA Model 1A)
  • Portugal (August 6th, 2015 – IGA Model 1A)
  • St Kitts and Nevis (August 31st , 2015 – IGA Model 1B)
  • St Vincent and the Grenadines (August 18th, 2015 – IGA Model 1B)
  • Montserrat (September 8th, 2015 – IGA Model 1B)
  • Cambodia  (September 14th, 2015 – IGA Model 1B)
  • Azerbaijan (October 9th, 2015 – IGA Model 1)
  • San Marino (October 28th,2015 – IGA Model 2)
  • Angola (November 9th, 2015 – IGA Model 1B)

 

Jurisdictions that have reached agreements in substance and have consented to being included on this list:

 

Model 1 IGA

  • Algeria (June 30th, 2014)
  • Anguilla (June 30th, 2014)
  • Antigua and Barbuda (June 3rd, 2014)
  • Bahrain (June 30th, 2014)
  • Cabo Verde (June 30th, 2014)
  • China (June 26th, 2014)
  • Dominica (June 19th, 2014)
  • Dominican Republic (June 30th, 2014)
  • Greece (November 30th, 2014)
  • Greenland (June 29th, 2014)
  • Grenada (June 16th, 2014)
  • Guyana (June 24th, 2014)
  • Haiti (June 30th, 2014)
  • Indonesia (May 4th, 2014)
  • Kazakhstan (November 30th, 2014)
  • Malaysia (June 30th, 2014)
  • Montenegro (June 30th, 2014)
  • Panama (May 1st, 2014)
  • Peru (May 1st, 2014)
  • Saudi Arabia (June 24th, 2014)
  • Serbia (June 30th, 2014)
  • Seychelles (May 28th, 2014)
  • St Lucia (June 12th, 2014)
  • Thailand (June24th, 2014)
  • Trinidad and Tobago (November 30th, 2014)
  • Tunisia (November 30th, 2014)
  • Turkmenistan (June 3rd, 2014)
  • Ukraine (June 26th, 2014)

 

Model 2 IGA

  • Armenia (May 8th, 2014)
  • Iraq (June 30th, 2014)
  • Macao (November 30th, 2014)
  • Nicaragua (June 30th, 2014)
  • Paraguay (June 6th, 2014)
  • Taiwan (June 23rd, 2014)

 

Jurisdictions that have reached agreements in substance can be treated as having agreements (IGA’s) in effect until the end of 2014. This treatment is available to jurisdictions that reached agreements in substance before July 1st, 2014.

 

The actual signed IGA’s and the reached agreements in substance involve 112 jurisdictions by July 16th, 2015.

 

What about Tax Information Exchange in the European Union?

The European Union Counsil adopted on March 24th, 2014 a new Directive amending Directive 2003/48 regarding mandatory automatic exchange of information in the field of taxation.

 

The main changes are:

  • The communication by competent authorities of information from 1 January 2016 about dividends, capital gains, accounts and other income.
  • The obligation for a Member State which provides wider cooperation to a third country (e.g. U.S. FATCA IGA) to provide the same wider cooperation to any other Member State.

 

The mandate given to the Commission to negociate an ageement with Switzerland, Liechtenstein, Monaco, Andora and San Marino should be reached before the end of 2014.

 

The five Finance Minister of France, Germany, Italy, Spain and  United Kingdom (the G5) announced at the  April 28th, 2014 Paris meeting that 44 jurisdictions will sign before end of October 2014 an automatic tax information exchange agreement between and with the European Union member states. The first information exchange will start in 2017 related to information collected after December 31st, 2015.

 

What are the International Initiatives around FATCA?

The G20 Summit held in St- Petersburg on September 7-8, 2013 committed to start by end of 2015 the automatic exchange of tax information, in accordance with the rules set up by the OECD, and finally adopted the automatic exchange of tax information as the new international standard of tax cooperation.

 

The OECD issued on February 12, 2014 a single new “Standard for Automatic Exchange of Financial Account Information” including the text of the Model Competent Authority Agreement (CAA) and the Common Reporting and Due Diligence Standard (CRS). The G20 Finance Minister endorsed the Standard presented by the OECD during the 22-23 February 2014 meeting in Sydney (Australia).

 

The OECD annual ministerial council meeting held in Paris on May 6th 2014 endorsed the Declaration on Automatic Exchange of Information in Tax Matters by all 34 member countries along with Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa.

 

On July 21st, 2014, the OECD released a full version of global standard for automatic exchange of information. The new consolidated version includes commentary and guidance for implementation by governments and financial institutions, detailed model agreements, as well as standards for harmonised technical and information technology solutions, notably a standard format and requirements for secure transmission of data.

 

The G20 meeting held in Austria in September 2014 formally endorsed the new standard.

 

At the Global Forum hedl in Germany the 29th October 2014, 50 countries agreed to start the automatic tax information exchange in 2017 and about 90 countries agreed to ban bank secrecy in tax matters.

 

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