Transcript Document

FROM PRINCIPLES TO PLANNING
FROM PRINCIPLES TO PLANNING
Key Points That you Should Know
about FATCA
Background
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FATCA: Foreign Account Tax Compliance Act enacted in 2010, to curb tax evasion
Proposed Regulations: February 2012
Final Regulations: January 2013
Worldwide scope of implementation with or without the signature of an International Governmental
Agreement (“IGA”)
Persons concerned: Foreign Financial Institutions (“FFIs”) and Non Foreign Financial Entities (“NFFEs”)
with more than 50% of passive income - Multinational Corporations (“MNCs”) - U.S. Withholding
Agents (“USWAs”)
Obligation: Reporting to the IRS of U.S. Account holders (for FFI) and of U.S. holders of a substantial
ownership interest (for NFFE) - Starting January 1, 2014 for ordinary income (FDAP, dividends,
interests, wages, annuities, rents, royalties…) and January 1, 2017 for gross proceeds, foreign passthru
payments and grandfathering obligations
Impact: Potential for 30% FATCA withholding for non-compliance:
 Jan. 1, 2014: 30 % withholding on all U.S. source fixed, determinable, annual or periodical
(“FDAP”) income received by the FFI or NFFE;
 Jan. 1, 2017: 30 % withholding extended in 2017 to grandfathering obligations and foreign
passthru payments
Current State of Play: IRS – Treasury – Form Status – Portal Status
Hot Topics
 Treasury & IRS Updates
 Senator Paul introduced the first bill aiming at limiting the impact of FATCA on May 8, 2013.
 Reciprocity of information
– President Obama's fiscal 2014 budget plan proposes to grant the Treasury Department specific
authority to exchange information under FATCA.
– It would allow the United States to share information similar to what it gets from other
countries.
– Potential Impact: Provision could spell burdens on U.S. financial institutions required to collect
new information.
– Foster IGA Negotiations: Message of good faith as Treasury works to negotiate FATCA
agreements with other countries.
 Model for the rest of the world
– EU works on an anti-tax evasion pilot project modeled after FATCA, since April 9, 2013.
– IGAs that impact Tax Treaties
Worldwide Tax Practices Upheaval
 Worldwide implementation of FATCA : Starts Jan. 1, 2014
 International Governmental Agreements (IGA) negotiated with 75 countries
 6 International Governmental Agreements (IGA) signed:
– Model 1: UK, Mexico, Denmark, Ireland and Norway
– Model 2: Switzerland
 IGAs agreed but not yet released: Germany, Italy, Spain
 Actively negotiating with conclusion expected soon: Canada, Finland, France, Guernsey, Isle of Man,
Japan, Jersey, Bermuda, the Netherlands
 Actively engaged in dialogue: Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia,
Hungary, Israel, Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore,
Sweden, Bahamas, India, Taiwan and BVI
 Treasury is exploring options with these countries: Brazil, Chile, Czech Republic, Gibraltar, Lebanon,
Luxembourg, Romania, Russia, Seychelles, St-Martin, Slovenia and South Africa.
 No IGA: Asia, South America, South Africa… Extraordinary effort to get ready
 Tax Havens (e.g., Cayman Islands, BVI…)
 Financial Action Task Force (“FATF”) Recommendations
Practical Implementation for FFI
 IRS Portal for FFIs’ registration
 An FFI that has registered to be FATCA compliant and that has been issued a global intermediary
identification number (GIIN) will appear on a published FFI List. This list is scheduled to be published
monthly beginning December 2013.
 FATCA Manual Registration through New Form 8957
 Retaliation: 30 % withholding on FDAP income.
 Release of the New Form 1042 with:
– Total U.S. source FDAP Income not required to be withheld upon under Chapter 4
– Total U.S. source FDAP Income reportable under Chapter 4
 Release of the New Form 1042-S with:
– Chapter 3 and Chapter 4 authority for Exemption
– Chapter 3 and Chapter 4 for Type of Recipient, Withholding Agent or Intermediary
NFFEs: New Details in the Final Regs.
 Active NFFEs are exempted from FATCA
 NFFE is active if less than 50% of its gross income for the preceding calendar year is passive income
 Passive Income:
- dividends, including substitute dividend amounts,
- interests,
- rent and royalties,
- annuities,
- the excess of gains over losses from the sale or exchange of property giving rise to passive
income and from transactions in any commodities,
- the excess of foreign currency gains over foreign currency losses,
- the net income from notional principal contracts,
- the amounts received under cash value insurance contracts, and certain amounts earned by
insurance companies.
 New exceptions from passive income treatment:
- dividends, interest, rents, royalties received from a related person (same group of companies) to
the extent this income is not treated as a passive income by the related person,
- income earned by dealers acting in the ordinary course of their business as regards as forward
and option contracts and other similar financial instruments such as notional principal contracts
and instruments referenced to commodities.
Important Deadline Timeline
2013
2014
2015
2016
2017
Colleen P. Waddell
WeiserMazars LLP
212.315.6780 [email protected]