10 Fast FACTs about FATCA
1. FATCA = Foreign Account Tax Compliance Act
2. It is a behaviour modification technique to find U.S persons ‘offshore’ and reinforce the global trend towards greater transparency and information exchange.
3. FATCA’s extensive reporting requirements have been deliberately designed to turn ‘fiduciary intermediaries’ into tax intermediaries’ precisely because they have access to information.
4. Compliance is to be enforced through the application of a 30% withholding tax on withholdable payments to non-participating or non-excepted non-US Foreign Financial Institutions (FFI), Foreign Financial Entities (FFE); or recalcitrant account holders.
5. Withholdable payments to which FATCA will apply include U.S source income and may be extended to non U.S source income through the proposed application of the ‘pass through’ concept.
6. FFIs and FFEs who are ‘per se’ FFIs or FFEs; enter into FFI or FFE agreements with the U.S IRS; or are ‘deemed’ to be compliant with FATCA rules will be exempt from the application of the rules.
7. Group penalties will be applicable even if one FFI or FFE member is non-compliant
8. Six OECD countries have started talks with the US to enter into agreements to become FATCA partners. FATCA partners are likely to be limited to OECD countries as the U.S has stated a preference to use the provisions of its TIEAS and not FATCA agreements with its TIEA partners.
9. Institutions and entities within a FATCA- country partner will report to the local revenue authourity and not the U.S IRS; be deemed to be a participating FFI or FFE and therefore not subject to the 30% U.S withholding.
10. FATCA is due to come into force in 2013.