FATCA, which was enacted in the USA as a part of the Hiring Incentives to Restore Employment (HIRE) Act of 2010, requires financial institutions to use enhanced due diligence and reporting procedures to identify US persons who have invested in either non-US financial accounts or non-US entities. The intent behind FATCA is to keep US persons from hiding income and assets overseas.
Under FATCA, foreign financial institutions such as banks, asset managers, insurance companies and pension funds are required to enter into an agreement with the US Internal Revenue Service (IRS)+, which is merely the first step in the process. On top of that, financial institutions will have to align all the key areas, including operations, technology, risk, legal and tax in order to assure successful future FATCA implementation and compliance.
Foreign financial institutions could face significant consequences if they fail to enter into the above described agreement with the IRS, or to otherwise comply with the FATCA regulations - the non-compliant financial institutions shall be subject to a 30% withholding tax on any “withholdable payment” made to their proprietary accounts. Pursuant to the FATCA provisions, foreign financial institutions will also be required to gather certain information from their account holders. An account holder’s failure to provide the required information will result in classifying their account as recalcitrant and any US source income payment credited to such account will then be subject a 30% withholding tax which will be withheld by the crediting financial institution and transferred to the IRS.
Financial institutions will need to make significant process and technology changes in order to comply with FATCA. Even though most FATCA provisions don’t take effect until June 2013, a majority of multinational financial groups have already begun with the necessary preparation and new process implementation. In order to meet the compliance requirements set forth by FATCA duly and timely, the majority of the affected financial institutions are currently:
To help you prepare and successfully implement FATCA regulations with a minimum possible impact on your current business model, PwC has formed a network of FATCA specialists in key markets throughout the world. These professionals are part of our Global Information Reporting (GIR) practice, which brings together specialists who know the intricacies of the international tax law as well as the specifics of the local jurisdictions, rules and regulations.
In the Czech Republic, we have built a team of specialists with multidisciplinary background (Consulting, Tax, Assurance, and Law) who have participated in FATCA projects (current state and gap assessments and FATCA training programs) for financial institutions both in the Czech Republic and abroad. Our FATCA team in the Czech Republic are paying special attention to reducing the administrative backlog connected with FATCA implementation and providing solutions tailored to financial institutions operating on the Czech market.
Our experts are also closely monitoring the current developments regarding the contemplated conclusion of the “Agreement to Improve Tax Compliance and to Implement FATCA” between the Czech and the US Government and the connected local legislation updates.
For support with FATCA implementation and information on the most up-to-date developments of the respective legislation, do not hesitate to contact our Prague FATCA team: