Foreign Account Tax Compliance Act (FATCA)

FATCA Compliance: What every financial institution should know
July 2011

The Foreign Account Tax Compliance Act (FATCA) will impact many foreign (i.e., non-US) financial institutions (FFIs). FATCA is a response to the perception that US individuals are not reporting all US income earned outside the US either due to the lax standards or intentional actions of certain foreign entities.

In this issue,

  • Why is FATCA important?
  • Who will be affected by FATCA?
  • How will FATCA work?
  • When will FATCA become effective?
  • What will be required under a FFI Agreement?
  • When should companies begin preparing for FATCA?
  • What steps should companies be taking?

Understanding FATCA - Mark Jansen of PwC explains the main details and implications for both financial institutions and customers of the Foreign Account Tax Compliance Act (FATCA) enacted in the US.

 

 

 

 

 

 

 

 

 

 

 

Preparing for FATCA - Mark Jansen of PwC looks at the issues for financial institutions - and customers - of the Foreign Account Tax Compliance Act (FATCA), and considers what preparation is necessary now.

 

 

 

 

 

 

 

 

 

 

 

Compliance with FATCA - Michael Brevetta of PwC looks at the details and requirements of the Foreign Account Tax Compliance Act (FATCA), and also explains the penalities for non-compliance.

 

 

 

 

 

 

 

 

 

 

 

And why it is important to my institution

The Foreign Account Tax Compliance Act of 2009 (FATCA) was included in the Hiring Incentives to Restore Employment (HIRE) Act enacted in March 2010, and is generally effective for payments made after 31 December 2012.  FATCA was enacted in response to the continued perception that U.S. individuals are not reporting all of their income earned outside of the U.S. either due to tax standards or intentional actions of certain foreign entities.
 
FATCA imposes a 30 percent withholding tax on any "withholdable payment" made either to a Foreign Financial Institution (FFI) or Non Financial Foreign Entity (NFFE).  To avoid the withholding tax the FFI or NFFE must comply with the new reporting, disclosure, and related requirements.
 
The IRS issued preliminary guidance in 2010 (Notice 2010-60) and further guidance in 2011 (Notice 2011-34), which are steps in the efforts of the IRS and Treasury to accelerate the flow of information to affected institutions so that they have sufficient time to implement the systems and processes changes necessary to comply fully with the new withholding, documentation and reporting obligations that will result from FATCA.

How will it impact you?

Many multinational organisations will need to make significant changes to be compliant with FATCA.  While most of the FATCA provisions do not take effect until 2013, some financial institutions have begun to assess the potential impact and identify the potential changes that may need to be made to processes and controls (i.e. customer onboarding, know your customer, etc), technology and systems and determine the data that will be needed to comply with the due diligence and reporting requirements.