FATCA, which was enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act of 2010, requires financial institutions to use enhanced due diligence 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.
A foreign financial institution (FFI) could face significant consequences if it fails to enter into an agreement with the Internal Revenue Service (IRS), which is merely the first step; the ability to align all the key stakeholders, including operations, technology, risk, legal, and tax, will be paramount to successfully comply with FATCA. The institution would be subject to a 30% withholding tax on any “withholdable payment” made to its proprietary account for failing to comply with FATCA.
In addition, accountholders who don’t provide the FFI with FATCA-required documentation would be deemed recalcitrant. The FFI would then be obligated to deduct a 30% withholding tax on any withholdable payment credited to their accounts.
Multinational financial institutions will need to make significant process and technology changes to comply with FATCA. While most FATCA provisions don’t take effect until the middle of 2013, many financial institutions have already begun to prepare. Financial institutions should consider steps such as:
To help you prepare, 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 tax law as well as local jurisdictions, rules and regulations.
Financial services companies already have worked with us on current state and gap assessments and taken part in our FATCA training programs. To plan your transition, contact PwC’s FATCA team:
Partner, PwC Jamaica
Tel: 876 932 8429
Partner, PwC Jamaica
Tel: 876 932 8328
Tel: 876 932 8323
CARICOM Tax Leader, Partner
Tel: 876 932 8423