The Foreign Account Tax Compliance Act (US FATCA) becomes effective on 1 July 2014 and applies to all Foreign Financial Institutions (FFIs) inside and outside of the United States. Whether or not you have US source income, all FFIs, wishing to conduct business with participating European institutions need to consider their status and consider it now!
Tax Information Sharing Agreements aim to identify the overseas income of US citizens as well as UK tax residents, under UK FATCA, in order to maximise tax collection and prevent abuse of offshore bank accounts.
FATCA’s reach is also growing and with the release of the OECDs Common Reporting Standard more than 42 countries have signed up to a model which imposes requirements for financial institutions to review, monitor and collect information identifying where account holders pay tax. The information is then reported to their local tax controllers.
So where are we now?
For US FATCA and UK FATCA, Intergovernmental agreements (IGAs) have been signed between the US, overseas tax territories and the Crown Dependencies.
The Crown Dependencies have issued draft guidance notes, but there is still a little way to go to cover off all the questions.
How to avoid FATCA Withholding
If you are a Financial Institution (FI), established in a jurisdiction that has entered into an IGA then you will need to register with the IRS to obtain a Global Intermediary Identification Number (GIIN). Once the IRS approved FIs receive notice of their registration acceptance a GIIN is issued.
Commencing 2 June 2014 a monthly online list will be produced by the IRS showing compliant entities, allowing withholding agents to verify payees’ GIINs.
Registration needs to happen before 1 July 2014 for entities outside of an IGA jurisdiction. Entities within an IGA jurisdiction, such as Guernsey, need to ensure registration is complete before the year end.
As an FFI, we believe organisation and a robust technology and reporting platform is a must in the implementation of US and UK FATCA, while we are a small firm, we consider ourselves ahead of the curve in delivering an organised practical approach to our clients.
Flexibility within our technology platform has meant we have a clearly outlined implementation plan and onborarding process ready for compliance on 1 July 2014.
PEA has engaged EY to assist in its clients’ legal entity analysis in order to be ready for the deadline and we are welcoming our clients and interested parties to contact us to discuss where we may be able to assist in identifying the classification of entities, responsibilities and identification of sponsoring entities.
Please call James in Guernsey or Peter in Denmark for any technical help:
James Orrick / +44 1481 730988 / email@example.com
Peter Toyberg / +45 70 20 40 61 / firstname.lastname@example.org