- This newsletter is to update you on recent developments with respect to the different global initiatives that are being implemented in order to achieve a global automatic exchange of information:
- Amicorp Netherlands B.V.
- the G20/OECD commitment towards a global system of automatic exchange of information.
- the U.S. Foreign Account Tax Compliance Act (FATCA);
- the InterGovernmental Agreements (“IGAs”) signed by the U.S. with partner countries;
Due to the various developments, individuals and corporations can no longer rely on confidentiality and have to ensure proper and timely disclosure of information to authorities under the applicable regulations and also have to ensure that their investment structures are compliant to the applicable regulations, while still beneficial.
G20/OECD steps to global transparency
Various trends are taking place rapidly towards automatic exchange of information.
- The US introduced FATCA to collect financial information on foreign accounts held directly or indirectly by US Persons. Further details and updates are in the paragraph below.
- The UK announced a similar FATCA approach for its Crown Dependencies and Overseas Territories for the reporting of foreign investments of UK residents.
- The G5 countries agreed in April to explore a common approach to FATCA.
- The Global Forum keeps two-phase peer reviews of 98 jurisdictions to assess efficiency of its systems and procedures of exchange of information, provides ratings of the level of compliance and recommends improvements.
- The G20 on September 6 endorsed the OECD action plan, “A Step Change in Tax Transparency.” The G20 is committed to automatic exchange of information as the global standard to be presented at the next G20 gathering in February 2014 and to become effective between G20 countries by end of 2015.
- The G20 considers the multilateral Tax Convention for Mutual Administrative Assistance on Tax Matters as the legal basis. In August China also signed the Convention, and the G20 encourages all countries worldwide to join this Convention.
- The G20 also endorsed the OECD action plan “BEPS” to combat Base Erosion and artificial Profit Shifting of Multinationals. The action plan is aimed to align taxation with substance and value-creating activities and to combat the abuse of tax treaty benefits, shell companies and transfer pricing rules to achieve double non taxation. In addition, automatic exchange of information is a key part of the BEPS plan.
- For more info reference is made to: http://www.oecd.org/tax/exchange-of-tax-information/ and http://en.g20russia.ru/news/20130906/782776427.html
- It is expected that financial institutions in all countries will be enforced by governments to play an active role in the automatic exchange of information.
FATCA and IGAs
The latest key developments on FATCA and IGA’s and its impact are summarized below. On Amicorp’s website you will find the updated AmiNews on FATCA and IGAs with detailed information, classification of Foreign Financial Institutions (FFIs) and Non Foreign Financial Entities (NFFEs), with compliance requirements, updated deadlines and definitions.
FATCA deadlines extended
- The FATCA implementation timeline has been extended in Notice 2013-43 by 6 months.
- The effective implementation of FATCA is thus extended to July 1, 2014.
- The first reporting year under FATCA is 2014 instead of 2013 previously.
- In the same notice further guidance is provided for FFIs resided in countries that concluded an IGA but which IGA may not yet be effective per July 2014.
- This extension with 6 months is welcomed. It gives a bit more time to prepare, but immediate action is required now.
IRS Registration Portal
- Per August 19 the IRS Portal has been opened for registration of FFIs. The period August 19 through December 31, 2013 is a trial period for FFIs to become familiar with the FATCA registration website, to access its online account, to modify or add preliminary information.
- On or after January 1, 2014, each FFI will be expected to finalize its registration information by making any necessary additional changes, and submitting the information as final.
- As registrations are finalized and approved in 2014, registering FFIs will receive a notice of registration acceptance and will be issued a global intermediary identification number (GIIN).
- The IRS will electronically post the first IRS FFI list with the GIIN by June 2, 2014 and will update the list on a monthly basis thereafter.
- To receive the GIIN prior to July and to ensure inclusion in the June 2014 IRS FFI List, an FFI will need to finalize its registration on the IRS Portal by April 25, 2014.
FATCA Final Regs and Withholding Forms amended
- The FATCA Final Regulations as issued in January 2013 have been amended on September 10. These amendments are technical and procedural from nature. Further amendments are still expected.
- The withholding forms W-8, W-8BEN-E, W-8IMY and W-9 have been recently adapted to FATCA requirements. Individuals and entities with financial accounts will be requested by the Financial Institutions to complete and sign the applicable forms. Timely and adequate response may be needed.
IGAs signed and IGAs in negotiation
- As per to date the UK, Mexico, Denmark, Ireland, Norway, Spain, Germany, Switzerland and Japan have concluded IGAs with the US.
- Various jurisdictions have announced that they have concluded and/or initialized IGAs including Netherlands, Singapore, Malta and also Cayman Islands, BVI, Bahamas.
- The US Treasury repeated that it is in the process of concluding such IGAs with more than 50 countries, which in most cases create reciprocity on exchange of information.
- Other countries, including Russia and China, are in the process of concluding IGAs by year end.
Impact of FATCA and IGAs for individuals and entities
- FATCA and IGAs are aimed to enforce tax compliance by “US Persons” who are holding financial assets and accounts outside of the USA. However non-US individuals may also be subject to disclosure, either in case of US Indicia, or if they remain failing to certify to withholding agents that they are not US persons, or due to the reciprocal exchange in the model 1 IGAs. In case of questions for additional information or forms by financial institutions adequate timely response may be needed.
- Foreign Financial Institutions (FFI) have to disclose such financial information, under the FATCA regulations or under the applicable IGA. Trusts, investment entities, funds are either classified as FFI or as passive NFFE and depending on its classification, country of residence and applicable IGA they need to disclose such financial information either to the IRS or to local tax authorities or (in case of NFFE) to the respective withholding agents, or otherwise will become subject to 30% FATCA withholding on certain US source income. All these FFIs and NFFEs have to ensure that they meet the FATCA disclosure requirements.
Amicorp strives to be compliant with regulations including FATCA and to ensure that all structures we work with are FATCA compliant and also compliant in the jurisdiction where the ultimate beneficial owner is tax resident.
For this purpose Amicorp will be contacting its clients and client entities in the next few months:
- Individuals will be informed on disclosure requirements and compliant structuring in their domestic jurisdictions.
- Individuals and entities will be requested to complete relevant data.
- Trusts, investment entities, funds and other potential FFIs and NFFEs will be informed on the FATCA compliance requirements as well as the services to be provided by Amicorp to ascertain FATCA compliance for these entities.
For more information: www.amicorp.com