FATCA Basics for Foreign - PowerPoint Presentation

Slide1

FATCA Basics for Foreign

A

ccount

H

olders

Allison Christians

FATCA Facts

US law, in force, US Treasury implementing, can choose to

delay, restrict, tone down; or

forge ahead, expand, ratchet up

Aimed at non-US third parties who hold customers’ money and financial assets

Will punish these third parties with penalties if they do not either

ensure their customers are not ‘US persons’, or

If they are US persons, tell the IRS about their assets and gross income.

So, we want

to

know:

who

are these third parties

?

how

will

they ensure

their customers are not US persons?; and

what will they have to do if they think their customers are US persons?; and

what do I have to do as a customer?

1. Who are these third parties?

the main one is FFI: foreign financial institution.

An FFI is any

non-US entity that

accepts

deposits

(

e.g. a bank)

holds

financial assets

for others

(e.g. a

custodian, some trusts)

invests or trades financial assets as a business (

e.g.

a mutual fund)

an

insurance

company

there are other third parties but we will focus on FFIs

2. How

will

FFIs ensure

their customers are not US persons?

Ask new customers to sign documents saying they are not US

persons

Search existing accounts for ‘indicia’ of US person status

Only

have

to do this once account exceeds $50k for individuals, $

250k for

entities; $250k for life insurance

but

can

search all accounts

Under IGA, may not have to search certain

govt

-sponsored accounts (e.g. retirement, education savings plans)

If they find indicia, ask customers

to

provide documents showing or stating that they

are not US

persons

What the FFI is looking for

account holder identified as a

U.S. citizen or resident

birthplace in

the U.S.

a

U.S. telephone number

a

U.S. residence or mailing

address

standing instructions to transfer funds to a U.S. based accountIndications of a power of attorney over the account to a person with a U.S. addressa “care of” or hold mail address as the sole address

For individuals with account 50k to 1m, FFI only has to search electronic recordsFor individuals with accounts > 1m, FFI must search paper records as well

Withholding Certificate

Withholding Certificate

What the FFI will do if they find these indicia

Indicia

U.S

. citizen or resident

Birthplace in the U.S

.

U.S

. telephone

number alone

U.S. telephone # +

n

on-US telephone #U.S. residence or mailing addressstanding instructions to transfer funds to a U.S. based accountIndications of a power of attorney over the account to a person with a U.S. address“care of” or hold mail address as sole

address

Document request

WHC

+

PFC

PFC

+

CLN

or

WHC

+

PFC

+ reasonable explanation

WHC

and PCFSWHC or PCFSWHC and PCFSWHC or PCFS

FFI can rely on valid documentation unless actual knowledge or reason to know the info is unreliable or wrong

WHC: withholding certificatePFC: proof of foreign citizenship via govt issued IDCLN: certificate of loss of nationalityPCFS: proof of claim of foreign status A: Cert of Residence from tax authority B: Govt-issued ID C: approved similar certificate

What

will

FFIs do

if they think their customers are US persons?

If no IGA in effect:

request waiver of any right that would prevent FFI from sending info to IRS

Once received, report name, account numbers & amounts, TIN, gross proceeds,

etc

to the IRS (assume open book)

If not received: close account

If IGA is implemented:report name, account numbers & amounts, TIN, gross proceeds, etc to the tax authority (e.g. CRA) for delivery to IRS

What

do I have to do as a customer?

Upon receipt of a request for documentation:

Check to make sure it is the required documentation

Respond accordingly; or

Choose not to respond, close

account; or

Choose not to respond, await account closure