Swiss Amercian Chamber of Commerce

Transcription

1 US Clients and US Securities - No more? FATCA, Voluntary Disclosure, Estate Tax, Regulatory Requirements and more Swiss Amercian Chamber of Commerce 20 April 2011

2 FATCA in a Museum of Art? 20 April 2011 Page 2 Swiss-American Chamber of Commerce

3 a closer look reveals: there is a lot of art in FATCA 20 April 2011 Page 3 Swiss-American Chamber of Commerce

4 What disturbs the U.S.? 20 April 2011 Page 4 Swiss-American Chamber of Commerce

5 What the QI regime does not cover at the moment... U.S. Person Non-U.S. Person "Non-U.S." entity with U.S. ownership U.S. Securities W reporting QI non designated Double tax treaty access through pooling Treatment in line with Non-U.S. person "Non-U.S." Securities Currently out of scope Currently out of scope Currently out of scope 20 April 2011 Page 5 Swiss-American Chamber of Commerce

6 but the IRS would want to have in scope U.S. Person Non-U.S. Person "Non-U.S." entity with U.S. ownership U.S. Securities W reporting QI non designated Double tax treaty access through pooling In scope of FATCA "Non-U.S." Securities In scope of FATCA Currently out of scope In scope of FATCA 20 April 2011 Page 6 Swiss-American Chamber of Commerce

7 Four basic steps under FATCA (I) Identification of U.S. accounts (IV) Penalties for non-participating FFIs and recalcitrant account holders (III) Annual reporting to the IRS (II) Obtain Waiver from U.S. client (II)a Terminate client relationship with recalcitrant clients 20 April 2011 Page 7 Swiss-American Chamber of Commerce

8 Client identification (I) Identification of U.S. accounts (IV) Penalties for non-participating FFIs and recalcitrant account holders (III) Annual reporting to the IRS (II) Obtain Waiver from U.S. client (II)a Terminate client relationship with recalcitrant U.S. clients 20 April 2011 Page 8 Swiss-American Chamber of Commerce

9 Client identification Identifying all "financial accounts" Depositary account maintained by an FFI (de minimis US$50 k) Custodial account maintained by an FFI Equity or debt interest in an FFI (other than regularly traded on an established securities market) 20 April 2011 Page 9 Swiss-American Chamber of Commerce

10 Notice Pre-existing individual accounts 1. Documented U.S. accounts (unless <$50 k depositary a/c) 2. Small accounts (<$50 k) 4. Accounts with U.S. Indicia 3. Private Banking accounts 5. Accounts of US$ 500,000 or more 20 April 2011 Page 10 Swiss-American Chamber of Commerce

11 Notice Pre-existing individual accounts 1. Documented U.S. accounts (unless <$50 k depositary a/c) 1. Documented U.S. accounts (unless <$50 k depositary a/c) 2. Small accounts (<$50 k) 4. Accounts with U.S. Indicia PFFI to continue to treat accounts as U.S. accounts 3. Private Banking accounts 5. Accounts of US$ 500,000 or more unless small depositary account option (less than US$50,000) 20 April 2011 Page 11 Swiss-American Chamber of Commerce

12 Notice Pre-existing individual accounts 2. Small accounts (<$50k) 1. Documented U.S. accounts (unless <$50 k depositary a/c) 2. Small accounts (<$50 k) 3. Private Banking accounts 4. Accounts with U.S. Indicia 5. Accounts of US$ 500,000 or more PFFI may apply this small account threshold optionally "retail account" 20 April 2011 Page 12 Swiss-American Chamber of Commerce

13 Notice Pre-existing individual accounts 3. Private Banking account When is a client a private banking client? 1. Documented U.S. accounts (unless <$50 k depositary a/c) 2. Small accounts (<$50 k) 3. Private Banking accounts 4. Accounts with U.S. Indicia 5. Accounts of US$ 500,000 or more Relationship manager must perform diligent review (including associated family members) Search for U.S. indicia and request documentation Otherwise treat as recalcitrant Create and maintain list of U.S. and non-u.s. recalcitrant account holders 20 April 2011 Page 13 Swiss-American Chamber of Commerce

14 Notice Pre-existing individual accounts 4. Accounts with U.S. Indicia Diligent review of electronically searchable information If U.S. indicia found, request additional documentation 1. Documented U.S. accounts (unless <$50 k depositary a/c) 2. Small accounts (<$50 k) 4. Accounts with U.S. Indicia Within two years, afterwards recalcitrant 3. Private Banking accounts 5. Accounts of US$ 500,000 or more 5. Accounts of US$500,000 or more as per 31 December 2012 ("Non-PB High Value accounts") Annual retesting as from 1/1/2014 Diligent review of electronically searchable information If U.S. indicators: request documentation as with PB clients 20 April 2011 Page 14 Swiss-American Chamber of Commerce

15 Notice Pre-existing individual accounts The compliance officer's duty 1. Documented U.S. accounts (unless <$50 k depositary a/c) 2. Small accounts (<$50 k) 4. Accounts with U.S. Indicia 3. Private Banking accounts 5. Accounts of US$ 500,000 or more PFFI's Compliance officer must certify to IRS: Timely completion of identification steps PFFI management did not help, or had policies and processes in place for helping, account holders to hide U.S. accounts Procedures had been in place to keep employees from doing so Certification covers time from 9 April 2011 (date of notice) to effective date of FFI agreement! 20 April 2011 Page 15 Swiss-American Chamber of Commerce

16 Treatment of NPFFIs and recalcitrant account holders (I) Identification of U.S. accounts (IV) Penalties for non-participating FFIs and recalcitrant account holders (III) Annual reporting to the IRS (II) Obtain Waiver from U.S. client (II)a Terminate client relationship with recalcitrant U.S. clients 20 April 2011 Page 16 Swiss-American Chamber of Commerce

17 Notice Concept of passthru payments Potential for (administrative) nightmares? Bank A (PFFI) CHF100,000 Bank client (non-u.s. person) interest income: No FATCA wht CHF2, April 2011 Page 17 Swiss-American Chamber of Commerce

18 Notice Concept of passthru payments Bank A (PFFI) CHF60,000 (CH assets) CHF40,000 (U.S. assets) CHF100,000 Bank client (non-u.s. person) RECALCITRANT interest income: FATCA wht 30% on CHF800 CHF2,000 ( CHF240) Passthru Percentage PPP = 40% 20 April 2011 Page 18 Swiss-American Chamber of Commerce

19 Notice Concept of passthru payments Bank B (PFFI) Bank A (PFFI) CHF30,000 (CH assets) CHF30,000 (U.S. assets) CHF60,000 CHF60,000 (CH assets) CHF40,000 (U.S. assets) CHF100,000 Bank client (non-u.s. person) RECALCITRANT interest income: FATCA wht 30% on CHF1,400 CHF2,000 ( CHF420) Passthru Percentage PPP = 50% Passthru Percentage PPP = 40% Revised PPP = 70% 20 April 2011 Page 19 Swiss-American Chamber of Commerce

20 Strategic alternatives? U.S. clients Non-U.S. clients U.S. securities No U.S. securities U.S. securities No U.S. securities Become participating FFI and sign agreement Full compliance, identification, reporting & withholding Decision does not make sense from an economic point of view Identification necessary to give assurance that there are no U.S. accounts Decision does not make sense from an economic point of view Refrain from becoming FFI compliant 30% FATCA withholding tax; "punishment" of all clients; Reaction IRS? Reaction regulator? Reaction IRS? Reaction regulator? 30% FATCA withholding tax "punishment" of all clients Detach completely from U.S. market 20 April 2011 Page 20 Swiss-American Chamber of Commerce

21 Strategic alternatives? U.S. clients Non-U.S. clients "Deemed compliant status" U.S. securities No U.S. securities U.S. securities No U.S. securities No reporting as there are no U.S. accounts Become participating FFI and sign agreement Refrain from becoming FFI compliant Full compliance, identification, reporting & withholding 30% FATCA withholding tax; "punishment" of all clients; Reaction IRS? Reaction regulator? Decision does not make sense from an economic point of view Reaction IRS? Reaction regulator? Identification necessary to give assurance that there are no U.S. accounts 30% FATCA withholding tax "punishment" of all clients Decision does not make sense from an economic point of view Detach completely from U.S. market No withholding unless recalcitrant account holders or NPFFIs Requires signing of a FATCA agreement Requires an initial search of client (and possibly equity and debt holders) and on-going processes to remain compliant 20 April 2011 Page 21 Swiss-American Chamber of Commerce

22 U.S. banks to collect information on nonresident alien accounts 20 April 2011 Page 22 Swiss-American Chamber of Commerce