FATCA Update May 2014

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2 The Basics Foreign Account Tax Compliance Act Purpose of Prevent and detect offshore tax evasion by US citizens Increased information reporting Enforced by withholding tax Effective begins on 1 July 2014 Identification & Documentation Certification & Compliance Reporting QI The QI regime aims for correct withholding on payments to non-us persons The regime is about gathering information (via FFI reporting) and bringing noncompliant US persons back into the system How does it work? While the IRS generally has no jurisdiction over foreign people and entities, financially compels foreign entities to identify and report information about U.S. persons to the IRS by requiring US withholding agents and participating foreign financial institutions to report on and withhold 30% of certain payments to foreign persons that are not compliant. Slide 2

3 New Regulations On February 20, 2014, the Internal Revenue Service (IRS) published two sets of regulations: 1. The regulations that contain changes to the provisions of ; and 2. The Harmonization regulations that coordinate the documentation standards, reporting and withholding rules relating to payments made to non-us and US persons (Chapters 3 and 61 and Section 3406 of the Code) with the regulations Slide 3

4 New Regulations Regulations Create additional exemptions from FFI status by adding new categories of NFFEs and deemed-compliant FFIs Alters the definition of an expanded affiliated group to offer more flexibility Harmonization Regulations Extend the validity period of W-8 forms scheduled to expire on June 30, 2014 to December 31, 2014 Permits faxed and scanned W-8 forms Permits foreign taxpayer identification numbers (TIN) to be provided in lieu of a US TIN for claim of treaty benefits Slide 4

5 Registration Updates On April 2, 2014, the IRS published Announcement which: 1. Expands the circumstances in which the United States will treat a jurisdiction as having an IGA in effect through the end of 2014; and 2. Extends the time by which FFIs must register with the IRS in order to be included on the first and second IRS FFI lists FFI List Search and Download Tool Beginning in June 2014, a search tool, partial list download, and a full downloadable list will be available on IRS.gov to the public. Prior to the availability of the search tool, the IRS has published a User Guide with an overview of the functionalities of the tool. The User Guide can be accessed at: Slide 5

6 Overview of IGA Jurisdictions 6 Signed IGAs IGAs Agreed in Substance Model 1: Model 2: Model 1: Model 2: Australia, Belgium, Canada, Cayman Islands, Costa Rica, Denmark, Estonia, Finland, France, Germany, Guernsey, Hungary, Honduras, Ireland, Isle of Man, Italy, Jamaica, Jersey, Luxembourg, Malta, Mauritius, Mexico, Netherlands, Norway, Spain, and United Kingdom Austria, Bermuda, Chile, Japan, and Switzerland Bahamas, Brazil, British Virgin Islands, Bulgaria, Colombia, Croatia, Curacao, Czech Republic, Cyprus, Gibraltar, India, Indonesia, Israel, Kosovo, Kuwait, Latvia, Liechtenstein, Lithuania, New Zealand, Panama, Peru, Poland, Portugal, Qatar, Singapore, Slovak Republic, Slovenia, South Africa, South Korea, Sweden, and Romania None Slide 6

7 Notice On May 2, 2014, the Internal Revenue Service (IRS) published Notice which provides 1. for a transitional enforcement period; 2. that an obligation (including an account) held by an entity that is opened, executed, or issued on or after July 1, 2014 and before January 1, 2015 may be treated as a pre-existing account; 3. modifications to the standards of knowledge for withholding agents under Chapter 3 for accounts documented before July 1, 2014; 4. a revision to the definition of a reasonable explanation of foreign status under Chapter 4; and 5. additional guidance for limited FFIs and limited branches Slide 7

8 Forms and Instructions Status of New Forms and Instructions: Form Name Purpose 2014 Form 1042 Annual Tax Return for U.S. Source Income of Foreign Persons 2014 Form 1042-S Foreign Person s U.S. Source Income Subject to 2013 Form 1042-S Foreign Person s U.S. Source Income Subject to Reporting Reporting Reporting Form 8966 Foreign Account Tax Compliance Act () Report Reporting No Instructions Published? Yes No No Form 8957 Foreign Account Tax Compliance Act () Registration Registration Yes Slide 8

9 Forms and Instructions Status of New Forms and Instructions: Form Name Purpose Form W-8BEN Form W-8BEN-E Form W-8IMY Form W-8ECI Form W-8EXP Form W-9 Certificate of Foreign Status of Beneficial Owner for United States Tax and Reporting (Individuals) Certificate of Status of Beneficial Owner for United States Tax and Reporting (Entities) Certificate of Foreign Intermediary, Foreign Flow- Through Entity, or Certain U.S. Branches for United States Tax and Reporting Certificate of Foreign Person s Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States Certificate of Foreign Government or Other Foreign Organization for United States Tax Request for Taxpayer Identification Number and Certification Certificate Certificate Certificate Certificate Certificate Certificate Instructions Published? Yes No No Yes Yes Yes Slide 9

10 Swiss IGA Updates FINMA Newsletter FINMA has posted guidance on complying with in Switzerland on its website. The guidance covers topic such as registration with the IRS and the role of the Responsible Officer. The guidance is available on the FINMA website: SIF Qualification Committee The Qualification Committee that has been established under the guidance of the SIF has published a new document containing a list of questions received and their approved interpretations of these questions. The questions and interpretations can be accessed on the SIF website: Slide 10

11 Future Outlook The extent of automatic information exchange initiatives is increasing QI EUSD US IGA UK DAC, EUSD, EU Pilot Project OECD - Common Reporting Standard (CRS) In favor of the U.S., begin of an automatic exchange of information with a yet limited scope but including tax treaty benefits Mutual exchange of information for the effective taxation of cross-border interest income and revenues applied by EU member states (with the exception of Austria and Luxembourg) and certain third countries : Developments & Perspective In favor of the U.S., a comprehensive automatic exchange of tax information regime was enacted by Intergovernmental negotiations concerning the implementation of lead to bilateral Model Agreements (IGAs) including the opportunity of a reciprocity Bilateral agreements were signed between the UK and Guernsey, Jersey and Isle of Man, which are consistent with the Model 1 IGA to implement Proposed amendments to the EU Savings Directive (EUSD) and Directive on Administrative Cooperation (DAC) as well as a EU Pilot Project are planned in order to achieve a comprehensive reporting standard within the EU analog to The OECD received a mandate by the G8/G20 countries to develop a global reporting standard to achieve a comprehensive and multilateral automatic exchange of information (AEOI) in the future 11

12 Thank you! This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricwaterhouseCoopers AG, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it All rights reserved. In this document, refers to PricwaterhouseCoopers AG which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.