FATCA: THE 2014 HORIZON

Transcription

1 FATCA: THE 2014 HORIZON Breakout Session 5C FIBA 2014 AML Compliance Conference February 21, 2014 Gabriel Caballero, Esq. Gunster, Yoakley & Stewart, P.A. 2 South Biscayne Boulevard Suite #3400 Miami, FL P D

2 TAX ADVICE DISCLOSURE To ensure compliance with requirements imposed by the IRS under Circular 230, we inform you that any U.S. federal tax advice contained in this communication (including any attachments), unless otherwise specifically stated, was not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any matters addressed herein.

3 AGENDA I. Introduction II. Implementation Overview III. FFIs IV.USWAs V. Panel Discussion VI.Open Q & A

4 BACKGROUND FATCA requires withholding of 30% on withholdable payments to FFIs and NFFEs that do not meet certain requirements Withholdable Payments generally refer to any payment of: U.S. source FDAP income (e.g., interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income); and gross proceeds from the sale or other disposition (occurring after December 31, 2016) of any property of a type which can produce interest or dividends from sources within the United States. Withholding on U.S. source FDAP begins on July 1, 2014 Withholding on offshore U.S. source income, gross proceeds and foreign passthru payments begins on January 1, 2017

5 WHAT IS AN FFI? Any foreign entity that: Accepts deposits in the ordinary course of a banking or similar business; Holds, as a substantial portion of its business, financial assets for the benefit of one or more other persons; Is an investment entity; Is an insurance company or a holding company that is a member of an EAG that includes an insurance company, and the insurance company or holding company issues, or is obligated to make payments with respect to, a cash value insurance or annuity contract; or Is a certain type of that is a member of an EAG that includes some of the aforementioned holding company or treasury center entities or that is formed as part of a collective investment vehicle.

6 MOST COMMON TYPES OF FFIS Banks Broker Dealers Trust Companies Insurance Companies Hedge Funds Certain Types of Trusts

7 FFI CLASSIFICATIONS Participating FFIs Excepted FFIs Deemed- Compliant FFIs Registered Deemed-Compliant FFIs Certified Deemed-Complaint FFIs Owner-documented FFIs Exempt Beneficial Owners

8 WHAT IS A USWA? Generally, a U.S. person that has the control, receipt, custody, disposal, or payment of a withholdable payment or foreign passthru payment Can include U.S. branches of foreign banks Examples: Domestics Banks Domestic partnerships Domestic corporations Certain types of trusts

9 RECENT DEVELOPMENTS Notice (Jul. 12, 2013) Revised timelines Additional guidance concerning the treatment of financial institutions located in jurisdictions that have signed IGAs for the implementation of FATCA but have not yet brought those IGAs into force Generally, the Notice provides a six (6) month extension to several, but not all, key compliance dates under FATCA FATCA Registration Portal Opens (Aug. 19, 2013) Rev. Procedure Final FFI Agreement (Jan. 13, 2014) IGA Developments

10 NOTICE Item Withholding Timeline Modification General FATCA withholding obligations for withholding agents on payees that are foreign financial institutions ( FFIs ) or nonfinancial foreign entities ( NFFEs ) with respect to obligations that are not grandfathered obligations will be required on withholdable payments made after June 30, 2014, subject to certain limited exceptions. The definition of grandfathered obligation will be revised to include obligations outstanding on July 1, 2014 (and associated collateral). The Notice does not affect the timing provided in the final regulations for withholding on gross proceeds, passthru payments, and payments of U.S. source FDAP with respect to offshore obligations by persons not acting in an intermediary capacity. New Account Opening Procedures and the Definition of Preexisting Obligations Withholding agents generally will be required to implement new account opening procedures by July 1, 2014, or, in the case of a participating FFI ( PFFI ), by the later of July 1, 2014 or the effective date of its FFI agreement. As a result, the definition of the term preexisting obligation has been revised accordingly. Treasury intends to include a similar change to the definition of the term Preexisting Account in both model IGAs. Thus, it is expected that future IGAs will define the term Preexisting Account to mean a Financial Account maintained as of June 30, Due Diligence on Preexisting Obligations The FFI Agreement of a PFFI that registers and receives a GIIN from the IRS on or before June 30, 2014, will have an effective date of June 30, For withholding agents other than PFFIs, the deadlines for completing due diligence on preexisting obligations will be postponed by six (6) months. Account balance or value will be measured initially as of June 30, 2014, for purposes of determining whether an account is exempt from review, subject only to an electronic search for indicia, or subject to enhanced review. An account with a balance or value that was initially $1,000,000 or below, and with respect to which there has been no change in circumstances, will not be subject to enhanced review unless the account balance or value exceeds $1,000,000 as of the end of 2015 or any subsequent calendar year. Treasury intends to provide for a similar six-month delay in the due diligence procedures included in Annex I of IGAs concluded after the issuance of this Notice. First Report of a PFFI with respect to U.S. Accounts PFFI will be required to file information reports on its U.S. accounts with respect to the 2014 calendar year no later than March 31, Registration Expiration of withholding certificates and documentary evidence Extension of Expiring QI, WP, and WT Agreements The FATCA registration website is projected to be accessible to financial institutions on August 19, Other key dates for registration, however, will be extended by six months. Withholding certificates and documentary evidence that would otherwise expire on December 31, 2013, will expire instead on June 30, 2014, unless a change in circumstances occurs. All QI, WP, or WT agreements that would otherwise expire on December 31, 2013, will be automatically extended until June 30, 2014.

11 FATCA REGISTRATION Registration portal available at: FFI must create online FATCA account for itself and for members of EAG for which FFI is designated as Lead Complete registration (based on IRS form 8957) Registration can only be submitted and approved on or after Jan. 1, 2014 Upon approval, FFI will receive a Global Intermediary Identification Number ( GIIN ) from the IRS, unless the FFI is treated as a Limited FFI

12 FATCA FFI LIST IRS will publish a list of registered and approved FFIs and their GIINs every month FFI List search and download tool will also be available to search this list by FI name, GIIN or country (estimated for June 2014) Data will be refreshed on the 1st of the month and will only include FIs and branches approved 5 business days prior to the first of the month. The date of the last update to the information will be displayed on the page Previous months lists will not be available on IRS.gov First list expected for June 2, 2014

13 FINAL FFI AGREEMENT Updated cross-references (notably, in section 2 of the FFI agreement) for anticipated publication of temporary regulations (expected for early 2014) that provide: Further clarifications and modifications to the final chapter 4 regulations; and Coordinating rules under chapters 3, 4, and 61 of the IRS Internal Revenue Code Technical corrections (e.g., escrow procedure, change in circumstances period, etc.) Changes to conform to temporary chapter 4 regulations 2-year transition period during which a reporting Model 2 FFI may elect to apply the due diligence procedures described in the FFI agreement in lieu of those in Annex I of an applicable Model 2 IGA

14 IGA DEVELOPMENTS * Model 1 Canada, Cayman Islands, Costa Rica, Denmark, France, Germany, Guernsey, Hungary, Ireland, Isle of Man, Italy, Jersey, Malta, Mauritius, Mexico, Netherlands, Norway, Spain and United Kingdom Model 2 Bermuda Japan Switzerland *As per information available eat on February 17, 2014.

15 IGA DEVELOPMENTS * Actively Engaged Argentina, Australia, Belgium, Cyprus, Estonia, Israel, Korea, Liechtenstein, Malaysia, New Zealand, the Slovak Republic, Singapore and Sweden Exploring Options Bermuda, Brazil, the British Virgin Islands, Chile, the Czech Republic, Gibraltar, India, Lebanon, Luxembourg, Romania, Russia, Seychelles, St. Maarten, Slovenia, and South Africa *As per Nov. 8, 2012 U.S. Treasury Press Release with updates from previous slide. According to Jul. 12, 2013 U.S. Treasury Press Release, U.S. Treasury engaged in FATCA discussion with more than 80 countries.

16 KEY DATES FOR 2014 Jun. 30 Jul. 1 Apr. 25 Registration deadline to appear on first IRS FFI List Jun. 2 Expected date first IRS FFI List to be published -FFI Agreement Effective Date -Cut-off date for Grandfathered Obligations -New expiration date for Withholding Certificates & other documentary evidence -New expiration date for QI, WP & WT agreements - Deadline for new account opening procedures -Preexisting Accounts: accounts opened prior to -New Accounts: accounts opened on or after -Withholding begins on recalcitrants & nonparticipating FFIs Dec. 31 Deadline for Due Diligence on Preexisting Accounts of Prima Facie FFIs

17 KEY DATES FOR 2015 Dec. 31 Jan. 1 Undocumented Prima Facie FFIs treated as nonparticipating FFIs Mar. 31 Reporting Deadline for U.S. accounts and Ownerdocumented FFIs for 2014 (2013 no longer required) Jun. 30 Due Diligence Deadline for Preexisting High Value Accounts of Individuals Jul. 1 Withholding begins on Preexisting High Value Accounts of Individuals -Due Diligence Deadline for Preexisting Accounts of: (1) Entities (other than Prima Facie FFIs); and (2) Individuals (other than High Value Accounts) -Expiration Date of Limited FFI and limited branch status

18 FATCA FOCUS: FIRST QUARTER 2014 FFIs Determination of FATCA status Registration! Registration! Registration! Finalization of FATCA Compliance Plan USWAs Finalization of FATCA Compliance Plan Due Diligence for existing FFIs & NFFEs Preparation for FATCA Withholding

19 FATCA FOCUS: SECOND QUARTER 2014 FFIs Finalization of FATCA Compliance Plan Implementation of Account-Opening Procedures for New Accounts Due Diligence for Preexisting Accounts of Prima Facie FFIs USWAs Finalization of FATCA Compliance Plan Due Diligence for existing FFIs & NFFEs Implementation of Account-Opening and Payment Procedures for new FFIs & NFFEs Implementation of FATCA Withholding

20 FATCA FOCUS: THIRD QUARTER 2014 FFIs Compliance with Account-Opening Procedures for New Accounts Address treatment and/or withholding of recalcitrants and nonparticipating FFIs Due Diligence for Preexisting Accounts of Entities (including Prima Facie FFIs) USWAs Ongoing due diligence for FFIs & NFFEs Compliance with FATCA Withholding obligations

21 FATCA FOCUS: FOURTH QUARTER 2014 FFIs Due Diligence for Preexisting Accounts of Entities (including Prima Facie FFIs) Address treatment and/or withholding of recalcitrants and nonparticipating FFIs Due Diligence for Preexisting Accounts of High Value Individual Accounts Preparation for reporting of U.S. Accounts and Ownerdocumented FFIs USWAs Ongoing due diligence for FFIs & NFFEs Compliance with FATCA Withholding obligations Preparation for reporting of withholdable payments

22 FINALIZING A COMPLIANCE STRATEGY Working Group/Project Team Due Diligence Withholding Reporting Systems Training EAG Issues Record Retention Policies & Procedures Commercial Agreements: Correspondent Banking Agreement Account Agreement Loan Documentation Letters of Credit ISDAs (if applicable)