FATCA Impact of FATCA and the planned Intergovernmental Agreement on the Private Banking sector in Luxembourg Private Banker Luxembourg 14 March 2013

Transcription

1 FATCA Impact of FATCA and the planned Intergovernmental Agreement on the Private Banking sector in Luxembourg Private Banker Luxembourg 14 March 2013

2 Final Regulations Highlights Notices Hire Act What changed? Harmonization with IGAs Draft Regulations Industry Comments Model IGAs Relaxation of certain documentation and due diligence requirements Expanded scope of «grandfathered obligations» Liberalization of requirements for certain retirement funds and savings accounts Limited FFI continued transition rule Bearer shares Brokers (delivery vs payments) Registration process Final Regulations 17 January

3 Intergovernmental agreements Current status The U.S. Department of the Treasury announced that it is engaged with more than 50 countries and jurisdictions around the world to implement the Foreign Account Tax Compliance Act (FATCA) Signed : UK; Mexico; Ireland; Denmark, Switzerland Agreements initialed: Spain; Norway, Germany, Italy Close to finalisation: France, Japan, Canada, Finland, Guernsey, Ireland, Isle of Man, Jersey, Netherlands In negotiation: Argentina, Australia, Belgium, Cayman Islands, Cyprus, Estonia, Hungary, Israel, Korea, Liechtenstein, Luxembourg, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, and Sweden Exploring options for IGA: Bermuda, Brazil, the British Virgin Islands, Chile, the Czech Republic, Gibraltar, India, Lebanon, Romania, Russia, Seychelles, Sint Maarten, Slovenia, and South Africa. Not interested for the moment: China; Hong Kong 3

4 Comparison of FATCA Agreements (Flow of information) No Intergovernmental Agreement Intergovernmental Agreement Model I Intergovernmental Agreement Model II Request information National Government National Government Infos Request information Infos Reporting on recalcitrant account holders on an aggregated basis FFI FFI FFI Reciprocal Agreement Non-Reciprocal Agreement 4

5 FATCA regulations and intergovernmental Agreements Main Features «Die Wahl zwischen Pest und Cholera» Luxemburger Wort IGA Model I IGA Model II Only registration with IRS Might trigger automatic exchange of information with EU Member States Signature of contractual agreement with the US Regular responsible officer certifications 36 pages of rules (plus domestic implementation rules) 31 pages pages of rules FFIs covered by a Model 1 IGA do not need to apply the final regulations FFIs covered by a Model 2 IGA required to implement FATCA as prescribed in the final regulations except expressely modified in the IGA. 5

6 Luxembourg & Intergovernmental agreement Key findings from KPMG s survey (November 2012) 61% Of all respondents declare Model 1 as the preferable regime for their institution In the news Das Abgeltungssteuermodell hält der Luxemburger Finanzminister weiter für die beste Lösung, weil es Steuerehrlichkeit und Privatsphäre gleichzeitig garantiert. Frieden ist aber offenbar zur Überzeugung gelangt, dass es nichts bringt, auf dieser Auffassung gegenüber den USA, Deutschland und anderen EU-Staaten zu beharren. «Wir müssen entkrampft diskutieren», fordert der Finanzminister. Man müsse dabei wissen, mit wem man geschäften wolle (NZZ, ) 44 % Of the bank s representants declare Model 1 as the preferable regime for their institution 90 % Of the fund s representants declare Model 1 as the preferable regime for their institution Beide Modelle bedeuten im Grunde, das Luxemburg im Verhältnis zu den USA dem automatischen Informationsaustausch zustimmt. Zumindest mit den USA wäre dann das Bankgeheimnis Geschichte (Luxemburger Wort, ) Le ministère des Finances évalue encore les termes selon lesquels la coopération avec les autorités fiscales américaines serait le moins nuisible à la Place. (Paperjam, ) 6

7 FATCA regulations and intergovernmental Agreements What guidance to use in Luxembourg IGA Model I IGA Model II Registration Final Regulations Final Regulations Due diligence Annex I (IGA) Annex I (IGA) Passive NFFE Annex I (IGA) Annex I (IGA) Withholding Core Text (IGA) Core Text (IGA) Reporting Core Text (IGA) Final Regulations Definition of FFI Core Text (IGA) Core Text (IGA) Deemed-compliant & Exempt status Responsible officer certification Annex II (IGA) + Final Regulations? N/A Annex II (IGA) + Final Regulations Final Regulations 7

8 Final Regulations Responsible officer tasks The responsible officer has to: Establish a compliance programm (policies, procedures and processes) Periodically review (every 3 years) and certify the efficiency of the FFI internal controls to meet the obligations under the FFI agreement certify to the IRS within 60 days after the 2nd anniversary of the FFI Agreement that the PFFI: has completed the review of all high-value accounts as well as the account identification and documentation requirements for all pre-existing financial accounts; and Certify that the participating FFI did not have any formal or informal practices or procedures in place from 6 August 2011 up to the date of the certification to assist account holders in the avoidance of FATCA Suggesting to split up accounts to avoid classification as a high-value account Suggesting that account holders of U.S. accounts close, transfer or withdraw from their account to avoid reporting Intentional failures to disclose a known U.S. account Suggesting to remove U.S. indicia or facilitating the manipulation of account balances or values. 8

9 FFI status RDCFFI Local FFI Local FFI Is licensed and regulated as a financial institution in its country of incorporation/organization (FATF compliant jurisdiction No fixed place of business outside its country except for administrative support functions and not advertised to the public Does not solicit customers outside its country Required to identify resident account holders for information reporting, withholding tax or AML due diligence At least 98% of the accounts by value maintained by residents Safeguards to ensure that no U.S. account is opened or maintained All members of the group have to be incorporated or organized in the same country Has no policies or practices in place to discriminate against opening and maintaining accounts for individuals that are U.S. specified persons, resident in its country 9

10 FFI status RDCFFI Nonreporting members of participating FFI groups Nonreporting members Procedures and policies in place to ensure that within 6 months of opening or identifying an account for: It either : U.S. Person Recalcitrant account holder NPFFI transfers the account to an affiliate that is PFFI, reporting Model 1 FFI, or US FI Closes the account Becomes PFFI 10

11 Highlights Treas. Reg : Withheld Tax and Reporting Form 8966 Reporting: PFFI Accounts owned by specified U.S. persons: Name, address, TIN, account number, balance, and payments of income and proceeds. Accounts owned by U.S. owned foreign entities Name, address, and TIN of entity, account number, account balance, payments of income and proceeds (and name, address, and TIN of each substantial U.S. owner). Accounts owned by ODFFIs Name, address, and TIN of entity, account number, account balance, payments of income and proceeds (and name, address, and TIN of each specified U.S. owner). 11

12 Highlights Treas. Reg : Withheld Tax and Reporting Form 1042-S Reporting: PFFI (Aggregate) Reporting of reportable amounts to: NPFFIs; and Recalcitrant Account Holders. PFFIs and DCFFIs not making an election to be withheld upon must report. Those making an election must provide sufficient information to upstream withholding agents to enable them to report. Reporting may be pooled or recipient specific. If pooled, but must be segregated by certain categories. 12

13 Highlights Treas. Reg : Withheld Tax and Reporting Form 1042-S Reporting: Foreign Reportable Amount In 2015 and 2016, PFFIs must report foreign reportable amounts paid to each NPFFI. Regulations define this as a FDAP payment that would be U.S. sourced if paid by a U.S. person. Model 2 IGA defines this as a FDAP payment that would be a Withholdable Payment if it were from sources within the U.S. Given cross reference to regulations and FFI Agreement, it is not clear which definition should apply to Model 2 FIs. 13

14 FATCA Timeline Foreign Financial Institutions (1) Registration process C. 15 October 2013 GIIN (Global Intermediary Identification Number) will be assigned A. 17 January 2013 Final FATCA regulations released B. 15 July 2013 IRS Portal opens E. 2 December 2013 Publication of first IRS FFI list (updated on a monthly basis) Registration by to be on the first FFI list D. 25 October 2013 Last date to register with IRS to ensure inclusion on FFI List * These dates assume that the FFIs PFFI Agreement is approved by the IRS and is effective on 1 January

15 FATCA Timeline Foreign Financial Institution (2) G. 1 January 2014 A. 8 February 2012 IRS publishes draft FATCA regulations C. August 2012 Drafts IRS forms released QIs will be required to assume chapter 4 responsibilities as a condition for maintaining / obtaining QI status. Withholding on U.S.-source FDAP payments begins. New Obligations issued after January 1, 2014 are not grandfathered obligations. New Account Opening Procedures effective. L. 29. February 2016 I. 31 December 2014 Deadline for FFIs to Due date for Responsible complete remediation on all Officer due diligence high-value accounts certifications J. 31 March 2015 IRS reporting on US accounts and aggregate reporting on recalcitrant accounts for 2013 and 2014 N. 1 January 2017 Withholding begins on noncompliant accounts for gross proceeds payments Earliest application of passthru payments withholding on foreign source payments B. 26 July 2012 Draft of Model 1 IGA released F. 17 January2013 Final FATCA regulations released E. 24 October 2012 Announcement November 2012 Model 2 IGA released H. 30 June 2014* K. 31 December 2015* Deadline for FFIs to complete remediation on all prima facie FFIs Deadline for FFIs to complete due diligence reviews for all remaining accounts M. 31 March 2016 * These dates assume that the FFIs PFFI Agreement is approved by the IRS and is effective on 1 January Annual IRS reporting on US accounts and aggregate reporting on recalcitrant accounts Begin IRS reporting on accounts held by NPFFIs O. 31 March 2017 Annual IRS reporting on US accounts and aggregate reporting on recalcitrant accounts Last year of IRS reporting on accounts held by NPFFIs IRS registration + certification Investor classification Withholding Reporting 15

16 Thank you Gérard Laures Partner, Tax KPMG Luxembourg Sàrl ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

17 2013 KPMG Luxembourg S.à r.l., a Luxembourg private limited company, is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.