TRANS WORLD COMPLIANCE, INC. CARIBBEAN ASSOCIATION OF BANKS, INC. & BARBADOS INTERNATIONAL BUSINESS ASSOC. Presents: FATCA compliance update

TRANS WORLD COMPLIANCE, INC. IN PARTNERSHIP WITH CARIBBEAN ASSOCIATION OF BANKS, INC. & BARBADOS INTERNATIONAL BUSINESS ASSOC. Presents: FATCA compliance update

AGENDA Current FATCA status / update FATCA program level Tax jurisdictional level FI level How manage the complexity Note: Slides may be dense, don t try to read everything, a copy is available by emailing us at sales@transworldcompliance.com. Questions: Type in the GoToWebinar chat box or send them to dpeak@transworldcompliance.com. Copyright 2016, Trans World Compliance, Inc. 2

FATCA ROLL OUT 2015 2016 2017+ US IRS FATCA Who How UK FATCA Who How US Citizens, NPFFI, Recalcitrant Accounts US FATCA XML format UK Territory Residents (10 CDOT + UK) UK FATCA XML format CRS FATCA Who How 101 Countries phased in over two years CRS FATCA XML format Copyright 2016, Trans World Compliance, Inc. 3

REPORTING COMPLEXITIES Reporting 2014 + earlier 2015 2016 2017+ What FATCA regulations apply? Who needs to be reported? None US FATCA US FATCA + UK FATCA US FATCA + CRS No one US Citizens + Entities with substantial US owners (>10%) + any dormant accounts + recalcitrant individuals + non participating FFIs Same as 2015 plus If you are CDOT any UK Citizens if their tax residency is UK, Jersey, Guernsey, Isle of Mann, or Gibraltar + UK Entities with substantial (>25%) UK owners How is it reported? No reporting US FATCA XML US FATCA XML UK FATCA XML Where do you report? No reporting Model 1: local tax authorities Model 2: US IRS No IGA: US IRS Model 1: local tax authorities Mode 2: IRS + HMRC No IGA: US IRS Same as 2015 plus Individuals and entities with substantial owners (>25%) of any Common Reporting Standard (CRS) agreement jurisdictions US FATCA XML CRS FATCA XML Model 1: local tax authorities Model 2: IRS + local tax authorities No IGA: Directly to the country tax authorities Copyright 2016, Trans-World Compliance, Inc. 4

US FATCA IGA COUNTRIES Total: 113 Model 1 Model 2 Agreement in Substance Signed In Force Anguilla, Antigua and Barbuda, Bahrain, Cabo Verde, China, Dominica, Dominican Republic, Greece, Greenland Grenada, Guyana, Haiti, Indonesia, Kazakhstan, Malaysia, Montenegro, Panama, Peru, Saudi Arabia, Serbia, Seychelles, Trinidad and Tobago, Tunisia, Turkmenistan, Ukraine Algeria, Angola, Belgium, Cambodia, Costa Rica, Croatia, Curaçao, Georgia, Israel, Kuwait, Montserrat, Philippines, Portugal, South Korea, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Thailand, Turkey, Turks and Caicos Islands, United Arab Emirates, Uzbekistan, Vietnam Australia, Azerbaijan, Bahamas, Barbados, Belarus, Brazil, British Virgin Islands, Bulgaria, Canada, Cayman Islands, Colombia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Guernsey, Holy See, Honduras, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jamaica, Jersey, Kosovo, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Mexico, Netherlands, New Zealand, Norway, Poland, Qatar, Romania, Singapore, Slovak Republic, Solvenia, South Africa, Spain, Sweden, United Kingdom Armenia, Iraq, Macao, Nicaragua, Paraguay, Taiwan Chile, Hong Kong, Moldova, San Marino Austria, Bermuda, Japan, Switzerland Source: https://www.treasury.gov/resource-center/tax-policy/treaties/pages/fatca.aspx Copyright 2016, Trans World Compliance, Inc. 5

CRS REPORTING JURISDICTIONS Jurisdictions undertaking first exchanges by 2017 (55 countries) Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands, United Kingdom Jurisdictions undertaking first exchanges by 2018 (43 countries) Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Belize, Brazil, Brunei Darussalam, Canada, Chile, China (People s Republic of), Cook Islands, Costa Rica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Qatar, Russia, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Turkey, United Arab Emirates, Uruguay, Vanuatu Jurisdictions that have yet to commit to a Timeframe (3 countries) Bahrain, Panama, Lebanon Source: OECD SECRETARY-GENERAL REPORT TO G20 FINANCE MINISTERS, Washington, DC, April 2016 Copyright 2016, Trans World Compliance, Inc. http://www.oecd.org/tax/oecd-secretary-general-tax-report-g20-finance-ministers-april-2016.pdf 6

CARIBBEAN COUNTRIES REPORTED (2015) Green = Reported (6) Grey = Committed to report (13) Red = No agreement (5) Anguilla (UK), Antigua and Barbuda, Aruba, Bahamas, Bermuda, Barbados, British Virgin Islands (UK), Cayman Islands (UK), Cuba, Curaçao (Kingdom of the Netherlands), Dominica, Dominican Republic, Grenada, Haiti, Jamaica, Montserrat (UK), Saint Barthélemy (France), Saint Kitts and Nevis, Saint Lucia, Saint Martin (France), Saint Vincent and the Grenadines, Sint Maarten (Kingdom of the Netherlands), Trinidad and Tobago, Turks and Caicos Islands (UK) Copyright 2016, Trans World Compliance, Inc. 7

EXTEND REPORTING DEADLINES IRS Notice 2015-66. Many partner jurisdictions that have signed IGAs or reached an agreement in substance on the text of an IGA continue to work through their internal procedures to bring the IGA into force. Pursuant to its authority under section 1471(b)(2)(B), and consistent with Announcement 2014-38, for Model 1 IGAs that have not yet entered into force on September 30, 2015, Treasury intends to continue to treat FFIs covered by the IGA as complying with, and not subject to withholding under FATCA so long as the partner jurisdiction continues to demonstrate firm resolve to bring the IGA into force and any information that would have been reportable under the IGA on September 30, 2015, is exchanged by September 30, 2016, together with any information that is reportable under the IGA on September 30, 2016. Copyright 2016, Trans World Compliance, Inc. 8

FI LEVEL Current status / update We have no way of telling right now How do they know if I haven t anyone to report? Only Direct Reporting NFFEs have to file a Nil Report Copyright 2016, Trans World Compliance, Inc. 9

US TAX PAYER REPORTING OBLIGATIONS Who must file Reporting Threshold (Total Value of Assets) What is Reported Penalties Form 8938 FBAR (FinCEN form 114) Specified individuals, which include U.S citizens, resident aliens, and certain nonresident aliens that have an interest in specified foreign financial assets and meet the reporting threshold Taxpayers living in the US: Unmarried taxpayer (or married filing separately): Total value of assets was more than $50,000 on the last day of the tax year, or more than $75,000 at any time during the year. Married taxpayer filing jointly: Total value of assets was more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the year. Taxpayers living outside the US: Unmarried taxpayer (or married filing separately): Total value of assets was more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the year. Married taxpayer filing jointly: Total value of assets was more than $400,000 on the last day of the tax year, or more than $600,000 at any time during the year. Maximum value of specified foreign financial assets, which include financial accounts with foreign financial institutions and certain other foreign non-account investment assets Up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000; criminal penalties may also apply U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold Aggregate value of financial accounts exceeds $10,000 at any time during the calendar year. This is a cumulative balance, meaning if you have a combined account balance of $12,000 at any one time (but divided between 2 accounts), both accounts would have to be reported. Maximum value of financial accounts maintained by a financial institution physically located in a foreign country If non-willful, up to $10,000; if willful, up to the greater of $100,000 or 50 percent of account balances; criminal penalties may also apply Copyright 2016, Trans World Compliance, Inc. Source: https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements 10

GOOD FAITH IRS Notice 2013-33. Calendar years 2014 and 2015 will be regarded as a transition period for purposes of IRS enforcement and administration of the due diligence, reporting, and withholding provisions under chapter 4, as well as the provisions under chapters 3 and 61, and section 3406, to the extent those rules were modified by the temporary coordination regulations. With respect to this transition period, the IRS will take into account the extent to which a participating or deemed-compliant FFI, direct reporting NFFE, sponsoring entity, sponsored FFI, sponsored direct reporting NFFE, or withholding agent has made good faith efforts to comply with the requirements of the chapter 4 regulations and the temporary coordination regulations. Copyright 2016, Trans World Compliance, Inc. 11

PARTICIPATING FFI Voluntary program (although IGAs have enshrined this into local law) Requires an FFI to report certain US citizens Require to report recalcitrant, dormant, and non-participating FFIs Requires closing of recalcitrant and dormant accounts and withholding on nonparticipating FFIs Copyright 2016, Trans World Compliance, Inc. 12

EXTEND WITHHOLDING TO 2019 IRS Notice 2015-66. In order to continue to facilitate an orderly phase-in of FATCA withholding, Treasury and the IRS intend to amend the chapter 4 regulations under section 1473 to extend the start date of gross proceeds withholding by providing that the definition of the term withholdable payment means any payment of U.S. source FDAP income, and for sales or other dispositions occurring after December 31, 2018, any gross proceeds from the sale or other disposition of any property of a type that can produce interest or dividends that are U.S. source FDAP income. Additionally, Treasury and the IRS intend to amend the regulations under section 1471 to extend the start date of withholding on foreign passthru payments to provide that a participating FFI is not required to withhold tax on a foreign passthru payment made to a recalcitrant account holder or a nonparticipating FFI before the later of January 1, 2019, or the date of publication in the Federal Register of final regulations defining the term foreign passthru payment. Copyright 2016, Trans World Compliance, Inc. 13

ONE CARIBBEAN JURISDICTION Press Release to FIs on July 31, 2015: The deadline date for registration with the Revenue Authority as a reporting entity in relation to your company's FATCA reporting obligation information for the year 2014 is Monday, August 17, 2015. The deadline date for the reporting or transmission of the required information to the Revenue Authority is September 15, 2015. http://barbados.gov.bb/bra/pages/fatca.aspx Copyright 2016, Trans World Compliance, Inc. 14

REPORTING SPECIFICS NIL Reports are required Normally (according to the IRS) NIL reports are only required for Direct Reporting NFFEs However, this jurisdiction requires NIL reports from all FFIs Reporting In XML format Must be encrypted and sent to a SFTP server http://barbados.gov.bb/bra/pages/fatca.aspx Copyright 2016, Trans World Compliance, Inc. 15

REPORTING PENALTIES TRANSMISSION DATE FI TO THE AUTHORITY Deadline September 15 th Failure to comply = imposition of penalty Penalty = $50,000.00 and/ or $5000.00 per day http://barbados.gov.bb/bra/pages/fatca.aspx Page 30 Copyright 2016, Trans World Compliance, Inc. 16

FUTURE OF TAX JURISDICTION REPORTING Financial Institutions Local Tax Authorities Global Tax Authorities Bank A, US, UK, ES, etc. data is collected Bank B, US, UK, ES, etc. data is collected Data is sorted by reportable jurisdiction and checked for completeness. ES Data is received by each jurisdiction based on Competent Authority Agreements Data is processed to ensure compliance with local tax law UK Etc. for all financial institutions ES UK US US Copyright 2016, Trans World Compliance, Inc. 17

RULE BASES Three dimensions (ex: KY to the US for FY 2015) Where you are reporting from (KY) Where you are reporting to (US) What fiscal year you are reporting (FY2015) What does it do? Figure out who needs to be reported Flagging of deficiencies Translates that data into XML Securely submit the data to the tax jurisdiction Copyright 2016, Trans World Compliance, Inc. 20

RULE BASES Remediation Convert to XML Transmit to tax authorities US RuleBase US XML Load data US Citizens UK RuleBase UK/CRS XML UK Tax Residents XX RuleBase CRS XML XX Tax Residents Copyright 2016, Trans-World Compliance, Inc. 21

IDENTIFYING AND CORRECTING DEFICIENCIES Row status, click to remediate. 1 3 PDF Audit Report. Click to edit the record. 2 4 Click to show any hierarchy relationships. Copyright 2016, Trans World Compliance, Inc. 22

SUBMIT DATA TO THE TAX AUTHORITIES Uncheck this to hold a record back from reporting. 4 1 Click this to view the XML created. Click to submit data to the tax authorities. 3 2 Click this to review the FATCA form. Copyright 2016, Trans World Compliance, Inc. 26

CONTACTING TRANS WORLD COMPLIANCE Q&A David Olenzak President 703-298-8678 dolenzak@transworldcompliance.com www.transworldcompliance.com Notice: Trans World Compliance, Inc. software is provided as a tool to assist clients in adherence to US FATCA regulations and any advice provided by Trans World Compliance, Inc. software and employees should not be construed as legal or professional accounting advice in regards to the legal requirements to adhere with any international tax regulations. Copyright 2016, Trans World Compliance, Inc. 29