Foreign Account Tax Compliance Act (FATCA)

Foreign Account Tax Compliance Act (FATCA)

Reporting under the US Foreign Account Tax Compliance Act (FATCA) becomes effective as of 1 July 2014. SIX Financial Information has already implemented the structures necessary to support the financial industry with complete data required for FATCA compliance.

Enacted under the US Hiring Incentives to Restore Employment (HIRE) Act in 2010, the FATCA provisions represent a significant extension of the current Qualified Intermediary (QI) regime already in effect in the US. All FFIs are requested to register themselves with the US Internal Revenue Service (IRS).

The US law is aimed at foreign financial institutions (FFIs) and other financial intermediaries to ensure full tax compliance by US persons (citizens and residents) and avoid tax evasion through use of offshore accounts. FFIs failing to meet this request will be subject to a 30% withholding tax on income from US sources, including dividends and interest paid by US corporations. The withholding tax for uncooperative account holders and FATCA non-participating financial institutions on US income starts as well in 2014. Pass-through Payment Information will be requested at the earliest as of 2017.

Special FATCA Inter Governmental Agreements (IGA)

Model 1 IGA

FFIs under Model 1 IGA jurisdiction will be treated as satisfying FATCA due diligence and reporting requirements.  They will have to register with the IRS but will not have to sign an FFI agreement.

The United States has announced that agreements with approximately 50 jurisdictions regarding a special FATCA Model 1 IGA are in process. Among others, countries include the UK, Germany, France, Denmark and Spain.

Model 2 IGA

FFIs under Model 2 IGA jurisdiction will be required to register with the IRS and report information about US accounts through the OECD standards.

The US has signed international tax compliance and FATCA implementation agreements based on Model 2 with Switzerland and Japan.

Our Services

SIX Financial Information will provide the international financial industry with the data required in order to comply with FATCA:

  • Institution Level Classification & Status: FATCA entity type and FFI status will be noted, along with the IRS-issued Global Intermediary ID Number (“GIIN”), which will be cross-referenced with other institutional identifiers, including the Legal Entity Identifier (“LEI”)
  • Instrument Level Tax Status: in scope, in scope – grandfathered, in-scope – short term and associated withholding rates

SIX Financial Information is an active participant in industry discussions on FATCA and other important cross-border taxes and regulations.  We host ongoing workshops with a group of leading international banks and other stakeholders in order to ensure comprehensive and timely support for our clients. We continuously adapt our data and services to comply with the act.

In anticipation of the FATCA implementation, SIX Financial Information began preparing its reference data structure to match the latest tax requirements in 2012, and we are continuously updating our structures based on the latest FATCA developments. The primary source for the data is our near-real time reference data product, Valordata Feed (VDF), where a number of structural enhancements have already been made at the institution and instrument levels in order to reflect the required data needs.

Timeline

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