fatca training · uk - jersey fatca the process joint negotiations between the uk and crown...

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FATCA training

Comsure Group 5 December 2013

www.pwc.com/jg

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PwC

Agenda

Slide 2

5 December 2013

Overview

• Introduction 3

• Update on status of FATCA in Jersey 8

• FATCA Compliance Approach 14

• Legal entity analysis 16

• Client due diligence 33

• Potential for withholding 47

• Reporting 49

Questions?

FATCA Training

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Introduction

Slide 3

5 December 2013 FATCA Training

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Technical overview

The objective of FATCA was to enforce disclosure of offshore accounts held by US taxpayers through the threat of withholding on payments to Foreign Financial Institutions (‘FFI’)

Following a joint announcement by the US, France, Germany, Italy, Spain and the UK to intensify co-operation in combating international tax evasion, Inter Governmental Agreements have been signed while Bi-lateral and Multi-lateral Information Exchange Agreements are being pursued

IGA financial

institution

Account

holders

Documentation

Local tax

authority

Non

participating

FFI

‘Paym ents’ not including

consideration for the provision of

goods or non-financial services

Reporting

on reportable

accounts and

pay ments to

NPFFIs

FFI Reporting and

Certifications

on US reportable

accounts and payments

to NPFFIs

IRS

Other tax

authority

Potential

reporting

on Other

reportable

accounts

• Obtain information on account h olders

• Comply with required due diligence a n d verification procedures

• Obtain applicable waiver of disclosure limitations

Model 1 IGA

reporting

on US reportable

accounts and

pay ments to NPFFIs

Slide 4


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Current state of play

Still to come? Signing of US IGA’s

Local IGA legislation Local IGA Guidance

Standard FFI

agreement

Final IRS Forms W-8 ‘Multi-lateral FATCA’

Year Month What has been published?

2010 March 2010 Foreign Account Tax Compliance Act 2010 and Notices

2011 Various Notices

2012 Various Proposed regulations, draft forms, Model I Inter Governmental Agreement (IGA), UK – US IGA,

Announcement 2012-42 and Model II IGA and Revised Model I, UK Draft Regulations (International Tax Compliance (USA) Regulations 2013), Draft Guidance Notes and Summary of Responses from the consultation

2013 17 January Final Regulations – US FATCA

20 March States of Jersey announcement on Negotiations on US FATCA and on Enhanced reporting

arrangements with the UK

9 April HM Treasury announcement on ‘multi-lateral’ information exchange

12 July US Treasury Announces Six-Month Extension to FATCA (Notice 2013-43)

7 August Final International Tax Compliance Regulation 2013 issued – UK FATCA

14 August HMRC release revised UK Guidance

19 August IRS Registration system available

23 October UK Jersey agreement signed

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Intergovernmental agreements Current status

IGA signed (9)

• Cayman Islands

• Costa Rica

• Denmark

• France

• Germany

• Ireland

• Japan

• Mexico

• Norway

• Spain

• Switzerland

• United Kingdom

IGA initialled/negotiations

concluded

• Italy

• Bermuda

• Malta

Final negotiations underway

• Belgium

• Finland

• Isle of Man

• Luxembourg

• Netherlands

• New Zealand

• Singapore

• Australia

• British Virgin Islands

• Canada

• Czech Republic

• Guernsey

• Jersey

• Sweden

• Israel

Slide 6


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FATCA timeline for FFIs under Model I IGAs

FFI Gov ernance

Du e diligence for

preexisting a ccounts

Procedures for new

accounts

Withholding

Reporting

2018 2017 2016 2015 2014 2013

Jun 30 2014

Ear liest date that an FFI

can be a Reporting Model 1 FI

Aug 19 2013

– IRS FATCA r egistration

por tal av ailable

Apr 25 2014– Last day to

r egister for inclusion on the Jun 2, 2014 IRS list of PFFIs

and RDCFFIs

Jun 2 2014 – First IRS list of PFFIs

and RDCFFIs to be published

Jan 1 2016 – Sponsored

entities with US Reportable Accounts must furnish GIINs

for payments made after 2015

Jan 1 2015 – The first date on

w hich verification of GIINs is r equired with respect to payees

that are reporting Model 1 FFIs

Jun 30 2015 – Complete

i dentification and review of pr eexisting high value i ndividual accounts

Jun 30 2016 – Complete

i dentification and review of all r emaining preexisting individual and entity accounts

Jul 1 2014 –Enhanced account opening

pr ocedures must be in place to establish the FATCA status of new accounts

Jul 1 2014 – Begin FATCA withholding on

U S source FDAP income paid to NPFIs

Jul 1 2014 –Cut-off date for grandfathered

obligations

Prior to Sep 30, 2015 –Reporting FATCA Partner FI w ill need to provide required

i nformation to FATCA Par tner prior to IGA deadlines in order for FATCA

Par tner to be able to meet cor responding deadlines

Sep 30, 2015 – Model

1 A IGA will terminate if appropriate safeguards

and i nfrastructure are not in place

2016 – Reporting FATCA Par tner FI to report to FATCA Par tner Country the name and

the aggregate amount of pay ments made in 2015 and 201 6 to NPFI

2018 – Reporting FATCA Par tner FI to obtain and r eport TIN of each specified

U S account holder for pr eexisting accounts

Slide 7


NOTE: Dates derived from ‘Co-ordination of timing’ provisions of the Model 1 IGA and notes apply to detail

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Update on status of FATCA in Jersey

Slide 8


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US and UK FATCA Current status

Status of negotiations

US IGA √

TIEA protocol √

UK IGA √

TIEA protocol √

Slide 9

Timetable for signing and entry into force

Signing expected in near future

Draft guidance notes and regulations expected to be published on signing or shortly thereafter


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UK - Jersey FATCA

The process

Joint negotiations between the UK and Crown Dependencies

Single set of guidance notes for US and UK FATCA

The objectives

Consistency between the US and UK IGA’s – Some differences

Consistency between the Crown Dependencies

Deliver the information needed while minimising the burden on business

The challenges

US regulations for a UK/Crown Dependencies bilateral agreement

Lack of global application

Slide 10


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UK - Jersey FATCA

Negotiating the IGA – Specific challenges

Registration

Annex II

Sponsored entity regime

Trusts and trust companies

UK resident non domiciled

Guidance notes and regulations

Future changes

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UK – Jersey FATCA

Key dates for implementation

31 December 2013 Informing clients of the Disclosure Facility under UK FATCA

1 July 2014 FFI must implement policies and procedures to establish and monitor clients and products in scope of UK FATCA

1 July 2015 Review of Pre-existing Accounts (High Value Accounts) at 30 June 2014 must be completed by this date

2015 Reporting will commence with respect to 2014 financial period

Slide 12


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Next steps

G20/OECD

Global standard for automatic exchange of information

We fully support the OECD work with G20 countries aimed at presenting

such a new single global standard for automatic exchange of information by

February 2014 and to finalizing technical modalities of effective automatic

exchange by mid-2014. In parallel, we expect to begin to exchange

information automatically on tax matters among G20 members by the end of

2015.

Slide 13


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FATCA compliance approach

Slide 14


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FATCA compliance approach Overview

Classify financial institutions that are in scope

Identify what constitute financial accounts

Classify customers with pre-existing and new accounts

Reporting, withholding and

certifications

Report information on

relevant accounts

to relevant authority

Confirm financial

institution

analy sis

Determine which activities and

products offered by FFI’s are

Financial Accounts

Search pre-existing individual

and entities accounts to classify

them for FATCA purposes

Identify information that will be

reported as U.S. accounts/UK

accounts and where withholding

applies (only applicable for US

FATCA)

Implement

governance and

controls with

appropriate assurance

Requirem ent to

register with IRS

Ensure on-boarding processes

capture Self-Certification and agree

approach to test reasonableness

Slide 15


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Legal entity analysis

Approach

Slide 16


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Approach to legal entity analysis

• Systematic approach to legal entity classification

• Application of FATCA rule set

• Record basis of classification

• Support on-going review for changes in activity or ownership

• Retain registration information

• Retain compliance information – Audit trail

• Support registration process

Entities

Accounts

Customers

Compliance

and reporting

Slide 17


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Data required to classify legal entities

• Name

• Unique identifier e.g. company number

• Address

• Country of incorporation

• Country of tax residence

• Business activity

• Type of entity company/trust/partnership, etc.

• Status active/dormant/to be liquidated

• Parent entity

• Percentage ownership

• US tax status – if election has been made (see later slides)


Slide 18

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Approach Due diligence considerations

Individual versus entity account holders

Pre-existing versus new accounts

Indicia of U.S Status

Individuals

Entities

Entities

Accounts

Customers

Compliance

and reporting

Slide 19


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Key concepts and definitions

Slide 20


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Legal entity analysis Which rules apply?

Entity US regulations Model 1 IGA

Company Country of organisation/ incorporation Country of tax residence

Partnership Country of organisation/ incorporation

Country of tax residence. For limited partnerships

follow the residence of the general partner

Trust Where a court would have authority to render judgement concerning

substantially all issues regarding administration of the trust and one or

more persons have authority to control

substantially all decisions of the trust

Residence of the trustees

Entities

Accounts

Customers

Compliance

and reporting

Slide 21


Until FATCA is enacted as part of domestic law the strict position is that you follow the US regulations.

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Branches

• Under the Inter Governmental approach a branch is treated as a separate legal entity for FATCA purposes. The treatment of the branch follows its country of tax residence.

• For example under the UK model:

- An overseas branch of a UK company is governed by the rules in the country in which the branch is located.

- A UK branch of an overseas entity is treated as a separate entity resident in the UK for FATCA purposes. The UK rules apply.

• There is a detailed definition of a branch in the US regulations. This will need to be considered if there is a branch located in a non IGA country or a Model II IGA country.

Entities

Accounts

Customers

Compliance

and reporting

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Disregarded entities

• For US Federal tax purposes you can elect for an entity to be treated as disregarded.

• Elections can be made for non US entities. The result is that for Federal tax purposes the profits are treated as accruing to the US parent.

• Elections, known as “check-the-box” elections are common for US parented groups and for investment funds with US investors.

Entities

Accounts

Customers

Compliance

and reporting

Slide 23

US regulations IGA country

Disregarded entity

Not a separate entity from its parent

Separate entity based on country of tax residence

Entity based in non IGA country is a USFI


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Disregarded entities Example of US Federal Tax Classifications


Slide 24

Investment

Fund LP (UK)

Intermediate

Fund LP (UK)

Feeder Fund

LP (UK)

Feeder LLC

Company

Partnership Legal Status

Company

Legal Status

partnerships Legal Status

partnerships

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Legal entity analysis Groups - Expanded Affiliated Group

Expanded Affiliated Group Basic definition

• Parent means an entity that owns directly or indirectly over 50% of the stock by vote and value.

• The parent must be taxed as a company for US Federal tax purposes. It cannot be US tax transparent (partnership) or a disregarded entity. It is essential to check the US tax status of each entity because it does not always follow the legal form.

• An individual cannot be a parent entity even if they own over 50% by vote and value.

• A partnership can be a member of an EAG if the parent owns directly or indirectly more than 50% by value of the income and capital of the partnership.

Entities

Accounts

Customers

Compliance

and reporting

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Identify and EAG’s within the structure?

• Determine who is the parent and which entities are members of the group.

• One member of the group, typically the parent, needs to be designated as the lead FFI for registration purposes.

Why does it matter?

• The parent of the group may not be administered by yourselves.

• You may administer the parent but not all the members of the group.

• Need to establish a communication strategy to agree who is the lead FFI and the information they will require to initiate the registration process.

• The existence of a group may allow you to rely on exemptions

Entities

Accounts

Customers

Compliance

and reporting

Slide 26


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Expanded Affiliated Group Example 1

Entities

Accounts

Customers

Compliance

and reporting

Slide 27

Invest Sarl

Jersey GP Dutch BV

UK LP

UK LP

100% 65%

100% 100% vote

65% value

Investor debt

UK LP

Invests in UK Properties Jersey

administered entity


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Real Estate

Slide 28


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Legal entity analysis Real Estate structures

Definition of an Investment entity

A Investment entity is an entity that primarily conducts one or more of the following activities or operations for or on behalf of a customer:

• Trading in money market instruments (cheques, bills, certificates of deposit, derivatives, etc.); foreign exchange; exchange, interest rate and index instruments; transferable securities; or commodity futures trading.

• Individual and collective portfolio management.

• Otherwise investing administering, or managing funds or money on behalf of other persons.

Slide 29

Entities

Accounts

Customers

Compliance

and reporting


The above definition does not include real estate

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Real Estate Structures Basic ownership structure

Key points

• Real estate is not a Financial Asset. The JPUT may not be a Financial Institution for FATCA purposes where the real estate is directly owned.

• Care needs to be taken if the JPUT owns other assets which would be financial assets for FATCA purposes. The definition states “primarily” conducts as its business. This is defined as meaning more that 50% of its gross income is attributable to activities listed on the previous slide.

• Can this be applied on a consolidated basis.


Slide 30

JPUT

Property

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Real Estate Structures Asset owned through sub holding structure

Key points

• JPUT owns shares in a company and not real estate therefore owns a financial asset. Apply trust analysis.

• The HoldCo does not own any financial assets therefore it is not a financial institution.

• The same analysis would apply if the property were owned by a partnership.

• The HoldCo will be a passive non financial foreign entity. It will have an obligation to identify any controlling persons who are US persons and to report them.


Slide 31

JPUT

Property

HoldCo/LP

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Real Estate Example

Entities

Accounts

Customers

Compliance

and reporting

Slide 32

JSYLP

JSY GP

JSY JPUT

English LP

Property investment

Luxco Sarl

100%

49.995%


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Client due diligence Key concepts

Slide 33


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An FFI is a Custodial or Depository Institution, Investment Entity or Specified Insurance Company


Slide 34

Entities

Accounts

Customers

Compliance

and reporting

Type Examples

Custodial Any entity that holds, as a substantial portion of its business, financial assets for the account of others

Depository Any entity that accepts deposits in the ordinary course of a banking or similar business

Investment Entity Any entity that conducts as a business (or is managed by an entity that conducts as a business) one or more of the following activities or operations for or on behalf of a customer:

(1)trading in money market instruments (cheques, bills, certificates of deposit, derivatives, etc.); foreign exchange; exchange, interest rate and index instruments; transferable securities; or commodity futures trading

(2)individual and collective portfolio management; or

(3)otherwise investing, administering, or managing funds or money on behalf of other persons

(Interpreted in a manner consistent with similar language set forth in the definition of “financial institution” in the FATF Recommendations)

Specified Insurance Company Any entity that is an insurance company (or the holding company of an insurance company) that issues, or is obligated to make payments with respect to, a Financial Account

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Determining the aggregate balance or value of accounts

Basic rules Required to aggregate all accounts maintained by the FFI or Related

Entities.

BUT only to the extent that your computerized systems link the accounts.

For example, by reference to a data element such as client number or taxpayer identification number.

It is sufficient for the account holder to be able to see the aggregated value of all accounts even if this cannot be viewed internally.

Each holder of a jointly held account will be attributed the entire balance or value of the jointly held account.

Entities

Accounts

Customers

Compliance

and reporting

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U.S indicia

Identification of the account holder as a U.S. citizen or tax resident.

Unambiguous indication of a U.S. place of birth.

Current U.S. mailing or residence address (including a U.S. post office box or U.S. “in-care-of” address).

Current U.S. telephone number.

Standing instructions to transfer funds to an account maintained in the United States.

Currently effective power of attorney or signatory authority granted to a person with a U.S. address.

An “in-care-of” or “hold mail” address that is the sole address the FFI has on file for the account holder.

Entities

Accounts

Customers

Compliance

and reporting

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Definition of US Person

Dual citizens of the U.S. and another county.

U.S. Citizens even if residing outside the United States.

U.S. Passport holder.

Born in the US unless renounced citizenship.

Is a lawful permanent resident of the United States, regardless of where they reside (i.e. a holder of a “green card”).

Substantial presence test: a non-U.S. Citizen that is:

• Physically present in the United States for at least 183 days by counting:

─ All the days (at least 31) in the current year.

─ 1/3 the days in the immediately preceding year and

─ 1/6 the days in the second preceding year.

• Is not a diplomat, teacher, student or an athlete.

Entities

Accounts

Customers

Compliance

and reporting

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Enhanced procedures for High Value Accounts

FFI is required to aggregate any accounts that a relationship manager

knows or has reason to know are:

• Directly or indirectly owned

• Controlled

• Established (other than in a fiduciary capacity) by the same person

An FFI must implement procedures to ensure that a relationship manager identifies any change in circumstances of an account.

Relationship Manager – Officer/employee of FFI who is assigned responsibility for specific account holders on an on-going basis (advises/recommends).


Slide 38

Entities

Accounts

Customers

Compliance

and reporting

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Client due diligence Investor take on, account remediation and documentation requirements


Slide 39

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“Financial accounts”

Preexisting vs.

new obligation

• General cut-off date on December 31, 2013 • New account of preexisting customer expected to be incorporated

into the IGA context; tbc based on release of additional IGAs and

application of MFN clause

Documentation

to be m onitored

/reviewed

• No obligation to monitor expiration dates, and thus no obligation to renew documentation upon expiration (assumption: unless required for KYC/AML/regulatory purposes)

• Obligation to monitor/update documentation due to a change in circumstance

Financial

Account

• Four types of financial accounts are defined: depository accounts, custodial accounts, certain debt/equity interests, and certain insurance and annuity contracts

Exceptions • Exceptions: excluded products in Annex II

• General cut-off date on December 31, 201 3

• Also includes a new account of preexisting account holder that holds a preexisting account, instrument, contract, or equity interest

with the FFI

• Obligation to monitor expiration dates and accordingly, renew documentation upon expiration

• Obligation to monitor/update documentation due to a change in

circumstance • Substitute forms are allowed with potential different validity period

• Specific rules for indefinite validity of certain withholding statements or documentary evidence until change of circumstances

• Four types of financial accounts are defined: depository accounts, custodial accounts, certain debt/equity interests, and certain insurance and annuity contracts

• Certain savings accounts • Certain term life insurance contracts • Account held by an estate

• Certain escrow accounts • Certain annuity contracts

• Account or product excluded under IGAs (Annex II)

Account holder

concept

• Generally, the account holder is the person listed or identified as the holder of the account

• Special “look-through” rules apply for accounts held for the benefit

of another person as agents, custodians, nominees, signatories, inv estment advisors, and intermediaries

• Generally, the account holder is the person listed as the holder or the owner of the account

• Specific rules apply for disregarded entities, EBO, joint holder,

non-FI agent, grantor trust and for insurance /annuity contracts

Final Regulations Model 1 IGA

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Preexisting individual investors

Documentation

to be reviewed

• High Value Accounts electronic search + paper search (unless exception is met) + relationship manager inquiry

• All other PIAs electronic search

• U.S. Reportable Account (tbc)

• Reporting

T imeline for PIA

due diligence

• High Value Accounts – December 31,2014 (1 year from cutoff date)

• All other PIAs – December 31,2015 (2 y ears from cutoff date)

Exceptions

(Optional)

• Cash Value Insurance or Annuity Contracts ≤ $250,000 as of December 31, 2013

• Depository accounts ≤ $50,000

• All financial accounts ≤ $50,000 as of December 31, 2013

• Certain Cash Value Insurance or Annuity Contracts with

restrictions on sales to U.S. residents, with certain accounts subject to local reporting or withholding

Documentation

required

• If no U.S. indicia found: not additional documentation required to treat account as foreign

• If U.S indicia found:

- Foreign status: self-certification and/or specified

documentation can be collected based on indicia found

- U.S. status: default if U.S. indicia found and no documentation collected to ‘cure’ such indicia

T reatment if not

sufficiently

documented

• High Value Accounts electronic search + paper search (unless certain exceptions are met) + relationship manager inquiry

• All other PIAs electronic search

• Recalcitrant (until sufficient information obtained)

• Withholding and account reporting on an aggregate basis

• High Value Accounts – December 31, 2014 (1 year from effective date of FFI Agreement)

• All other PIAs – December 31, 2015 (2 y ears from effective date of FFI Agreement)

• Cash Value Insurance or Annuity Contracts not documented as U.S. ≤ $250,000 as of effective date of FFI Agreement

• Depository accounts ≤ $50,000 for U.S. accounts

• All financial accounts (other than insurance/annuity), not

documented as U.S. ≤ $50,000 as of effective date of FFI Agreement

• If no U.S. indicia found: no additional documentation required to treat account as foreign

• If U.S. indicia found:

- Foreign status: withholding certificate and/or specified

documentation must be collected based on indicia found

- U.S. status: W-9 and waiver, if necessary

FFI can elect to apply new account procedures to preexisting accounts


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Pre-existing Individual Account: List of “Required” Documentation

-Current U.S Mailing or residence

address,

- One or m ore U.S tel no.’s that are

the only tel no.’s

- Unam biguous indication of a U.S

place of birth

1. A self-certification that the account holder is not a U.S. citizen or resident for tax purposes; and

2. A non-U.S. passport or other government-issued identification evidencing the account holder’s citizenship in a country other than the United States.

1. A self-certification that the account holder is neither a U.S. citizen nor a U.S. resident for tax purposes;

2. A non-U.S. passport or other government-issued identification evidencing the account holder’s

citizenship or nationality in a country other than the United States; and 3. A copy of the individual’s Certificate of Loss of Nationality of the United States or a reasonable

explanation of: a. The reason the individual does not have such a certificate despite renouncing U.S. citizenship;

or

b. The reason the account holder did not obtain U.S. citizenship at birth

-Standing instructions to transfer

funds to an account maintained

in the U.S

1. A self-certification that the account holder is not a U.S. citizen or resident for tax purposes; and 2. Documentary evidence establishing the account holder’s non-U.S. status.

If certain indicia are found with respect to an account, such account shall be treated as a U.S.

Reportable Account unless the FFI elects the exception and either obtains the required document below or has previously reviewed such documentation and maintains a record of:

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-A currently effective power of attorney or signatory authority granted to a person with a U.S.

address, -An “in care of” or “hold mail”

address as the sole address, - One or more U.S. telephone numbers (if non-U.S. telephone

number also associated)

1. A self-certification that the account holder is not a U.S. citizen or resident for tax purposes; or 2. Documentary evidence establishing the account holder’s non -U.S. status.

Entities

Accounts

Customers

Compliance

and reporting

FATCA Training

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Preexisting entity investors

Exceptions

(Optional)

• Aggregate account value ≤ $250,000 as of December 31, 2013; regardless of U.S. status of account

• Exception valid until account value exceeds $1 ,000,000

Documentation

required to

certify account

status

• General reliance on information maintained for regulatory or customer relationship purposes and information that is publicly available to reasonably determine account status

• Self-certification or FFI-EIN may be required for some accounts to

certify status based on indicators found if additional information is needed to reasonably determine account status

Self-certification documentation includes Form W-8, Form W-9, or other similar agreed upon form

• FFIs – Treat as NPFFIs and report aggregate payments annually (transitional); withhold if already withholding for other U.S. tax purposes, or pass information upstream for previous withholding

agent to withhold

• NFFEs: tbc

T imeline for PEA

due diligence

• Prima Facie FFIs n/a

• All preexisting entity accounts December 31,2015 (2 years from cutoff date)

T reatment if not

sufficiently

documented

• Aggregate account value ≤ $250,000 as of effective date of FFI Agreement only if account is not previously documented as U.S.

• Exception valid until account value exceeds $1 ,000,000

• General rule for each entity type: withholding certificate, supplemented or substituted by other documentation and verifications when specified

• Some reliance on publicly available information (including SICs as

documentary evidence in specified cases)

• Alternative documentation options provided for certain entity types

based on the type of obligation (e.g. preexisting obligation, offshore obligation, preexisting offshore obligation, account with no withholdable payments paid to it, etc.)

• Presumption rules apply to entity accounts not sufficiently documented

• Recalcitrant/NPFFI (until sufficient information obtained)

• Withholding and reporting on an aggregate or payee specific basis

• Prima Facie FFIs June 30, 2014 (6 months from effective date of FFI Agreement)

• All other preexisting entity accounts December 31, 2015 (2 years

from effective date of FFI Agreement)

• Special rule for bearer shares: Payee must be identified at the time

a payment is collected by the beneficial owner


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New individual investors

Exceptions

(Optional)

• Depository accounts ≤ $50,000 (completely excepted)

• Cash Value Insurance Contracts ≤ $50,000

Documentation

required to

certify account

status

• Establish foreign status:

- Self-certification

• Establish U.S. status:

- Self-certification , including U.S. TIN

Self-certification documentation includes Form W-8, Form W-9,

or other similar agreed upon form

Documentation

to be reviewed • Review documentation collected in AOP, including for KYC/AML

purposes to confirm the reasonableness of self-certification

T reatment if not

sufficiently

documented

• U.S. Reportable Account (tbc)

• Reporting

• Depository accounts ≤ $50,000 for U.S. accounts (excepted from reporting but not from identification/documentation)

• Cash v alue insurance contract ≤ $50,000 during the entire year

(excluded from the definition of a financial account)

• Establish foreign status:

- Withholding certificate,

- Valid documentary evidence, or

- Specified information

• Establish U.S. status

- W-9 or TIN (in any manner) and valid waiver, if necessary

• Generally, PFFI must review all documentation collected to determine the account’s status

• Reliance on third party credit agency and alternative procedure are

av ailable when conditions are met

• Recalcitrant (until sufficient information obtained)

• Recalcitrant status starts at the earlier of: • 90 days after the account is opened or

• the date a withholdable or foreign passthru payment is made to the account

• Withholding and account reporting on an aggregated basis

T imeline for NIA

due diligence • Upon account opening

• The earlier of:

- 90 days after the account is opened or

- the date a withholdable or foreign passthru payment is made

to the account


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45

PwC

New entity investors

Exceptions • None

Documentation

required to

certify account

status

• None

• General rule for each entity type: withholding certificate , supplemented or substituted by other documentation and v erifications when specified

• Some reliance on publicly available information (including SICs as

documentary evidence in specified cases)

• Alternative documentation options provided for certain entity types

based on the type of obligation (e.g. preexisting obligation, offshore obligation, preexisting offshore obligation, account with no withholdable payments paid to it, etc.)

T reatment if not

sufficiently

documented

• FFIs - Treat as NPFFIs and report aggregate payments annually (transitional); withhold if already withholding for other U.S. tax purposes, or pass information upstream for previous withholding

agent to withhold

• NFFEs: tbc

• Presumption rules apply to entity accounts not sufficiently documented

• Recalcitrant/NPFFI (until sufficient information obtained)

• Recalcitrant/NPFFI status starts at the earlier of:


- the date a withholdable or foreign passthru payment is made to the account

• Withholding and account reporting on an aggregated or payee specific basis

T imeline for

NEA due

diligence

• The earlier of:


- the date a withholdable or foreign passthru payment is made to the account

• Upon account opening, tbc

• For certain entity types (i.e. Active NFFE, FATCA Partner FIs and Partner Jurisdiction FIs) Reliance on information publicly available or in possession is allowed to determine status

• For all other entity types Self-certification required to establish

status

Self-certification documentation is not further defined


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PwC

Potential for withholding


Slide 46

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47

PwC

Withholding

• No tim eline given, expected to begin on U.S. source FDAP on January 1, 2014

Expect further guidance on if timeline will follow proposed

regulations or will be aligned with reporting timeline in IGA

Who m ust

withhold?

• Only entities assuming primary withholding responsibility for other U.S. tax purposes m ust withhold under the IGA:

• QI assum ing primary withholding responsibility

• Withholding foreign partnership

• Withholding foreign trust

• Other entities must pass sufficient information upstream for another withholding agent to report and withhold

Who m ust be

withheld upon? • NPFFIs (with or without account relationship) – tbc.

Withholdable

pay m ents

• U.S. source FDAP income

• The treatment of gross proceeds and foreign passthru payments is still unclear and postponed with a commitment to develop a

practical approach

Grandfathered

obligations

• No specific guidance given; however, per the definition of a withholdable payment, a payment will not be considered a withholdable payment under the Model IGA if it is not treated as a

withholdable payment under the Final Regulations

T imeline

• Phased-in withholding on:

- January 1, 2014: U.S. source FDAP income

- January 1, 2017: Certain gross proceeds

- January 1, 2017: Foreign passthru payments (expected)

• Each withholding agent (foreign or U.S.) that has control, receipt, custody, disposal, or payment of a withholdable payment

• Special rules for FFIs making the election to be withheld upon as a

QI as well as when making payments to certain intermediaries

• NPFFIs (with or without account relationship)

• Recalcitrant account holders

• Non-compliant Passive NFFEs (with or without account

relationship)

• U.S. source FDAP income

• Gross proceeds from the sale or disposition of any property which can produce U.S. source dividends/interest

• Foreign passthru payments (expected)

• January 1, 2014: General cut-off date for grandfathered obligations

• Separate cut-off dates and categories of grandfathered obligations giv en for obligations giving rise to dividend equivalent payments

and foreign passthru payments

• Clarification that payments with respect to collateral securing a

grandfathered obligation will be grandfathered


47


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48

PwC

Reporting


Slide 48

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49

PwC

Reporting

• U.S. reportable accounts

Items to report

in account

reporting

• Basic information: Name, address, TIN (if any), account number, nam e and ID of the Reporting FI, account balance or value

• Pay ments: Total gross amount paid or credited to the account,

including gross proceeds (specific requirements for payments to different types of financial accounts such as depository or

custodial)

Reporting

channel • To the local tax authorities

T ransitional

reporting

• For FATCA Partner FIs, all payments to NPFFIs in 2015 and 2016

• Form is unclear as 1042 reporting is not foreseen

No guidance is provided with respect to the term ‘all payments’

Account

reporting

tim eline

• Initial: September 30, 2015 (for calendar years 2013 and 2014)

• Annual: September 30th

Reporting timeline under IGA is for exchange of information.

Specific timeline for FFIs to report to be given under local law

Scope of account

reporting

• U.S. accounts • Accounts held by owner documented FFI • Recalcitrant accounts (on an aggregate basis, 5 groups)

• Basic information (with minor modifications): Name, address, TIN, account number, account value or balance, jurisdiction of branches

• Pay ments: Total gross payments paid or credited to the account, including gross proceeds phased in time period

• Directly to the IRS

• For PFFIs, payments of foreign reportable amounts and U.S. source FDAP paid to NPFFIs in 2015 and 2016

• Initial: March 31, 2015 (for calendar years 2013 and 2014)

• Annual: March 31st


• Form not mentioned • Manner of reporting on payments subject to withholding: tbc

under local law

Form 1042

reporting

• PFFIs/registered DCFFI shall report chapter 4 reportable amounts paid to recalcitrant account holders /NPFFIs

• Additional obligations may apply for USWAs

• Chapter 3 reporting obligations remain

49


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50

Circular 230: This document was not intended or written to be used, and it cannot be used, for the purpose of av oiding US Federal, state or local tax penalties that may be imposed on any taxpayer. This document has been prepared pursuant to an engagement between

PricewaterhouseCoopers CI LLP and its client and is intended solely for the use and benefit of that client and not for reliance by any other person .

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, PricewaterhouseCoopers CI LLP, its

members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of y ou or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2013 PricewaterhouseCoopers CI LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers CI LLP (a limited liability partnership in the United Kingdom) which

is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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