What is FATCA? Are you ready?

FATCA has been one of the biggest buzz in the GRC community for the past months. We are now less than 12 months away before the initial provisions take effect. It’s critical for participating financial institutions to take account of FATCA requirements. Is your company ready? What steps are you taking towards FATCA compliance?

What is FATCA?

FATCA stands for The Foreign Account Tax Compliance Act (FATCA) which was enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act on March 18, 2010. FATCA creates a new information reporting and withholding regime for payments made to certain foreign financial institutions and other foreign entities. The FATCA rules generally become effective with respect to certain payments made on or after January 1, 2013.

To enforce compliance, FATCA requires foreign financial institutions (FFIs) to report directly to the IRS information about financial accounts held by U.S. taxpayers (even if they hold only non-U.S. assets), or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

An FFI that refuses to disclose information to the IRS faces a 30% withholding tax on certain U.S. source payments regardless of whether the recipient is a U.S. taxpayer participating FFI.

What is the intent of FATCA?

The Foreign Account Tax Compliance Act (FATCA), which comes into effect on January 1, 2013 is intended to reduce the levels of tax avoidance by U.S. citizens and entities through foreign financial institutions (FFIs). The aim is to increase transparency for the Internal Revenue Service (IRS) and identify U.S. tax payers who hold financial assets in non-U.S. financial institutions and offshore accounts so they cannot avoid their U.S. tax obligations. While the primary goal of FATCA is to gain information about U.S. persons, FATCA imposes tax withholding where the applicable documentation and reporting requirements are not met.

How will your organisation be affected by FATCA?

While FATCA certainly affects U.S. withholding agents and U.S. multinational companies, the greatest impact will likely be to Foreign Financial Institutions (FFIs). It requires financial institutions to enhance customer due diligence and reporting requirements for procedures to identify US persons who have invested in either non-US financial accounts or non-US entities.

Benchmark your preparations for FATCA implementation against your peers. We, at Thomson Reuters GRC, surveyed nearly 200 practitioners from firms around the world to assess their readiness for the forthcoming U.S. Foreign Account Tax Compliance Act (FATCA). The respondents included compliance, risk, audit and legal practitioners from across Africa, the Americas, Asia, Australasia, Europe and the Middle East. Click here to download FATCA Survey Special Report. 

How can Thomson Reuters help you?

Thomson Reuters for FATCA is a modular solution that can be deployed quickly to meet individual compliance requirements. Each of our components has an existing market pedigree which reduces customer risk in implementing new technology. It works from end-to-end of the whole FATCA process. This includes identifying U.S. persons in the on-boarding process, creating the correct self-certification documentation, and producing the reports required by the tax authorities. As an industry leader, we know that data quality and integrity is crucial which is why FATCA solution continually monitors and validates customer data to ensure the institution has a compliant process. The robust audit trail and workflow means that an institution is seen to be compliant.

We believe that technology and knowledge are key to a successful solution. Taking this in mind, we developed a FATCA E-learning course to equip your staff on key aspects of FATCA compliance and support best practice and sustainability. Contact us for more info on FATCA e-learning.

For more information on our FATCA Solution, write to us: http://info.fatca.thomsonreuters.com/fatcacontactus.

Here are some articles/commentaries that can help you understand what FATCA is and its impact:

• FATCA: The final regulations have landed — let the games begin
• Extraterritorial legislation offers glimpse into the future of regulation, conference told
• Basel rules and FATCA top list of banks’ worries in Asia, says report
• FATCA: the final regulations unravelled
• Final FATCA regulations remain open to change
• Foreigners’ accounts in U.S. banks eyed in tax crackdown
• Asia will continue to be subject to U.S. and European regulations, officials say
• Increased global transparency forces banks to be tax compliant, says lawyer
• Tax compliance is top external influence for compliance officers, Singapore conference hears
• Updated: U.S. issues FATCA rules sparing non-U.S. pension funds, mutual funds; enforcement looms

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