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FATCA

Foreign Account Tax Compliance Act (FATCA) 

What is FATCA?

FATCA stands for the Foreign Account Tax Compliance Act (FATCA). It was introduced in October 2009 and signed into law in March 2010 as part of Hiring Incentives to Restore Employment (HIRE) Act.

FATCA is designed to prevent tax-evasion by U.S. citizens or residents holding foreign accounts or offshore investments. Under the new FATCA regulations, foreign financial institutions (FFIs) must identify U.S. account holders as well as entities under U.S. control (i.e. U.S. persons having a substantial ownership interest in the entity) and provide the IRS with information on their assets, income payments and trade flows during the fiscal year. FATCA regulations generally became effective on July 1, 2014.

How does FATCA impact ARGUS and its clients?

To be FATCA compliant, ARGUS must register its own FFIs with the IRS. In addition, FATCA regulations require ARGUS to review existing onboarding and withholding processes and enhance them to comply with the regulations.

As part of an enhanced client onboarding process, additional documentation may be requested for clients holding accounts at ARGUS. For instance, ARGUS may need to obtain tax forms (i.e. W9/W8 series documents) after July 1, 2014, from both new and existing accountholders in order to identify the client’s tax classification.

In what cases do I need to submit a Form W-9/W8-BEN/W8-BEN-E to ARGUS?

In order to determine if tax withholding is applicable, ARGUS must authenticate the residency of its accountholders. For instance, if an account is held by a non U.S. citizen or non U.S. registered business entity, ARGUS may require a Certification of Foreign Status, such as Form W8-BEN or W8-BEN-E for the account. Similarly, if an account is held by a U.S. citizen, U.S. resident alien or U.S. business entity, the accountholder may be required to certify his/her tax status by completing a Form W-9. Please note that ARGUS does not accept US clients.

How will I know what Form to complete?

U.S. citizens or corporations may complete a W-9 Form by downloading it from the following webpage http://www.irs.gov/pub/irs-pdf/fw9.pdf .
Instructions for non-US citizens or corporations can be found in detail in the following webpage http://www.irs.gov/pub/irs-pdf/iw8.pdf , and are generally outlined below for your convenience:

  • W-8BEN – non-US individual (unless individual falls under below classification)
  • W-8BEN-E – non-US entity (unless entity falls under below classification)
  • W-8ECI – non-US person with claim that income is effectively connected with the conduct of a trade or business in the United States
  • W-8IMY – non-US intermediary, non-US flow-through entity, or non-US trust
  • W-8EXP – non-US government, international organizations, non-US central banks of issue, non-US tax-exempt organizations, non-US private foundations, or governments of US possessions

IMPORTANT NOTE:

The outline provided above is not intended to be exhaustive and is not warranted or guaranteed by ARGUS as to its completeness or accuracy. For assistance with selecting and completing the tax Form applicable to you, please consult a qualified tax professional.

Will ARGUS withhold taxes on my account?

Under the new FATCA regulations, withholdable payments do not include foreign exchange payments. Although gains on foreign exchange contracts are generally reported to the IRS as gross proceeds, FATCA regulations appear to apply to proceeds from the sale or disposition of property capable of producing interest or dividends from sources within the United States. Of note, this is subject to change if FATCA regulations are amended or revised. Please consult a qualified tax professional for additional assistance.

What is an Intergovernmental Agreement or IGA?

An Intergovernmental Agreement (IGA) is a bilateral agreement between the U.S. government and a country’s tax authority that facilitates compliance with FATCA. More than 50 countries are currently negotiating an IGA. Please visit the following webpage for further information in regards to the signing of Model 1 IGA between Cyprus and US Treasury http://www.cfa.org.cy/index.php?option=com_content&view=article&id=118:cyprus-signing-a-model-1-iga-with-us-treasury-fatca&catid=1:latest-news&Itemid=41

  • In countries with a Model 1 IGA, FFIs will comply under local legislation and report to their local tax authority; in turn, the local tax authority will exchange information with IRS.
  • In countries with a Model 2 IGA, FFIs will comply with local legislation to enter into agreements with, and report directly to the IRS.

What is the timeline for FATCA?

ARGUS is carefully analyzing the final regulations and IGAs. Global compliance started from July 1, 2014. ARGUS is in the process of updating the clients that are impacted by FATCA.

Where can I find more information about FATCA?

The IRS website (http://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-FATCA) offers additional information regarding FATCA compliance. You may also reference the US Department of the Treasury website (http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx) for supplementary information on IGAs.