The Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (FATCA) is a US law aimed at foreign financial institutions (FFIs) and other financial intermediaries to prevent tax evasion by US citizens and residents through use of offshore accounts. The FATCA provisions were included in the HIRE Act, which was signed into US law on 18 March 2010.
FATCA will have a far-reaching impact on US-based companies as well as foreign companies with US assets or clients. Under the new provisions, a FFI may enter into an agreement with US tax authorities (a.k.a. the Internal Revenue Service, or IRS) requiring it, among other things, to report information on the FFI's US accounts. A FFI that enters into such an agreement becomes a "participating FFI."
If a FFI does not enter into an agreement with the IRS, all relevant US-sourced payments, such as dividends and interest paid by US corporations, will be subject to a 30% withholding tax. The same 30% withholding tax will also apply to gross sale proceeds from the sale of relevant US property.
All FFIs must comply with FATCA or be subject to withholding. Given the significant lead times large companies may need to comply with FATCA requirements — particularly for IT system changes — financial leaders are strongly encouraged to act now.
Find out more about FATCA by visiting the FATCA section on our Global website.
Grand-Ducal Regulation announcing the list of CRS Reportable Jurisdictions
Publication of the Luxembourg list of reportable jurisdiction for automatic exchange of information
Luxembourg ECHA 4 Circular published on 6 February 2017
On 6 February 2017, the Luxembourg Tax Authorities issued the ECHA4 Circular (Circulaire numéro 4 pour l’échange automatique de renseignements à des fins fiscales). This Circular provides the Luxembourg requirements regarding the process and the format of the automatic exchange of information to be followed by Luxembourg Reporting Financial Institutions in the context of the Common Reporting Standard Law.
FATCA ECHA3 Circular update published on 19 January 2017
This Circular provides the 2017 updated Luxembourg requirements regarding the format of the automatic exchange of information between Luxembourg and the United States of America
Tax Form Validator (TFV) can streamline the tax form validation process for IRS Tax Forms W-8 and W-9 and their substitutes
Web-based and user-friendly, the TFV helps operations personnel efficiently validate forms based on up-to-date regulatory interpretation.
FATCA In-country Reporting Submission Tool (FIRST) developed for clients
FIRST is a light-touch Foreign Account Tax Compliance Act (FATCA) reporting tool, designed to provide a secure place to capture and collate the information required to be reported under Internal Revenue Service (IRS) or Intergovernmental Authority (IGA) regulations in 2015. FIRST is designed to support low-volume reporting requirements, on both individuals and entities.
FATCA: what insurance brokers need to think about
While most of the focus of FATCA (and the accompanying Intergovernmental Agreements (IGAs) between the US and certain FATCA partner nations) has been on financial accounts maintained at banks, custodians, asset managers, and life insurance companies, FATCA also has an effect on persons paying premiums to US and non US insurance and reinsurance companies and brokers to purchase insurance and reinsurance of US risks.
FATCA, data protection and general insurance companies
Summary of key issues discussed on 11 November 2014 seminar on the topic of data protection issues for general insurers.
Significant developments in the global automatic exchange of information
Two recent events illustrate significant development in the global automatic exchange of taxpayer information arena.
Council of the European Union agrees to extend the automatic exchange of information
On 14 October 2014, the Economic and Financial Affairs Council (ECOFIN), a configuration of the Council of Europe which is made up of the economics and finance ministers from all European Union (EU) Member States and relevant European Commissioners, agreed1 on a draft EU Directive extending the scope for the mandatory automatic exchange of information between tax administrations.
IRS updates procedures for withholding foreign partnerships and withholding foreign trusts; coordinates rules with FATCA
The IRS has issued updated procedures [Revenue Procedure 2014-47, 2014-35 IRB 1 (released and effective 8 August 2014)] for “withholding foreign partnerships” (WPs) and “withholding foreign trusts” (WTs) that elect to assume certain US withholding tax responsibilities.
OECD issues Standard for Automatic Exchange of Information in Tax Matters
On 21 July 2014, the Organisation for Economic Co-operation and Development (OECD) published the Standard for Automatic Exchange of Information in Tax Matters (the Standard).
OECD publishes Standard for Automatic Exchange of Financial Information in Tax Matters
On 21 July 2014, the Organisation for Economic Co-operation and Development (OECD) published the first edition of the Standard for Automatic Exchange of Financial Account Information in Tax Matters (The Standard).
Australia releases discussion paper Common Reporting Standard for the automatic exchange of tax information for comment
On 19 June 2014, the Australian Treasury released a discussion paper (DP) Common Reporting Standard for the automatic exchange of tax information for comment.