Monday, October 21, 2013

The Foreign Account Tax Compliance Act (FATCA) Its Impact on Corporate Agents and Trustee Services

The US has in recent years stepped up its initiatives to counter tax evasion and as part of this effort has introduced the FATCA statute. Although the primary purpose of FATCA is prevention and detection of tax evasion by US persons, it will have a significant impact across financial markets and affect non-US companies and individuals. 
In particular, FATCA will require that financial institutions, investment funds and global providers of corporate and trustee services continuously screen their client databases for US beneficial ownership as well as to classify and document clients’ entities as to their FATCA status.

FATCA establishes various procedures for validation of beneficial ownership which should be complied with by participants in the global financial markets. In many cases, these procedures have been further developed by inter-governmental agreements (“IGAs”) that the USA has entered into with foreign countries.

As a practical matter, FATCA will require Corporate Trustees, in addition to their robust client acceptance processes, to introduce specific new compliance procedures dedicated to identifying US persons within its client base, to classify client entities as to their FATCA status and to annually report findings of US persons.

This will have a significant impact on all international clients even if they are not US persons or not investing in the US. Whether you are an individual, shareholder/director of a corporation, beneficiary of a trust, a US or non-US person, a fund, a wealth manager, a bank, an insurance company etc., FATCA requires substantial information and documentation to be gathered as part of its registration, identification and reporting processes. 

FATCA will require that Corporate Trustees to identify and document all US beneficial owners of accounts as well as recipients of US source payments.

If the Corporate Agent provides only registered office services to client companies, the Corporate Agent will not be contacting the client in relation to FATCA. However, those clients will have their own responsibility to be FATCA compliant.  

Failure to perform the proper checks and submit the necessary documentation that FATCA requires will result in a 30% withholding tax being imposed on US source income.

The implementation and expansion of FATCA means that Corporate Agents will require new documentation from their clientele worldwide. This new information will allow them to properly assist with the registration and reporting of each applicable structure/situation.  

In the upcoming months, Corporate Agents/ Trustees will reach out to clients to highlight the specific information that is required for FATCA.

Need FATCA Help?

Contact the Tax Lawyers
of Marini & Associates, P.A.
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243end_of_the_skype_highlighting).   



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