US update

40 Pages·2016·1.96 MB·English

Spotlight on the US
Christopher Brown
US Tax Desk, KPMG In the UK
—
24 June 2016
Agenda
1 FATCA: An overview
2 Definition of FIs under FATCA
3 FATCA reportable accounts and account holders
4 Remediation
5 Onboarding
6 Reporting
7 Withholding
8 Federal excise tax developments
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In t2e0rn1a6t iKoPnaMl.G K IPnMteGrn aIntitoenrnaal tCioonoapl epraotvividee (s“K nPoM cGlie Inntt seernrvaitcioensa. Nl”)o, am Sewmibsesr e fnirtmity h. aMse amnbye ar ufitrhmosri toyf ttoh eo bKliPgMatGe onre btwinodr kK oPfM inGd eInptenrndaetniot nfiarml osr aarney a offtihlieart emde wmitbhe Kr PfirMmG v is-à-vis 2
third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
FATCA:
An overview
Background to FATCA
The Foreign Account Tax Compliance Act (‘FATCA’) was enacted on 18 March 2010
The Law The Impacted The Penalty
1 2 3
FATCA introduces a regulatory FATCA impacts: FATCA imposes a 30% withholding tax
compliance and reporting regime which on ‘withholdable payments’ (and, in the
— US payors and withholding agents
compels certain foreign entities future, ‘passthru payments’) made to
(including insurance companies) to — Foreign entities and FIs that receive non-participating ‘Foreign Financial
identify and disclose US persons US sourced payments or that are in Institutions’ (‘NPFFIs’) and ‘recalcitrant’
with offshore ‘financial accounts’ countries that have an agreement to accountholders
implement FATCA
Withholdable payments are US sourced:
— US persons with offshore assets and
— Interest, dividends and similar
accounts
income (‘FDAP’)
— Insurance and reinsurance
premiums*
* Treas. Reg. Section 1.1473-1(a)(4)(iii)
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In t2e0rn1a6t iKoPnaMl.G K IPnMteGrn aIntitoenrnaal tCioonoapl epraotvividee (s“K nPoM cGlie Inntt seernrvaitcioensa. Nl”)o, am Sewmibsesr e fnirtmity h. aMse amnbye ar ufitrhmosri toyf ttoh eo bKliPgMatGe onre btwinodr kK oPfM inGd eInptenrndaetniot nfiarml osr aarney a offtihlieart emde wmitbhe Kr PfirMmG v is-à-vis 4
third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The three FATCA Regimes
FATCA Regulations Model 1 IGA Model 2 IGA
— Default rules for jurisdiction that has — Any FFI that is resident in a Model 1 — FFIs will be required to implement
not entered into a Model 1 or IGA partner country will be FATCA as prescribed by the
Model 2 Intergovernmental governed by the terms of the FATCA Regulations, except to the
Agreement (‘IGA’), whether signed Model 1 IGA in effect with that extent expressly modified by the
or in substance country and implementing laws, relevant IGA
— A US Withholding Agent (‘USWA’) regulations and Guidance Notes — Each reporting model 2 FFI should
or any Foreign Financial Institution adopted by that country also register with the IRS directly,
(‘FFI’) that is not resident (or branch — Each Reporting Model 1 FI and will be required to follow the
that is not located) in any country (as defined by its IGA) must comply terms of the FFI Agreement
with which the US has entered into with the registration requirements — FFIs will seek consent from
an IGA will be subject to the final of the Model 1 IGA presumed US pre-existing account
US Treasury regulations which holders to supply information to
have been issued under FATCA the IRS
(‘FATCA Regulations’)
— Where consent is not granted, the
— FFIs will enter into agreements FFI will provide aggregate
(‘FFI Agreements’) with the Internal information to the IRS with respect
Revenue Services (‘IRS’) to agree to non-consenting account holders
to perform due diligence,
— The IRS may then make further
withholding and reporting
information requests to the Model 2
IGA partner country’s government
based on the aggregate information
— For all new accounts, consent must
be granted before an account can
be opened
For IGAs in effect see the US Treasury website: https://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx
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In t2e0rn1a6t iKoPnaMl.G K IPnMteGrn aIntitoenrnaal tCioonoapl epraotvividee (s“K nPoM cGlie Inntt seernrvaitcioensa. Nl”)o, am Sewmibsesr e fnirtmity h. aMse amnbye ar ufitrhmosri toyf ttoh eo bKliPgMatGe onre btwinodr kK oPfM inGd eInptenrndaetniot nfiarml osr aarney a offtihlieart emde wmitbhe Kr PfirMmG v is-à-vis 5
third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Exchanging and reporting flows
Country B
AC
HcACo
HocAcCou
HloAcdCoun
HoulAocedountolnocuOrcdeuntyltouncrdret nt yuhnortBret yneturCr irtCne st ’ Insurance
Co
Common Reporting Holders
 
Standard
U.S.
Account Country A
Holder
 
Account
 U.S. U.S. Bank
Holder

U.S.
Account Country B
Holder
 
Common Reporting
Other Insurance
Standard Countries’ Co
Account  Model 1 IGA reporting
OtherH olders  Model 1 IGA exchanges
Countries
 Leveraging on Model 1 IGA implementation to develop
Account
standardised automatic exchange in a multilateral context
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In t2e0rn1a6t iKoPnaMl.G K IPnMteGrn aIntitoenrnaal tCioonoapl epraotvividee (s“K nPoM cGlie Inntt seernrvaitcioensa. Nl”)o, am Sewmibsesr e fnirtmity h. aMse amnbye ar ufitrhmosri toyf ttoh eo bKliPgMatGe onre btwinodr kK oPfM inGd eInptenrndaetniot nfiarml osr aarney a offtihlieart emde wmitbhe Kr PfirMmG v is-à-vis 6
third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The close deadlines for
entities to be compliant
Timeline and key milestones across both FATCA and the
CRS are stretching
30 September 2015 organizational resources. The
22 December 2014 Competent Authority must provide lack of clear guidance across
Last date for Model 1 IGA required information to the IRS for 2014 many jurisdictions makes
FIs to register with the (FI reporting deadlines vary by country) building systemic solutions
IRS to ensure inclusion on 30 June 2016 to meet these deadlines a
initial FFI List of 2015 Complete due diligence for pre- 30 September 2017 significant challenge
T1r Jeuatl ya c2c0o1u4nts opened on or D1 eJaadnliunaer yfo 2r 0R1e5p orting eanxids tpinreg- eloxwisetirn-vga eluneti tayc accocuonutsn ts ptChroeom vIiRpdeSet erfeonqrt u2Ai0rue1td6h oi(nFrifIto yrre mmpaoutrsitotin ng t o
after this date as new Model 1 IGA FI to provide 30 September 2016 deadlines vary by country)
accounts (for many upstream withholding Competent Authority
jurisdictions this applies only agent with GIIN must provide required
for individuals) information for the IRS 30 September 2018
3
dC
eix0oli mgsJetupinnlcegeet h e 2fi go0dhr1u 5epv raelu- e fdcRooeerua p2dno0ltrir1ntyi5en) sg( F voIa fr refyop broeyri tging Cptdhreooeamv dIiRpldineSeet erfsoen qrvt ua2Ari0ryue1 tbd7hy oi( nFrcifIoto yrure mnmptaoruytrsi)totin ng t o
individual accounts reportable amounts to
NPFFIs begins
2014 2015 2016 2017 2018
29 October 2014 31 December 2016
C5
A
tho1oge irmmC eMoeppumuelenlttemtilrnaiet ,ens Acrt a usotlithm ghenom rCoiitRntyt Si tnog Cc1eoa RJurSlanyn tgaruoidea-oslripvyte e2 dr0 a1t6e for dhEtoialg ircghlyoe v mnaacdpleuole epft oteaerc rdp ccuroeoeu-u nentxtsirsietisng 1CW RJaSavn egu o2a- lcrivyoe u2 nd0ta1rti7es for C(
vSeinFaeRfIro pySlryret mb epaymxoad crtocbtihopineanutgner n b gr2td erec0eyg o1)aoiun7dfn slit nrfeioesrs 3Wtdeaoc1ixl iaci cgsDvooeteueimn nc2cgptee slchme ofitgobuehren dprtvru rai2eel0u-s 1e 7 CifcSnooeRfruo pSWnrt mteramxiavectesbiho e2a(nFnr I bg 2e0g 1oin7f s
reporting deadlines
30 December 2017 vary by country)
Early adopter countries to 31 December 2018
complete due diligence for pre- Wave 2 countries to complete
Model 1 IGA CRS Wave 1 (“early adopter”) countries CRS Wave 2 countries eanxids tpinreg- eloxwisetirn-vga eluneti tayc accocuonutsn ts
ldouwee dr-ilvigaelunec eac fcoor upnrtes- eaxnisdt ipnrge -
Source: KPMG International illustration existing entity accounts
The short timeline presents significant operational challenges to timely compliance.
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In t2e0rn1a6t iKoPnaMl.G K IPnMteGrn aIntitoenrnaal tCioonoapl epraotvividee (s“K nPoM cGlie Inntt seernrvaitcioensa. Nl”)o, am Sewmibsesr e fnirtmity h. aMse amnbye ar ufitrhmosri toyf ttoh eo bKliPgMatGe onre btwinodr kK oPfM inGd eInptenrndaetniot nfiarml osr aarney a offtihlieart emde wmitbhe Kr PfirMmG v is-à-vis 7
third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Definition of FIs
under FATCA
Definition of FIs under FATCA
Definitions of FFIs and NFFEs under Intergovernmental Agreement (‘IGAs’) (subject to local implementation rules):
FFIs under FATCA Not FFIs under FATCA
Insurance Companies
Depository
Institution Insurance Holding Companies
Banks
CISnopsmueprcaaifnnieciedes FFIs ICnusstitoudtioianl Securities Brokers NFFEs(a)
Asset Managers
Funds
Investment Trustees
Entity
Financial Holding Companies
Private Equity Companies
Note: (a) For entities that do not fall under the definitions of FFIs for FATCA purposes, they would generally be categorized as NFFEs. The entities may look further
into the FATCA definitions to distinguish whether they are active or passive NFFEs
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In t2e0rn1a6t iKoPnaMl.G K IPnMteGrn aIntitoenrnaal tCioonoapl epraotvividee (s“K nPoM cGlie Inntt seernrvaitcioensa. Nl”)o, am Sewmibsesr e fnirtmity h. aMse amnbye ar ufitrhmosri toyf ttoh eo bKliPgMatGe onre btwinodr kK oPfM inGd eInptenrndaetniot nfiarml osr aarney a offtihlieart emde wmitbhe Kr PfirMmG v is-à-vis 9
third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Definition of FIs under FATCA (cont.)
— Any entity that is an insurance company that issues, or is obligated to make payments with respect to, a Cash
Specified Value Insurance Contract or Annuity Contract. Also includes the holding company of an insurance company
Insurance
Company — Under the FATCA Regulations, reserving activities of an insurance company will not cause it to be a
Depository Institution, Custodial Institution or Investment Entity
Under the FATCA Regulations, an ‘insurance company’ is an entity or arrangement (1) that is regulated as an insurance business
under the laws, regulations, or practices of any jurisdiction in which the company does business, (2) for which greater than 50% of
gross income in the immediately preceding calendar year is from insurance, reinsurance, and annuity contracts, or (3) for which the
aggregate value of assets associated with insurance, reinsurance, and annuity contracts at any time during the preceding year is
greater than 50% of total assets. The IGA does not define ‘insurance company’ (terms not defined in the IGA should generally be
defined according to the applicable laws of the relevant country)
FATCA Regulations allow insurance companies to attain registered deemed compliant status as ‘local FFIs’ if they do not have a place
of business outside the local country. An insurance company having operations in another location could still be seen as a ‘local FFI’
if such location (1) is not publicly advertised and (2) performs solely administrative support functions (back office functions)
An insurance company that is not a financial institution is a non-financial foreign entity (‘NFFE’)
Depository
— An institution that accepts deposits in the ordinary course of a banking or similar business
Institution
— Any entity that holds financial assets for the account of others as a substantial portion of its business
Custodial
Institution — ‘Substantial’ means that 20% or more of the entity’s gross income is attributable to holding financial assets
and related financial services during specified period of time
— Any entity that conducts as a business for or on behalf of a customer: trading in money market instruments,
foreign currency, foreign exchange, interest rate and index instruments, and other specified financial products;
Investment Entity
managing investment portfolios; and investing, administering, or managing funds or money on behalf of other
persons. Includes any entity that is managed by an Investment Entity
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In t2e0rn1a6t iKoPnaMl.G K IPnMteGrn aIntitoenrnaal tCioonoapl epraotvividee (s“K nPoM cGlie Inntt seernrvaitcioensa. Nl”)o, am Sewmibsesr e fnirtmity h. aMse amnbye ar ufitrhmosri toyf toh eo bKliPgMatGe onre btwinodr kK oPfM inGd eInptenrndaetniot nfiarml osr arney a offtihlieart emde wmitbhe Kr PfirMmG v is-à-vis 10
third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.