FATCA Detailed Implementation Stanley Foodman CEO Foodman CPAs - PowerPoint PPT Presentation

FATCA Detailed Implementation

Stanley Foodman CEO Foodman CPAs & Advisors Stanley Foodman is CEO of Foodman CPAs & Advisors. Mr. Foodman specializes in international and domestic tax matters including tax compliance and tax controversies with the IRS. Mr. Foodman uses his extensive experience as a forensic accountant and reputation as an expert witness to represent clients in resolving their tax compliance matters, entering the voluntary disclosure program and tax controversies. Mr. Foodman along with his team of accountants also represent clients with a full range of accounting matters including compliance, voluntary disclosure, corporate and individual taxation, estate and trust tax and wealth planning. Foodman CPAs & Advisors consistently rank as one of the top accounting firms in South Florida. Foodman CPAs & Advisors represent individuals and businesses from around the world including the United States, Latin America, Europe and the Middle East. T: 1(305) 365-1111 E: stanley@foodmanpa.com

Agenda Session – Detailed FATCA Implementation Bank Participation Options Bank Implementation Implications PFFI Detailed Requirements • Management Commitment and Policies • Organizational & Technical Commitment • FATCA Indicia in KYC • Due Diligence • Reporting • Withholding • Refunds • Record Maintenance and Retention FATCA Chronology Concluding Consequences of Non-Compliance The FATCA Implementation Project / Challenges

A Bank Participation Options

FFI Participation Options (1) • IGA Model 1 Participating FFI (Govt. to Govt.) – Model 1 a) Reciprocal – Model 1 b) Non Reciprocal • IGA Model 2 Participating FFI (PFFI to IRS) • Participating FFI (No IGA) (PFFI to IRS) • Exempt / Deemed Compliant – Registered/ Certified/ Owner Documented – Can Include Exempt FFIs Under Model 1 or 2 Agreement, Sponsored FFIs and Government Banks (not competing in private sectors)

FFI Participation Options(2) Implications Requirements Requirements PFFI(no IGA) PFFI(no IGA) Model 1 * Model 1 * Model 2 Model 2 Sign Agreement with IRS Sign Agreement with IRS Yes Yes No** No** Yes Yes Report Data as per FATCA Regs Report Data as per FATCA Regs Yes Yes Yes Yes Yes Yes Report direct to IRS or to Own Report direct to IRS or to Own IRS IRS Own Govt. Own Govt. IRS IRS Government Government Comply with FATCA Regs or Comply with FATCA Regs or FATCA Regs FATCA Regs Model Model FATCA Regs FATCA Regs Model Agreement only Model Agreement only Agreement Agreement Comply with local Regs re: Comply with local Regs re: Yes Yes No No Yes Yes confidentiality / waivers confidentiality / waivers Withhold as per Regs Withhold as per Regs Yes Yes Limited Limited Limited Limited (NPFFIs) (NPFFIs) (NPFFIs) (NPFFIs) Report Recalcitrant Accounts Report Recalcitrant Accounts Aggregate Aggregate Individually Individually Aggregate Aggregate (if suspect) (if suspect) Close Recalcitrant Accounts Close Recalcitrant Accounts Yes Yes No No No No • * Reciprocal Version Model 1(a) affects USFIs; Model 1 (b) is Non-Reciprocal • ** Model 1 FFIs will register/ or be registered in IRS Portal to get GIIN Number

B PFFI (No IGA)Implementation Implications

Bank Implementation Implications 1. PFFI – Most Banks ➔ Sign Agreement with IRS by January 1, 2014 ➔ Agree to :  Carry Out FATCA Due Diligence on Existing Accounts  Set up new FATCA Account Identification Procedures  Report annually to IRS (or your government) on U.S. owned accounts  Obtain waivers where needed  Withhold as needed  Report Recalcitrant Account Holders  Close accounts as necessary  Strong Commitment of Cooperation to IRS and no assistance to clients on evasion (August 2011)  Provide IRS with additional information as requested

Bank Implementation Implications 2. DCFFI ➔ Three Categories  Registered (Can include Model exemptions/Sponsored/Govt  Certified  Owner Documented ➔ Registered  Meet Detailed Requirements  Agree to Conditions and Register with IRS  Renew the Certification with IRS every three years Examples: – Local FFIs – Non reporting members of FFI groups – Qualified Investment Vehicles – Restricted Funds

Bank Implementation Implications 3. DCFFI ➔ Certified  Certify directly to specific withholding agents (Form w-8) Examples: – Non registering local banks – Retirement Plans – Non Profit Organizations – FFIs with only low value accounts ➔ Owner Documented FFI  Certifies directly to withholding agents and provides all ownership documentation  Not an FI or affiliated to an FI  It does not maintain Financial Accounts  It does not issue debt (in excess of USD 50,000)

C PFFI (No IGA) Detailed Requirements

PFFI Requirements Management Commitment and Policies Organizational & Technical Commitment FATCA Indicia in KYC Due Diligence*  Pre-existing Account  New Accounts Reporting* Withholding* Refunds Record Maintenance and Retention * Dates in Chronology Slide

PFFI Requirements 1. Management Commitment & Policies ➔ Options for registration (FFI individual or combination for EAGs) ➔ IRS Agreement & Certifications ➔ Embed FATCA Commitment and New Focus into Bank Wide Policies; Systems and Internal Testing and Audits ➔ Roles and Responsibilities ➔ Financial Commitment

PFFI Requirements 2. Organizational / HR Commitment ➔ FATCA Responsible Officer (RO) or Officers (ROs)  Completes and signs IRS Registration  Can be assisted with up to 5 Points of Contact (POCs)  Can Authorize 3 rd Party (ATP) ➔ Functional Ownership for FATCA / Reporting Lines ➔ Technology Enhancements ➔ Internal Training ➔ Communication Plan ➔ External Training ➔ Integration to Risk Management and Auditing Plans

PFFI Requirements 3. Adopt FATCA U.S. Indicia into KYC ➔ U.S. ID of Individual or Beneficial Owner  Passport, Green Card, W-9 or other  A U.S. place of birth or incorporation  A U.S. address  A U.S. telephone number  Standing Instructions to transfer funds to U.S.  Power of Attorney / signatory authority to U.S. address or person  “In care of” or “hold” address

PFFI Requirements 4. Due Diligence ➔ Pre-existing account review  Aggregate Balances (Elect to use thresholds)  Exemption Thresholds (Electronic Search) - Individuals - $ 50,000 - Certain Cash Value/ Insurance and Annuity - $250,000 - Entity - $ 250,000  Perform Manual Searches for accounts exceeding $1,000,000

PFFI Requirements 4. Due Diligence ➔ New accounts  Obtain all US Indicia and Documentation at opening  Obtain waivers as applicable  Some exemptions (i.e. PFFI account, exempt NFFEs)

PFFI Requirements 5. Reporting (Electronic) ➔ Phase 1  Account Name  Account Number  Address  U.S. TIN Number  End of Year Balance Include: Recalcitrant Accounts /Payments to NPFFI/ Aggregated Balances and Account Closures ➔ Phase 2 and 3 phase in  Income Amounts (2015 activity)  Gross Proceeds (2017 activity)

PFFI Requirements 6. Withholding ➔ 30% ➔ Grandfathered Obligations outstanding prior to Jan 1 2014 ➔ Phase 1: US Source Withholdable Payments Jan 1, 2014 ➔ Phase 2: Phase in Gross Proceeds Jan 1, 2017 ➔ Including Passthrus to NPFFIs  FFIs are liable for failure to collect  Filing of Definition of a Foreign Passthru Payment with the Federal Register will further define dates for certain Grandfathered Obligations

PFFI Requirements 7. Refunds ➔ Allowed:  PFFI when excess withholding out of own funds  U.S. Beneficial Owner through additional form attached to tax return  Exempt NFFE with submission of documentation ➔ Refunds Not Allowed:  Non Participating FFIs

PFFI Requirements 8. Record Maintenance and Retention ➔ Documentation • US IDs • Withholding Certificates (W9, W8 ben /e or local equivalents) • Beneficial Ownership Certificates • Client communication (including electronic files) • Official Citizenship Renunciation Certificate ➔ Retention – 6 years or more if requested

D Chronology – Events & Implementation Dates

FATCA Chronology (1) Events and Implementation Dates Activity Event Due Date Final FATCA Regulations January 28,2013 FATCA Regulations Published and FFI Agreements Expected Availability of IRS On July 15, 2013 Line FFI Agreement System – Note that an FFI Agreement FATCA Portal signed prior to January 1, Deadline for Timely Filing of December 31, 2013 2014 will still have the Agreements between FFI and IRS effective date of January 1, 2014. Deadline to appear on first IRS October 25, 2013 List of PFFIs which will be published on December 2, 2013 As of this date, all New Account The later of January 1, 2014 Opening Procedures must be or effective date of FFI FATCA Compliant Agreement if signed after January 1, 2014