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

• 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 (1)

FFI Participation Options(2)

Implications

Requirements PFFI(no IGA) Model 1 * Model 2

Sign Agreement with IRS Yes No** Yes Report Data as per FATCA Regs Yes Yes Yes Report direct to IRS or to Own Government IRS Own Govt. IRS Comply with FATCA Regs or Model Agreement only FATCA Regs Model Agreement FATCA Regs Comply with local Regs re: confidentiality / waivers Yes No Yes Withhold as per Regs Yes Limited (NPFFIs) Limited (NPFFIs) Report Recalcitrant Accounts Aggregate Individually (if suspect) Aggregate Close Recalcitrant Accounts Yes 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

Requirements PFFI(no IGA) Model 1 * Model 2

Sign Agreement with IRS Yes No** Yes Report Data as per FATCA Regs Yes Yes Yes Report direct to IRS or to Own Government IRS Own Govt. IRS Comply with FATCA Regs or Model Agreement only FATCA Regs Model Agreement FATCA Regs Comply with local Regs re: confidentiality / waivers Yes No Yes Withhold as per Regs Yes Limited (NPFFIs) Limited (NPFFIs) Report Recalcitrant Accounts Aggregate Individually (if suspect) Aggregate Close Recalcitrant Accounts Yes No No

B

PFFI (No IGA)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

➔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

• 2. DCFFI

Bank Implementation Implications

➔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)
• 3. DCFFI

Bank Implementation Implications

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

➔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

• 1. Management Commitment & Policies

➔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 3rd 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

• 2. Organizational / HR Commitment

➔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

• 3. Adopt FATCA U.S. Indicia into KYC

➔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

• 4. Due Diligence

➔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

• 5. Reporting (Electronic)

➔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

• 6. Withholding

➔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

• 7. Refunds

➔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

PFFI Requirements

• 8. Record Maintenance and Retention

D

Chronology – Events & Implementation Dates

Activity Event Due Date

FATCA Regulations and FFI Agreements

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

• r effective date of FFI

Agreement if signed after January 1, 2014

FATCA Chronology (1)

Events and Implementation Dates

FATCA Chronology (2)

Events and Implementation Dates

Activity Event Due Date

FFI and US Account Due Diligence and Documentation for Pre Existing Accounts

Note that any accounts that you have not been able to Identify and Document by the Due Dates should be considered and treated as Recalcitrant Accounts. Identify and Document all Prima Facie FFI Accounts (Participating, Exempt, or any other FFI Accounts) The later of June 30, 2014 or 6 months after FFI agreement effective date Identify and Document all Entity accounts (non Prima Facie FFIs) The later of December 31, 2015 or 2 years after FFI agreement effective date Identify and Document all US Private Banking (Individual) High Value Accounts ($ 500,000 or more) The later of December 31, 2014 or 1 year after FFI agreement effective date Identify and Document all US Private Banking (Individual) Other Than High Value Accounts (less than $ 500,000) The later of December 31, 2015 or 2 years after FFI agreement effective date

FATCA Chronology (3)

Events and Implementation Dates

Activity Event Due Date

Reporting to the IRS

Reporting of Identified US Accounts; Account Name, Address, Number, US TIN, and 2013 and 2014 Year End / closing balances and any Account Closures during the reported years. Reporting will be due latest by March 31, 2015 for the activity with respect to 2013 and 2014 (from the effective date of FFI Agreement) Reporting of Identified US Accounts; Account Name, Address, Number, US TIN, and 2015 Year End / closing balance and Income amounts Reporting will be due latest by March 31, 2016 for the activity with respect to 2015 Reporting of all US Accounts as above but including all gross proceeds as well Enhanced Reporting with Gross Proceed Amounts commences in 2018 with respect to 2017 activity for any sale or disposition

• ccurring after December 31,

2016. Reporting of Recalcitrant US Account Holders Report with other account reporting above as the due dates for documentation and due diligence in previous slide materialize and you have not been able to comply.

FATCA Chronology (4)

Events and Implementation Dates

Activity Event Due Date

Withholding

Withholding Begins on US Source Withholdable Payments (including FDAP) From January 1, 2014 Withholding Begins on Gross Proceeds from any sale or other disposition occurring after December 31, 2016 From January 1, 2017 Enhance Withholding to include all Foreign Passthrus See Note Notes:

• Once a particular account has been documented (i.e. a U.S. account or a non participating FFI)

withholding and reporting for that account must commence even though it may be before the deadlines Stated.

• Filing of Definition of Foreign Passthru Payment with Federal Register will further define

dates for certain Grandfathered Obligations. Additional Clarification is expected on PFFI withholding responsibilities when final regulations are published.

E

FATCA Consequences

• f Non-Compliance

➔Already Covered Withholding / Correspondent Banking Relations and Isolation ➔Practical Consideration of flows coming from the US that may be withheld (even if no US Beneficial Owner) Examples:

• Interbank US Flows (Bene-Deduct)
• US Corporate Vendor Accounts

FATCA Consequences of Non-Compliance

To You: Banks & Financial Institutions

➔Banks will be reporting on their accounts to the IRS

• Serious Penalties and Incarceration are involved
• OVDP program can help them to achieve compliance

before the IRS starts investigation

• They need to consult a Licensed U.S. International Tax Attorney

and Certified Public Accountant

• They need to be careful not to use advisors

who supported them during non compliant years

FATCA Consequences of Non-Compliance

To Your customers: Individuals & Entities

➔KYC becomes Know and Keep Your Customer ➔Foreign MNCs will see your transparency as a plus ➔Transparency will help you strengthen your Correspondent Banking ➔Strengthens your AML /ATF ➔Minimizes your risks

FATCA Consequences of Non-Compliance

Turn FATCA Compliance to your advantage

F

FATCA Implementation Project And Challenges

Overview

Initial Scoping and Impact Assessment Strategic Decisions Project Initiation & Execution Ongoing FATCA Program Key Challenges

➔Business Units ➔Local Countries/ Laws / Agreements ➔Business Lines ➔Affected Clients / Volume ➔Available Data / Gap ➔Affected transaction Flows (including Passthru) ➔Technology Gap (ID / Aggregation) ➔Available Options ➔Report

FATCA Implementation Guidelines

• 1. Initial Scoping and Impact Assessment

➔Participation Options ➔Organizational and Business Adjustments ➔Roles and Responsibilities ➔Human and Technical Resource Requirements

• Internal
• External

➔Budget ➔Policy Communication and Empowerment

FATCA Implementation Guidelines

• 2. Strategic Decisions

➔Project Team Kick Off ➔Communication of Roles and Responsibilities

• FATCA Committee / RO/ POCs /ATP

➔Internal Training ➔FFI Agreement ➔Systems / Technology solution and implementation ➔Develop New Account Opening (KYC) Procedures ➔Plan and Execution of Due Diligence ➔Develop and Implement new Reporting, Withholding Documentation and Retention procedures ➔Policy for Discrepancy Resolution ➔External Communication (Clients/ Corrbanks)

FATCA Implementation Guidelines

• 3. Project Initiation and Execution

➔Incorporate all new policies and procedures

• FFI Documentation
• Ongoing Training Requirements
• Internal Controls
• Audits
• Management Oversight

FATCA Implementation Guidelines

• 4. Ongoing FATCA Program

➔Timing – Need to start now ➔Key to Identify your Local Authority Intentions ➔Work Around Local Law / Pending Agreements ➔Develop New Mind Set / Culture/ Education Needed on new risks/ focus and targets ➔IRS Chapter 4 Regulations

• Hard to Understand
• Build upon and refers to other chapters
• Multidisciplinary team required
• Banking / International Tax (U.S. Tax Specialty a must) /

Legal / IT / Ops

• Resources and Commitment

FATCA Implementation Guidelines

• 5. Key Challenges

Questions & Answers Thank you Closure