Latest FATCA Reporting and Withholding Developments for 2013 - PowerPoint PPT Presentation

Presenting a live 110 ‐ minute teleconference with interactive Q&A Latest FATCA Reporting and Withholding Developments for 2013 Navigating Complex Requirements for Reporting Foreign Assets TUES DAY, NOVEMBER 6, 2012 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Daniel L Gottfried Partner Rogin Nassau Hartford Conn Daniel L. Gottfried, Partner, Rogin Nassau , Hartford, Conn. Michael J. Miller, Partner, Roberts & Holland , New Y ork Attendees seeking CPE credit must listen to the audio over the telephone. Please refer to the instructions emailed to registrants for dial-in information. Attendees can still view the presentation slides online. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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FATCA Reporting and Withholding FATCA Reporting and Withholding Requirements T Tuesday, November 6, 2012 d N b 6 2012 Strafford Publications, Inc. These materials are provided for educational and informational purposes only, and are not intended and should not be construed as legal advice. d t i t d d d h ld t b t d l l d i 5

Introduction I. Foreign Account Tax Compliance Act (F ATCA) overview II. F ATCA information reporting - S S ection 6038D ti 6038D - T .D. 9567 - Form 8938 and instructions III. F ATCA withholding, reporting requirements - S ections 1471-1474 - Proposed Regs issued February 8, 2012 - Intergovernmental agreements - Effective dates 6

ATCA OVERVIEW F

Foreign Account Tax Compliance Act (FATCA) March 18, 2010 – Hiring Incentives to Restore Employment  Act (HIRE Act). Act (HIRE Act). Enacted Foreign Account Tax Compliance Act (F ATCA) as an  element of the HIRE Act. F ATCA greatly increases disclosure requirements and  penalties on taxpayers with foreign accounts and assets. F ATCA reporting is in addition to the FBAR requirements. p g q  F ATCA also imposes new withholding regime (in addition to  existing withholding rules). New rules for U.S l f S . payors.  New burdens on foreign financial institutions (FFI) and non-  financial foreign entities (NFFE). g ( ) 8

ATCA INFORMATION REPORTING F

In General S ection 6038D.  Expanded reporting obligations for U S Expanded reporting obligations for U.S . individuals with respect to individuals with respect to   any “ specified foreign financial assets” with aggregate value exceeding $50,000. Reporting for “ specified domestic entities” to come Reporting for specified domestic entities to come.  S pecified foreign financial assets (S FF As) include:  Any financial account maintained by a foreign financial  institution. The following if not held in a financial account:  Any stock or security issued by a non-U.S Any stock or security issued by a non U.S . person. . person.  Any interest in a foreign entity.  Any financial instrument or contract held for investment that  has a non U S iss er or co nter part has a non-U.S . issuer or counter-party. 10

Specified Foreign Financial Assets S FF A reporting much broader than FBAR reporting  Investments in foreign hedge funds, private equity funds and real  estate owned by an entity. estate owned by an entity. Capital or profits interest in foreign partnership.  Notes, bonds, other indebtedness issued by foreign person.  Interest in a foreign trust or estate. I t t i f i t t t t  Interest in foreign pension or deferred compensation plan.  S waps, options, derivatives, etc., with a foreign counterparty.  Not foreign real estate, but …  Not gold in the vault, but …  Narrower, however, in that interest requires beneficial ownership. Narrower however in that “ interest” requires beneficial ownership   Interest in social security, social insurance or similar program sponsored  by a foreign governments is not an S FF A. Note: exception not in regs and not defined Caution! Note: exception not in regs, and not defined. Caution!  11

Source of Rules Regulatory Framework:  Temp. Regs., 1.6038D-1T through -8T (excluding -5T).  T .D. 9567 (76 F .R. 243, 78553 (Dec 19 2011)).  Prop. Regs., 1.6038D-5T (and incorporate Temp Regs by  reference) reference) REG-130302-10 (76 F .R. 243, 78594 (Dec 19 2011)).  Form 8938 and Instructions (November 2011).  12

Interest in SFFA File Form 8938 if taxpayer has an “ interest” in the S FF A.  Taxpayer has interest in S Taxpayer has interest in S FF FF A if any income, gains, loses, A if any income, gains, loses,  deductions, credits, gross proceeds or distributions from the asset would be required to be reported on income tax return. “ Convenience owner” ?  Taxpayer has interest in S FF A owned by disregarded entity or  grantor trust. Jointly owned assets: Jointly owned assets:  Married taxpayers  Joint income tax returns – spouses report S FF As only once.  S S eparate income tax returns – each spouse must report eparate income tax returns – each spouse must report   100% of S FF As. Unmarried taxpayers – each j oint owner must report 100% of  S S FF FF As As. 13

Valuation of SFFA Use value as of December 31 unless that does not reflect reasonable  estimate of maximum value during the year. Rely on periodic account statements unless reason to know that the  statements do not reflect reasonable estimate of maximum value. Valuation of non-public investments.  No appraisal required - “ reasonable estimate” . pp q  Presumption of aggregate value.  Convert foreign currency using FMS rate as of 12/ 31.  Assets with negative value reported at $0. Assets with negative value reported at $0.  Beneficiary of foreign trust reports value of all distributions made  during the year plus value (using 7520 tables) of right to receive mandatory distributions as of the last day of the tax year. y y y Foreign estates, pension and deferred compensation plans are valued  based on the fair market value of the interest in the assets. If unknown, report the value of all distributions made over the year. 14

Reporting Thresholds Living in the U.S .  Unmarried/ separate - more than $50,000 on 12/ 31 or $75,000 at any  ti time during the year. d i g th Married/ j oint – more than $100,000 on 12/ 31 or $150,000 at any time  during the year. Living abroad as defined Living abroad, as defined  Unmarried/ separate - more than $200,000 on 12/ 31 or $300,000 at any  time during the year . Married/ j oint more than $400,000 on 12/ 31 or $600,000 at any time. Married/ j oint – more than $400,000 on 12/ 31 or $600,000 at any time.  “Living abroad” means having a tax home in a foreign country and being a bona  fide resident of foreign country/countries for entire year or at least 330 full days fid id t f f i t / t i f ti t l t 330 f ll d during any 12 consecutive months ending in that tax year. 15