FATCA
FATCA: the US challenge
In March 2010, a new law against tax evasion, the Foreign Account Tax Compliance Act, or FATCA, was enacted in the US, aiming to reinforce the existing Qualified Intermediary (QI) provision which has been in place since 2001 and enable the US tax authorities (IRS) to gather information concerning US taxpayers who currently escape the QI provision.
This law will become effective for all payments made as from 1 January 2013 and enhances the current system. The current system is distinctive in that it relies on a network of foreign financial intermediaries that have signed a “qualified intermediary” contract with the IRS, under which they commit to disclosing their US clients to the IRS. In return, they are not required to disclose their non-US clients and may apply reduced rates of withholding tax to such clients. Societe Generale, as the majority of European banking institutions, is a qualified intermediary.
Under FATCA, foreign financial intermediaries (FFI) wishing to continue to hold accounts belonging to US clients and/or to access the US market must either sign a new agreement with the IRS or apply a punitive 30% withholding tax rate on all US-sourced payments as well as income from disposals that generate US-sourced income. If the new agreement is not signed, all clients (US or non-US) of the FFI receiving payments coming from a US source will be penalised.
Demystifying FATCA Videos
Societe Generale experts on FATCA and Gerard Laures, Chairman of the ALFI FATCA working group, discuss with Pascal Bérichel, Head of SGSS Fund Distribution Services, and address the impacts of the new regulation on financial industry players.
