FATCA

What will change for clients

Intermediaries that sign this new agreement with the IRS (Participating FFIs or ‘PFFIs’) must comply with strict rules regarding their clients’ identification.  Indeed, under FATCA, such identification is based on a negative presumption. All clients are considered to be US clients unless evidence to the contrary is presented to the US authorities.

PFFIs must conduct a full documentation review relating to all their existing and new clients in order to ensure that both US individuals and entities have been properly identified.  Indicators of “Americanness” must be searched in the data recorded in their systems, based on criteria defined by the IRS.  Any client presenting one of these indicators must either be declared as a US client or prove that he is not a US client.  

Clients refusing to be disclosed will be classed as recalcitrant and will be subject to the 30% withholding tax rate on US-sourced payments and income from disposals that generate US-sourced income and will ultimately be required to close their accounts.

Entities (other than individuals) must be classed as US persons, FFI or Non-Foreign Financial Entities (‘NFFE).  Note that Collective investment vehicles or CIV are defined as FFIs and are therefore subject to the applicable regulations.  Asset management associations such as the AFG in France or the EFAMA at a European level are lobbying strongly for the exclusion of CIV from the provisions. 

For US clients, specific detailed reporting must be submitted to the IRS and the balances of their accounts must be declared.

+ Actions taken by SGSS