The U.S.A.’s Foreign Account Tax Compliance Act (FATCA) was introduced in October 2009.
FATCA adds a new chapter to the Internal Revenue Code (Chapter 4) aimed at addressing perceived tax abuse by U.S. persons through the use of offshore accounts. The new rules require Foreign Financial Institutions (FFI) to provide the U.S. Internal Revenue Service (IRS) with information on certain U.S. persons invested in accounts outside of the U.S.A. and for certain non-U.S. entities to provide information about any U.S. owners.
While the primary goal of FATCA is to gain information about U.S. persons, FATCA imposes a punitive withholding tax where the applicable documentation and reporting requirements are not met.
Scope of FATCA
FATCA is far-reaching and can impact any U.S. or foreign persons, to the extent that they are involved in making or receiving payments that fall within the scope of FATCA. While FATCA certainly affects U.S. withholding agents and U.S. multinational companies, the greatest impact will likely be to FFIs.
FATCA requirements are defined in the Final Regulations that were published by the U.S. Treasury Department and the IRS on 17 January 2013. In addition, for entities incorporated in countries entering into an intergovernmental agreement with the U.S.A., these requirements are reviewed and alleviated as stipulated in the agreement.
Both Clearstream Banking S.A. (CBL) and Clearstream Banking AG (CBF) are recognised as being FATCA compliant under FATCA regulations, as both entities are incorporated in countries (Luxembourg and Germany respectively) that have signed a Model I IGA with the U.S.A. In addition, both entities have been registered on the IRS FATCA portal as 'Registered Deemed Compliant FFI - Model I Reporting FI' and allocated Global Intermediary Identification Numbers (GIINs), as follows:
Clearstream Banking S.A.: N1V1GJ.00000.LE.442
Clearstream Banking AG: N1V1GJ.00002.ME.276
As registration was performed before 5 May 2014, our GIINs have been included in the first list of FATCA-compliant financial institutions published by the IRS on 2 June 2014.
The CBL and CBF FATCA self-certification forms can be found below in the Attachments section.
Clearstream as service provider
In addition to Clearstream’s Qualified Intermediary role, acting as primary non-resident alien (NRA) and back-up withholding agent with 1042 /1099 reporting obligations, both the ICSD and CSD are FATCA compliant Model I Reporting FIs, thereby endorsing FATCA withholding and reporting obligations.
This means that, if a customer is FATCA compliant but does not endorse primary NRA withholding responsibilities, thereby electing to be withheld upon under FATCA, Clearstream will assume this withholding responsibility on the customer’s behalf and perform the withholding on U.S. source payments, according to the customer’s instructions.
The FATCA regime has been incorporated in the service that we provide for the Qualified Intermediary (QI) regime with the objective to keep the structure and the service as close as possible to the offering familiar to our customers.
We do ask customers to provide us with a new Withholding Statement that will incorporate their FATCA status and confirm the account structure, as well as a new W-8/W-9 as applicable.
For customers that hold securities for FATCA non-compliant owners and do not endorse primary withholding responsibility we offer the possibility to hold these positions on an omnibus account.
The detailed service offering and related requirements / procedures are described in the Announcements A14071 dated 16 May 2014, and A15030, 6 February 2015.
To further assist customers, we have developed a 'FATCA flag' in our U.S. securities master file, thereby distinguishing the FATCA grandfathered obligations (FATCA flag set to NO) from others (FATCA flag set to YES). It is accessible in the Codelist Securities Database (registration on the Clearstream website and login required - Premium users only).
In addition, we are actively involved with both international and domestic market participants to set up a procedure ensuring that the information of a “substantial material change” that would cancel the grandfathered provision of the obligation, will be provided by the issuer (or its agent) of the obligation; and transmitted through the chain of intermediaries down to us and, via notification, on to the customer.
We are taking all necessary measures to ensure that all our upstream agents and depositories will meet their obligations under FATCA within the deadlines.
Impact at issuance level
FATCA also contains new requirements in Section 502 of the Internal Revenue Code applicable to issuers subject to U.S. tax law. The amendments to Section 502 repeal the relevant tax exemptions that were granted for foreign-targeted bearer bonds by the Tax Equity and Fiscal Responsibility Act (TEFRA) in 1982.
For further detailed information, please refer to the ' Operating Guidelines ' jointly issued by Clearstream, Euroclear and the International Capital Market Services Association (ICMSA).