Operational information FATCA

FATCA (Foreign Account Tax Compliance Act) was enacted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act and takes effect on 1 July 2014. The purpose of FATCA is to improve compliance of U.S. taxpayers who have foreign financial assets and offshore accounts.

To enforce compliance, FATCA requires Foreign Financial Institutions (FFIs) to report directly to the U.S. Internal Revenue Service (IRS) information about financial accounts held by U.S. taxpayers (even if they hold only non-U.S. assets), or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

An FFI that refuses to disclose information to the IRS faces a 30% withholding tax on certain U.S. source payments regardless of whether the recipient is a U.S. taxpayer.

To become a Participating FFI, a foreign financial institution enters into an IRS agreement with requirements covering three areas:

1. DOCUMENTATION: Obtain sufficient information on every account holder to identify U.S. accounts, and to comply with verification and due diligence procedures in identifying these accounts.

2. REPORTING: Report annually certain information on U.S. accounts, and comply with requests by the IRS for additional information regarding these accounts.

3. WITHHOLDING: Deduct and withhold 30% from the withholdable payments made to a recalcitrant account holder or a Non-Participating FFI, that is payments that are from:

  • US source FDAP, such as interest and divident payments;
  • Sales and gross proceeds for certain US securities; and
  • Foreign passthru payments (reserved).

Final regulations were published by the U.S. Treasury Department and the IRS on 17 January 2013. The Treasury and the IRS intention is to reduce or eliminate duplicative reporting and to conform, as appropriate the withholding , payee identification and other due diligence rules of Chapters 3 and 61 with rules under Chapter 4. Guidance to coordinate Chapters 3 and 61 with Chapter 4 were published on 21 January 2014.

Further, in order to remove domestic legal impediments to compliance, The U.S.Treasury Department has collaborated with foreign governments to develop Intergovernmental Agreements (IGA) to facilitate the compliance and implementation with the provisions of FATCA in a manner that still fulfills FATCA’s policy objectives and further reduces burdens on FFIs located in partner jurisdictions.

The information given in these pages does not constitute legal or tax advice. It was collected from various sources generally believed to be reliable. Clearstream Banking S.A. (CBL) and Clearstream Banking AG (CBF) believe the information provided here to be correct at the time of publication but disclaims responsibility as to the accuracy and completeness of the information or reference to any information.

Customers or investors should consult professional tax advisers about any tax matters concerning securities deposited with CBL and CBF.

The information in these pages is subject to change without notice and does not represent a commitment on the part of CBL and CBF, or any other entity in the Clearstream group of companies. CBL and CBF, their subsidiaries and affiliates expressly disclaim liability for errors or omissions in this information and materials.