U.S.A.: FATCA: Joint implementation statements by U.S. Treasury, Japan and Switzerland

On 21 June 2012, the U.S. Treasury Department issued two joint statements, with Japan and Switzerland, on the implementation of FATCA. The aim of these statements is to increase legal certainty for affected foreign financial institutions (FFIs) and reduce implementation costs.

Japan and Switzerland have developed, with the U.S. Treasury Department, a new model (Model II) according to which the exchange of information must take place directly between the financial institutions and the U.S. Internal Revenue Service (IRS) rather than via centralised government data gathering.

Background

On 10 February 2012, the U.S. Treasury Department issued a joint statement, with France, Germany, Italy, Spain and the United Kingdom, announcing a first model (Model I) for intergovernmental cooperation for the implementation of FATCA. According to Model I, the reporting by FFIs to their respective governments would be followed by the automatic exchange of this information with the U.S.A.

Model II, offered in the joint statements with Japan and Switzerland, establishes a structure of direct reporting by FFIs to the IRS.

The details of both joint statements will be discussed in the coming month.

Japan

The following facilitation measures are sought under the joint statement of the U.S. Treasury Department and Japan:

• FFIs in Japan should be registered with the IRS and report the following directly to the IRS on an annual basis:
  
  
  • The information on U.S. accounts for which consent is obtained from the U.S. account holders; and
  • The aggregate number and aggregate value of accounts held by recalcitrant account holders.
  
  
• The obligation for each FFI in Japan to enter into a separate comprehensive FFI agreement directly with the IRS would be eliminated, provided that each FFI is registered with the IRS.
  
• FFIs are not obliged to report the names of recalcitrant U.S. clients, make a tax deduction or close the client’s account. The U.S.A. can request administrative assistance concerning such recalcitrant clients by means of group requests.
  
• Certain financial institutions that present a low risk of tax evasion, such as pension funds, should be treated as deemed compliant with FATCA (deemed-compliant FFIs) or exempt from FATCA (exempt FFIs).
  
• Certain other measures should be provided to reduce burdens and simplify the implementation of FATCA.

Switzerland

The following facilitation measures are sought under the joint declaration between the U.S. Treasury Department and Switzerland:

• Certain financial institutions such as social security funds, pension funds and property insurers should be exempt from FATCA (exempt FFIs).
  
• Certain financial institutions that operate primarily on a local or regional basis will be deemed compliant with FATCA (deemed-compliant FFIs).
  
• Financial institutions are not obliged to report the names of recalcitrant U.S. clients, make a tax deduction or close the client's account. The U.S.A. can request administrative assistance concerning such recalcitrant clients by means of group requests.
  
• The easing of other requirements for Swiss financial institutions, for example, regarding the identification of existing clients as U.S. persons.

We will continue to monitor the implementation of FATCA and will provide more information about joint statements as it becomes available.

Further information

For further information, please contact the Clearstream Banking¹ Tax Help Desk on:

or Clearstream Banking Customer Service or your Relationship Officer.

1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in the Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500 (CBF) and Clearstream Banking, société anonyme, registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).