Foreign Account Tax Compliance Act (FATCA)

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FATCA

The Foreign Account Tax Compliance Act (FATCA) came into effect in July 2014 and imposes on all financial institutions, without any consideration of their location, an obligation to report all US and non-compliant account holders and to potentially withhold on all non-compliant account holders.

What is FATCA?

FATCA is a US tax law designed to prevent the use of offshore accounts by US taxpayers to evade US fiscal obligations. FATCA imposes on all non-US financial institutions (or Foreign Financial Institutions (FFIs)), two options: either be compliant or suffer 30 percent withholding tax on US source income.

Switzerland, like most OECD countries, has entered into an agreement with the US to facilitate the implementation of FATCA via a so called Intergovernmental Agreement (IGA) (SR 0.672.933.63), which has been enacted into Swiss law (FATCA law, SR 672.933.6). According to article 5 of the FATCA law, Swiss Financial Institutions must enter into an FFI Agreement with the US federal tax authorities, i.e. the Internal Revenue Service (IRS) and thus, register with the IRS. Once registered, the IRS allocates a specific Global Intermediary Identification Number (GIIN), which identifies the FFI as FATCA compliant towards the IRS and counterparties.

The main obligations of the FFI Agreement are: Frist, report information on US account holders to the IRS on an annual basis electronically using IRS Form 8966. Second, withhold 30 percent on US source income (i.e. dividends, interests, gross proceeds from the sale or disposition of US property) held by non-compliant account holders. Third, reduce the number of its business relationships with non-compliant clients and counterparties. These formal requirements are only the tip of the iceberg and many other consequences result, e.g. client documentation, client notification, counterparty certification, legal term amendments, etc.

Who does FATCA impact?

FATCA impacts the entire financial industry as it might require financial institutions to implement significant changes in policies and procedures to facilitate compliance with FATCA. FIs must establish complex implementation programs capable of running through all business divisions as well as maintain on an ongoing basis procedures that facilitate FATCA compliance. Achieving this necessitates the allocation of dedicated personnel competent in both technical and operational aspects.

Certain financial intermediaries and fiduciaries are less impacted but are nevertheless required to assess their FATCA obligations. Their first duty is to determine their so called “FATCA status” as well as the FATCA status of their clients. Depending upon the outcome, registration with the IRS may be required and withholding and reporting obligation may apply. In all circumstances, they must be prepared to respond to FATCA queries from clients and counterparties.

Finally, companies outside of the financial industry may also receive requests to confirm their FATCA status when opening bank accounts or requesting financing.

How can Deloitte help?

Deloitte offers a broad range of services ranging from assistance in determining a FATCA status of one or more entities to a full implementation program for larger financial institutions.

Our FATCA services

FATCA Workshop

We offer a number of tailored FATCA support packages:

  • Basic FATCA Presentation Package
  • Tailored FATCA Workshop Package
  • Technical FATCA Advisory Package

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Taxparency

A unique software based solution targeted at global financial institutions to enable the responsible officer, project leads, and subject matter experts to more efficiently facilitate their global FATCA, AEOI, or QI compliance.

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Responsible Officer certifications under QI and FATCA

The objective of Deloitte’s framework FATCA compliance program is to provide reporting Swiss FIs with a structured and accessible outline of the duties and responsibilities of the FI and the RO, as well as a template control framework, in order to efficiently guide institutions on FATCA compliance.

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CRS and FATCA online courses

Interested in learning about CRS and FATCA compliance? Deloitte in Switzerland and VisionCompliance are partnering to provide two online courses tailored to relationship managers’ needs.

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FATCA Key Dates

FATCA Key Dates - Review and stay on top of FATCA legislation and milestones

30 June 2014

Effective date of FFI Agreements if signed by 30 June 2014

1 July 2014

Requirement to implement new individual account onboarding procedures for Swiss Reporting FIs

1 July 2014

FATCA withholding on Fixed, Determinable, Annual, Periodical (FDAP) income payments to non-participating FFIs (NPFFIs), non-compliant NFFEs, and recalcitrant account holders begins

31 December 2014

Swiss Reporting FIs must document pre-existing entity accounts identified as Prima Facie FFIs. If the FFI signed an agreement after 1 July 2014, the deadline is six months from the effective date of the FFI Agreement

Please note that this is not a full list of all possible dates and FIs should refer to the US Treasury Regulations and local guidance for a complete list.

FATCA glossary of terms

A comprehensive glossary of FATCA acronyms will help you understand all the terms surrounding FATCA.

Keeping up with requirements around FATCA and knowing the acronyms used makes the complex regulations even more challenging to follow.

A downloadable and interactive PDF explains the definition of FATCA related glossary terms for your quick reference.

Contact our FATCA experts

Markus Weber

Markus Weber

Financial Services Tax & Legal Leader Switzerland

Markus heads the Financial Services Tax & Legal practice. He has more than ten years of experience in advising financial institutions in the banking, insurance and asset management sector, covering th... More

Brandi Caruso

Brandi Caruso

Financial Services Tax & Legal

Brandi heads the Tax Transparency offering within the Financial Services Tax & Legal practice across Switzerland, responsible for services related to QI, FATCA, CRS, and 871(m). She is a technical adv... More

Karim Schubiger

Karim Schubiger

Financial Services Tax & Legal

Karim leads the Tax Transparency team in the Suisse Romande and Ticino markets within the Financial Services Tax & Legal practice, responsible for services related to QI, FATCA, CRS, and 871(m). He is... More

Sarah Rathgeb

Sarah Rathgeb

Financial Services Tax & Legal

Sarah is a FATCA, AEOI/CRS and QI specialist advising Swiss and international banks and insurance companies on technical aspects of compliance, implementation and review relating to these regimes. She... More

Michael Grebe

Michael Grebe

Financial Services Tax & Legal

Michael is a Senior Manager in the Financial Services Tax & Legal practice. He advises banks, trust companies, and insurers in relation to the interpretation and implementation of the global transpare... More

Robin King

Robin King

Financial Services Tax & Legal

Robin is a Manager working in Financial Services Tax & Legal. He advises leading Swiss universal and private banks, acting as subject matter expert in the area of QI, FATCA and CRS. Robin is the autho... More