FATCA Advisory Services
Fast and high quality services are provided to assist our clients with FATCA compliance by the team of professionals from the US Tax Group of Deloitte Tohmatsu Tax Co. and the Financial Services Industry Group of Deloitte Touche Tohmatsu LLC, works closely with each other and collaborates with Deloitte’s Global FATCA Team.
- What is FATCA?
- “Financial Institutions” subject to FATCA
- Features of the Deloitte Japan FATCA Team and FATCA services
- Related topics
What is FATCA?
Effective as of July 1, 2014
The Foreign Account Tax Compliance Act, so called FATCA, is a U.S. federal law that requires financial institutions to comply with due diligence and reporting obligations. This law aims to prevent U.S. taxpayers from avoiding tax through the use of offshore accounts. The FATCA provisions were signed into law on March 18, 2010 and entered into force on July 1, 2014.
Under FATCA, financial institutions within and outside the U.S. will be required to perform the due diligence procedures for new accounts to identify specified U.S. persons and non-compliant financial institutions and annually provide information about these persons and institutions to the Internal Revenue Service (“IRS”), the counterpart of the National Tax Agency of Japan.
Withholding tax on investment income from U.S. sources at 30%
If financial institutions are determined to not comply with FATCA, any payment of interest and dividends on U.S. securities and gross proceeds from the sale or redemption of U.S. property, whether for their own accounts or their account holders, will be subject to withholding tax at a rate of 30%.
FFI agreements with the U.S. government and due diligence and reporting obligations for financial accounts
In order to avoid this 30% withholding tax under FATCA, it is necessary for financial institutions to enter into FFI agreements with the IRS. However, this will obligate them to perform the due diligence, reporting and other various procedures and conduct external audits for all of their accounts in accordance with the act and may require adaptation of their systems and processes.
“Financial Institutions” subject to FATCA
FATCA defines “financial institutions” broadly and therefore, will affect the following types of Japanese financial institutions, whether or not they have U.S. accounts:
・Agricultural/fishery cooperative associations
・Cooperative regional financial institutions (shinkin bank) and credit unions (shinyou kumiai)
・Real estate companies
・Private equity funds, etc.
Features of the Deloitte Japan FATCA Team and FATCA services
Fast and high quality services through its global network
Basically, FATCA requires financial institutions to fulfill due diligence, reporting and withholding obligations in accordance with U.S. tax law as they currently are under the qualified intermediary (“QI”) program.
The FATCA Japan Team, composed of QI/FATCA team members of Deloitte Tohmatsu Tax Co. and financial services experts of Deloitte Touche Tohmatsu LLC works as one to provide quick and high quality support through close collaboration.
The team also coordinates seamlessly with Deloitte’s Global FATCA Team using our global network to update clients with the latest information about the relevant U.S. tax regulations obtained from the IRS.
Deloitte’s Global FATCA Team, which is made up of professionals with an extensive range of experience in international tax and the U.S. withholding tax system and strong connections with the IRS, has been providing a great deal of FATCA related services to more than 100 major financial institutions in Japan.