Fatca

Foreign Account Tax Compliance Act (FATCA) Inland Revenue Code 1471 - 1474

Basic Structure of FATCA Opera=on Obliga.on lies here US Witholding Withholding Payee Agent Tax of 30% (Receiver) (that make makes payments) IF Payee / (Receiver) From 2014, if payment is FATCA compliant originates from Payer need not securiDes sale withhold tax. From 2017, includes payments originaDng from property sale EXCLUDES: rouDne business payments such as salary, wages, bills for purchase of materials etc.

What does it take to be FATCA compliant? Obliga.on lies here US Witholding Withholding Payee Agent Tax of 30% (Receiver) (that make makes payments) Show the FATCA cerDficate, §  Be registered with the US IRS receive 100% (i.e. avoid §  Give a list of account holders Witholding Tax) (individuals, companies, trusts, etc.) IRS gives a FATCA who have a US idenDty document cer=ficate §  Furnish annually list of movements in such accounts §  Sign annually an undertaking that it has not advised any US enDty on tax evasion §  Deduct when paying to non-FATCA compliant FI

Pass Thru

PAYER Both OUTSIDE USA: PAYEE FATCA applies under certain condi=ons. (receiver) This is called passthru. We will discuss it now.

Non US Corp FATCA compliant Financial InsDtuDon PPPaaayysmsmtheernnutt Contains income Knowing this to be a Non US Payee from US source passthru that should have had withholding Deduct a % of This payment is payment now called a Non US Payee passthru payment The goal is to prevent Financial InsDtuDons (notably Funds) from being used to route moneys avoiding FATCA

Shadowy Investments (Bahamas) Payment John Doe (US ciDzen living in Thailand) Earns from US without paying US tax

Non US Corp Paying insDtuDon which is FATCA compliant PPPaaayysmsmtheernnutt US Assets % Paying insDtuDon must Total Assets deduct this much from the Non US Payee payment Expected; not officially announced yet Significant implicaDons for Fund Management indTuhset rIRy Sw ihs iecxhp ies clotecda tteod r aelql uoivrer t ahnedse i npveersctesn atlal goevse tro be published – madtoeo a. vailable to the public.

The Flow Impact of Withholding Tax PAYER To Pay: Tax Dept 100 Obliged to deduct Deposits 30 with 30 full details of payer and receiver PAYEE Receives: 70 (receiver) Receives Files a return paying 2 Finds that all withholding and a_aches included his tax CerDficate for 30 cerDficate for 30 bill is 32. Tax authoriDes are not challenging the tax status of the enDty or of its earning: they are forcing the enDty to file and claim.