REGULATORY INITIATIVES
ally reporting the name, address, tax identification number (TIN), account number,
account balance, gross receipts and gross
withdrawals for each account.9 The FFI
must also withhold 30 percent of any “pass
thru payments” made to recalcitrant account
holders who do not wish to comply with
the disclosure.10 Where a foreign law would
prevent the reporting of information, the FFI
would attempt to obtain a valid and effective
waiver of such law from account holders. If
such waiver is not obtained, then the account
would be required to be closed. Non-participating FFIs, who do not sign the agreement,
face the 30 percent withholding tax on all
“withholdable payments.”11
In preliminary guidance from the IRS, Notice
2010-60, certain FFIs have been excluded
from complying with FATCA. Among the
exclusions are insurance companies that
issue insurance with no cash value (e.g., property and casualty and term life insurance);
start-up companies for the first 24 months of
commencing business; and retirement plans
sponsored by a non-U.S. employer with no
U.S. participants or beneficiaries.12
A brief description of FATCA
The following is a brief summary of FATCA
but by no means is meant to include all
details and provisions. FATCA significantly
extends and broadens reporting requirements for certain foreign entities regarding
“U.S. persons.” Foreign entities can no longer
conceal the identity of their U.S. customers
as they were able to in the QIP. The U.S.
will rely on FFIs and non-financial foreign
entities (NFFEs) that have U.S. clients to
provide information about their identity in
order to assist them in trying to stop U.S. tax
evasion. If they do not, they must terminate
their relationships with their U.S. clients
or choose to pay a 30 percent withholding
penalty on “withholdable payments.” 7 “Withholdable payments” for the purposes of this
Act, include U.S. source FDAP income (e.g.,
interest, dividends, etc.) and gross proceeds
from the sale of property which can produce
interest or dividends from U.S. sources.8
The definition of FFIs has been broadened to
include not just banks but institutions such
as brokerage firms, investment companies
and hedge funds,