Know the facts about FATCA

No doubt you have heard about the US Government’s Foreign Account Tax Compliance Act (FATCA). However have you fully considered the impact on your business?

Even if your fund does not have US investors, there are still steps you need to be taking.

Are you on top of the following:

  • Conducting FATCA due diligence on new account holders since June 2014?
  • Registered with the Internal Revenue Service (IRS) as a deemed compliant financial institution and obtained a Global Intermediary Identification Number (GIIN) by January 2015?
  • Reviewed fund product disclosure statement (PDS) / prospectus and client forms?

What is FATCA?

In October 2009 the US Government introduced FATCA. It was ultimately enacted in March 2012 as part of the Hiring Incentives to Restore Employment (HIRE) Act. FATCA was introduced to increase transparency for the IRS to help prevent tax evasion by US persons. It imposes certain due diligence and reporting obligations on foreign (non-US) financial institutions, including investment funds, custodians, investment managers and administrators. Financial institutions are required to register with the Internal Revenue Service (IRS), review customer accounts to identify any US citizens or US tax residents and report certain account information on to their local tax authority. This is regardless of whether the financial institution has any US clients or receives US source income.

What is the timetable?

Collecting and recording new investors’ compliance with FATCA should have commenced in July 2014.

Financial institutions should have registered with the IRS as a deemed compliant financial institution and obtained a Global Intermediary Identification Number (GIIN) before January 2015.

The next important deadline is March 2015. This is when local tax authorities in jurisdictions such as Australia, Singapore and Cayman Islands will begin reporting to the IRS on the FATCA compliance of Foreign Financial Institutions.

Existing investors’ compliance with FATCA needs to be reviewed, commencing with an audit of investors with account balances greater than USD $1 million by July 2015.

How do I prepare for FATCA?

Investment managers need to carefully assess the impact of FATCA on their business to minimise exposure to undue business and investor relations risk. With a number of deadlines fast approaching, make sure you are on top of your funds’ compliance obligations.

FundBPO is working with a range of clients on their new and existing compliance requirements. For example we are assisting our unit registry (transfer agency) clients with identifying new or existing investors that are US citizens or taxpayers.

To learn more about the actions FundBPO is taking on FATCA, please contact us.

 

This article is not intended to be financial advice and is of a general nature only that does not take into account your individual objectives, financial situation or needs. While all efforts have been made to ensure the information contained in this article is accurate, errors may occur.

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