ABBL
Association des Banques et Banquiers, Luxembourg
The Luxembourg Bankers' Association
Luxemburger Bankenvereinigung
The US HIRE Act provides for a number of measures aiming at maintaining and creating jobs in the USA. The sources of funding to be used to finance the job creation measures are to be found under the FATCA (Foreign Account Tax Compliance Act) section of the HIRE Act. FATCA primarily deals with tax Compliance obligations of US investors with foreign accounts, reporting obligations by US taxpayers as well as with anti-abuse measures in relation to lending and repurchase transactions. It aims at ensuring that all US taxpayers with accounts abroad and using foreign entities are reporting their foreign earned income and paying their taxes in the USA according to US tax rules.
FATCA introduces reporting obligations by foreign financial intermediaries (FFI) on US accountholders and certain US investors. It further introduces penalties applicable to FFIs that do not enter into an agreement with Internal Revenue Service (IRS). A new US withholding tax of 30% is applied on Interest, dividends and gross sales proceeds (on the capital redeemed or sold) paid to foreign financial intermediaries. FATCA imposes upon FFIs the obligation to apply specific client identification rules that go beyond existing EU and/or domestic anti-Money laundering (AML) and know your customer (KYC) rules.
FATCA also imposes an obligation to close accounts held by "recalcitrant" accountholders. Recalcitrant accountholders are clients that do not respect the additional conditions that the US are intending to impose (compared to the KYC rules applicable under the FATF and 3rd anti-Money laundering directive rules) and do not provide the FFI with specific documentation determining their non US status. FATCA imposes upon FFIs an obligation to report the number of recalcitrant accountholders and their assets.
FATCA will become applicable in phases from 1 July 2013 to 1 July 2015.
FATCA rules are bound to create a number of conflicts with local legislation, such as:
- the obligation to identify, document and screen clients to an extent that goes largely beyond European AML-KYC laws;
- the obligation to report automatically to the IRS on US and also non US clients;
- the obligation to close accounts of US and also non US clients that do not comply with the information requirements;
- the obligation to apply US withholding tax to non US persons under an obscure “pass-thru” concept that transforms non US income into US income;
- the obligation to waive Double Taxation Agreement rights under the concept of “election to be withheld upon".
Together with the European Banking Federation (EBF), the ABBL has submitted to the US authorities (notably to the IRS) numerous comments and proposals in relation to the provisions of FATCA.
IRS / Treasury: Notices and Regulations
REG-121647-10: Guidance concerning information reporting by foreign financial institutions for U.S. accounts, and withholding on certain payments made to foreign financial institutions and other foreign entities under the Foreign Account Tax Compliance Act (FATCA).
Notice 2011-53: Chapter 4 Implementation Notice. This notice describes the timeline for the implementation of Chapter 4 and discusses certain substantive and procedural matters that will be addressed in regulations by Treasury and the IRS.
Notice 2011-55: Suspends certain information reporting requirements until the IRS releases new Form 8938 (Statement of Foreign Financial Assets) and a revised Form 8621 (Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund)
Notice 2011-34: Supplemental Notice to Notice 2010-60 Providing Further Guidance and Requesting Comments on Certain Priority Issues Under Chapter 4 of Subtitle A of the Code
Notice 2010-60: Notice and Request for Comments Regarding Implementation of Information Reporting and Withholding Under Chapter 4 of the Code, IRB 2010-37, dated September 13, 2010
Articles
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08/02/2012
The Commission welcomes the USA's acceptance of an government-to-government approach to tackling tax evaders and implementing the US Foreign Account Tax Compliance Act. This more business-friendly arrangement for EU financial institutions is the result of intense discussions with the USA, following a letter sent by the Commission and EU Presidency to the US tax authorities in April 2011.
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08/02/2012
The US Treasury Department and IRS released for publication in the Federal Register proposed regulations (REG-121647-10) as guidance concerning information reporting by foreign financial institutions for U.S. accounts, and withholding on certain payments made to foreign financial institutions and other foreign entities under the Foreign Account Tax Compliance Act (FATCA).
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02/02/2012
The PwC annual Alternative Investments Conference took place on 30 January 2012 and brought together about 200 professionals from the industry who came to hear three panels of thought leaders deliver distinctive, forward-looking insight and points of view on important industry issues and developments, like FATCA, the Dodd Frank Act, including the Volcker Rule, and the AIFM Directive. The future of the Luxembourg funds industry generated discussions on both its track-record and its brand as a clear asset to seize new opportunities from these regulatory challenges.
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14/12/2011
13 December 2011 – Invited as guest speaker by Democrats Abroad, Jean-Jacques Rommes, CEO of the Luxembourg Bankers’ Association, provided an insight into FATCA and its consequences for the benefit of those most directly concerned by the legislation: US citizens living abroad.
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19/10/2011
In his conclusion to an ABBL meets members session on FATCA, Jean-Jacques Rommes, CEO of the ABBL, reiterated panellists’ indignation at the US’s complete disrespect of national sovereignty. For states, the complete lack of reciprocity is particularly worrying. Indeed, the US would never have tolerated to be treated the way they are treating others with FATCA. For Non-US citizens it is the fact of being subjected to US law without any consideration for the legal problems this entails.
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22/09/2011
The Foreign Account Tax Compliance Act (FATCA) is currently high on the worry list of financial intermediaries around the world. In order to provide an insight into FATCA and its provisions and to help members to make the right decisions, the ABBL held an ABBL meets members information session dedicated to this thorny issue. Members had the unique opportunity to discuss the political, technical and operational aspects of FATCA with renowned local and international experts.
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01/08/2011
This article reaches readers shortly after the US Treasury and the IRS department issued Notice 2011-53, dated July 14 2011, providing "a workable timeline" for FFIs and U.S. withholding agents to implement the various requirements of FATCA.
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20/07/2011
For the finance industry outside the US, FATCA represents an exorbitant financial cost, considering the significant investments that have to be made in human resources and IT infrastructure. Ironically, the potential tax income for US Treasury seems fairly negligible. The investments that have to be made are thus entirely disproportionate to the expected returns.
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19/07/2011
Over the past decade or so, doing business with the U.S. or dealing with US customers has increasingly turned into a headache for many foreign companies. This is especially true for the finance industry. The latest spoke put in the wheels of foreign companies is called FATCA; short for Foreign Account Tax Compliance Act.
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Last udpate February 2012
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