1. FATCA Basics for Foreign Account Holders
Allison Christians

2. FATCA Facts US law, in force, US Treasury implementing, can choose to
delay, restrict, tone down; or
forge ahead, expand, ratchet up
Aimed at non-US third parties who hold customers’ money and financial assets
Will punish these third parties with penalties if they do not either
ensure their customers are not ‘US persons’, or
If they are US persons, tell the IRS about their assets and gross income.

3. So, we want to know: who are these third parties?
how will they ensure their customers are not US persons?; and
what will they have to do if they think their customers are US persons?; and
what do I have to do as a customer?

4. 1. Who are these third parties?
the main one is FFI: foreign financial institution.
An FFI is any non-US entity that
accepts deposits (e.g. a bank)
holds financial assets for others (e.g. a custodian, some trusts)
invests or trades financial assets as a business (e.g. a mutual fund)
an insurance company
there are other third parties but we will focus on FFIs

5. 2. How will FFIs ensure their customers are not US persons?
Ask new customers to sign documents saying they are not US persons
Search existing accounts for ‘indicia’ of US person status
Only have to do this once account exceeds $50k for individuals, $250k for entities; $250k for life insurance
but can search all accounts
Under IGA, may not have to search certain govt-sponsored accounts (e.g. retirement, education savings plans)
If they find indicia, ask customers to provide documents showing or stating that they are not US persons

6. What the FFI is looking for
account holder identified as a U.S. citizen or resident
birthplace in the U.S.
a U.S. telephone number
a U.S. residence or mailing address
standing instructions to transfer funds to a U.S. based account
Indications of a power of attorney over the account to a person with a U.S. address
a “care of” or hold mail address as the sole address
For individuals with account 50k to 1m, FFI only has to search electronic records
For individuals with accounts > 1m, FFI must search paper records as well

7. Withholding Certificate

8. Withholding Certificate

9. What the FFI will do if they find these indicia
WHC: withholding certificate
PFC: proof of foreign citizenship via govt issued ID
CLN: certificate of loss of nationality
PCFS: proof of claim of foreign status
A: Cert of Residence from tax authority
B: Govt-issued ID
C: approved similar certificate
What the FFI will do if they find these indicia
FFI can rely on valid documentation unless actual knowledge or reason to know the info is unreliable or wrong
Indicia
Document request
U.S. citizen or resident
Birthplace in the U.S.
U.S. telephone number alone
U.S. telephone # + non-US telephone #
U.S. residence or mailing address
standing instructions to transfer funds to a U.S. based account
Indications of a power of attorney over the account to a person with a U.S. address
“care of” or hold mail address as sole address
WHC + PFC
PFC + CLN or WHC + PFC + reasonable explanation
WHC and PCFS
WHC or PCFS

10. What will FFIs do if they think their customers are US persons?
If no IGA in effect:
request waiver of any right that would prevent FFI from sending info to IRS
Once received, report name, account numbers & amounts, TIN, gross proceeds, etc to the IRS (assume open book)
If not received: close account
If IGA is implemented:
report name, account numbers & amounts, TIN, gross proceeds, etc to the tax authority (e.g. CRA) for delivery to IRS

11. What do I have to do as a customer?
Upon receipt of a request for documentation:
Check to make sure it is the required documentation
Respond accordingly; or
Choose not to respond, close account; or
Choose not to respond, await account closure