The provisions of the Foreign Account Tax Compliance Act (FATCA) were enacted in the United States (US) legislation in March 2010.The US and Cyprus governments signed a MODEL 1 Intergovernmental Agreement (IGA) on the 2nd of December 2014 for the automatic exchange of the reported information with the IRS.
Under the MODEL 1 IGA Cyprus Financial Institutions that fall within the scope of FATCA have to register with the IRS by the end of the year and become FATCA compliant. However, Cypriot Financial Institutions that fall within the scope of FATCA, are advised to register by the 22nd of December 2014 in order to be included in the list of registered companies for 2014.
Registering with the IRS and obtaining a GIIN (Global Intermediary Identification Number) imposes certain additional due diligence procedures and reporting obligations on US persons. FATCA is focused on strengthening information reporting and withholding compliance with respect to US persons who invest directly or indirectly through the ownership of foreign interests. To achieve this goal, FATCA requires Foreign Financial Institutions (FFIs) to provide information to the US Internal Revenue Service (IRS) on accounts held by US persons (directly or indirectly).
FATCA imposes a 30% withholding tax on Foreign Financial Institutions (FFIs) that fall within the scope of FATCA and do not comply with FATCA’s requirements. The 30% withholding tax on certain US source income will be imposed regardless of whether the FFI has US owners or clients.
Before a financial institution can become FATCA compliant, it should take certain steps to determine the impact FATCA may have on its operations and plan the route towards compliance in an efficient and effective manner.
Most financial institutions will need to proceed with enhanced due diligence procedures for customer on boarding systems to be FATCA compliant for new accounts, while launching separate work stream to identify and analyse pre-existing accounts.
Individuals in our Team have more than 30 years’ experience in regulatory compliance. We provide expert guidance and advice on upcoming legislation to guide our clients through this challenging task. We can provide comprehensive and holistic solutions tailored to each client’s individual needs for a smooth FATCA implementation such as:
- Analysis of impact on your business/operations
- Development of an action plan for compliance
- Guidance in completing FATCA relevant forms
- Assistance in the implementation of internal FATCA required procedures
- Providing support on FATCA future requirements and developments
- Training and education.