FATCA stands for the Foreign Account Tax Compliance Act. It is a United States of America (U.S.) legislation that deals with issues around tax compliance of U.S. persons (i.e. qualifying individuals and corporate entities defined under FAQ 4).
What is the intent of FATCA?
The purpose of FATCA is to encourage tax compliance by U.S. persons living in, or with income generating assets in foreign countries.
FATCA introduces new requirements for tax withholding, reporting, and account due diligence by foreign financial institutions, (including banks), as agents of the U.S. Internal Revenue Service (I.R.S).
How does FATCA impact on NIC Bank Ltd and its clients?
Due to our relationship and reliance upon our Correspondent Bankers for purposes of settlement of payments in the U.S. Dollar currency, NIC Bank Ltd was required to register as an agent of the I.R.S. and commit to collect plus verify appropriate client information (defined under FAQ 15) relating to U.S. Persons which will then be periodically submitted to the I.R.S. Additionally, the Bank is required to review existing on-boarding and withholding programs and enhance them in accordance with the I.R.S. requirements.
NIC Bank has therefore proactively reviewed its business practices to ensure compliance with the FATCA requirements while also best serving its customers interests.
Who is a US person?
Under U.S Tax laws, a U.S. person is determined by the following factors:
S. citizenship (including dual citizenship of the U.S. and another country);
Lawful permanent residency via Green card status;
S. place of birth;
S. residential address or a U.S. correspondence address;
Standing instructions to transfer funds to or from an account maintained in the U.S. or instructions regularly received from a U.S. address;
“In Care of “or “Hold Mail” address;
Power of attorney or signatory authority granted to a person with a US address;
Business entities with shareholding of 10% or more controlled by one or more U.S. persons.
NB: Having one of these indicia does not necessarily mean that the account holder is a U.S. person, but further information will be required to confirm their U.S. status.
What is a U.S. account?
It is one in which there is significant U.S. ownership i.e. if you are a U.S. person, then your personal account will be classified as a U.S. account. A business account will be deemed to be a U.S. account if U.S. person(s) hold significant shareholding in the company. Significant shareholding is defined as 10% or more ownership in the entity by one or more U.S. person(s).
How will I be affected if I am a U.S. person?
U.S. persons will be required to provide additional information to the Bank as a periodic requirement by the IRS. Details on the type of information to be provided or availed are listed under FAQ 15.
Will FATCA have an impact on me if I am not a US person?
FATCA will have no impact on you if you are not a U.S. person and hence no further action may be required. However, in certain circumstances, the Bank may require your action or confirmation to determine the correct status, for example through submitting declarations as may be required to update your information with us.
What are the repercussions of failing to furnish the bank with further information in relation to my U.S. status?
If you choose not to respond to queries and/or fail to submit any requested information or documentation relating to your U.S. status, you will be deemed an un-cooperative account holder, (defined under FAQ 10), and the Bank will be obligated to withhold 30% on all U.S. source income transacted via your account. The withheld amounts will thereafter be under the control of the I.R.S.
What is a U.S. source income?
U.S. source income is any income that originates from the U.S. and/or proceeds derived from U.S. source capital, for example dividends, interest, rent or proceeds of sale from properties in the U.S. etc.
Who is an un-cooperative account holder?
It is any account holder who fails to comply with reasonable requests for information necessary to determine if the account(s) is/are (a) U.S. account(s) or not.
Is FATCA applicable to both personal and business customers?
Yes, FATCA applies to both individuals as well as business entities (with significant U.S. ownership as described under FAQ 5).
Does FATCA replace existing U.S. withholding tax?
FATCA does not replace the existing U.S. tax regimes; it may however add additional requirements to the existing tax rules that you may already be following. For further advice on your tax status or FATCA classification, we recommend that you seek professional advice from your tax consultant.
Will FATCA affect me if someone sends me money from the U.S.A.?
Receiving money from someone in the U.S. will not attract FATCA withholding as long as the recipient is not classified as an un-cooperative account holder. Additionally, money transfers into and income earned in favour of accounts of U.S. persons may be subject to FATCA reporting and/or withholding requirements.
What happens if a joint account is held between a U.S. person and a non U.S. person?
Such an account will be treated as a U.S. account and will be subject to the FATCA requirements described within this document.
What information will be required by the I.R.S. and by when?
The name, address and U.S. Tax Identification Number (T.I.N.) of each account holder that is a specified U.S. person
In the case of any account holder that is a U.S. entity with one or more U.S. owners, the name, address and T.I.N. of each substantial U.S. owner of such entity
The account number(s)
The year-end account balance or value; and
Gross receipts and gross withdrawals or payments from the account.
Kindly note the above information will be required by the I.R.S. annually by 31st March of each year.
What information/documentation am I required to send to NIC Bank?
U.S. persons, and those with U.S. indicators, (e.g. U.S. address, U.S. place of birth, etc.) will be required to complete certain forms (either Form W-8 or W-9) to provide further information required by the I.R.S. We will send you the relevant forms upon your confirmation of your U.S. status.
NB: If your status changes from a non U.S. Person to that of a U.S. person, you will be required to update the Bank with your most current status / details as and when the change occurs.
Are all banks complying with FATCA?
Yes, all financial institutions outside the borders of the U.S.A. and which are dealing with the U.S. currency and U.S. persons are required to comply with the FATCA requirements.
Should you wish to seek further clarifications, kindly contact your Relationship Manager or our Customer Contact Centre via telephone- 020 2888 217/0711 041 111/ 0732 141 111, SMS- 20488, email email@example.com.