Payment & Account Services Financial Institutions
The Foreign Account Tax Compliance Act (FATCA) is a US legislation that was enacted on March 18th 2010 and that will enter into force on January 1st 2013. FATCA is essentially a regulatory reporting requirement for foreign financial institutions and foreign entities on their US account holder base. Rabobank has recognized the critical need to comply with the FATCA requirements and intends to enter into an agreement with the IRS and become a ‘participating’ FFI (Foreign Financial Institution).
In order to meet our liabilities towards the IRS we also need to assess FATCA compliance of all our key counterparties. Could you please let us know, via email, by July 31st 2011, whether you will be ready and FATCA compliant by December 31st 2012? In other words please let us know whether your organization intends to enter into an agreement with the IRS and become a ‘participating’ FFI as well?
Additional background on FATCA
FATCA requires Financial Institutions to:
- Identify US persons from their account base. "US persons" is a broad definition that requires new procedures for both individuals and entity accounts. If a customer does not provide the required information to determine if they are a US person within a reasonable period of time, the account will be closed;
- Report information to the IRS on accounts held by US persons.
- Deduct and withhold 30% tax on payments or pass-through payments to any client who fails to comply with the FATCA procedures. In order to fulfill that obligation, financial institutions must determine US cash flows for such clients, which in turn means that products need to be screened for the existence of US cash flows; and
- FATCA regulations have far reaching consequences for financial industry, mainly on the procedures governing Know Your Customer (KYC), reporting on customers and possible withholding of tax on certain types of payments. Also our financial products and operational processes might be impacted, particularly the withholding component. Moreover ‘participating’ FFI’s might be compelled to end their business relationships with ‘non-compliant’ FFI’s. Therefore we would like to know if you are entering into an agreement with the IRS.
In case you need more information we would like to advise you to contact your own tax department and to consult the information published by the IRS.
Should you have any questions for Rabobank at this stage, please do not hesitate to contact us via csdfi@rabobank.com or telephone number: + 31 30 71 22522.
