This new reporting and withholding regime presents significant challenges for FFIs in identifying US accounts and subsequently identifying and evaluating relevant payments for compliance. In order to comply with the FATCA provisions and to avoid the 30% withholding tax, the FFI must enter into a disclosure agreement with the U.S. Treasury and agree to:
- identify U.S. investors;
- comply with verification and due diligence procedures;
- perform annual reporting;
- deduct and withhold 30% from any passthru payment made to a recalcitrant account holder or another institution without an FFI agreement; and
- comply with requests for additional information.