Canada - English


  • Service: Tax, International Tax Services, Topics
  • Industry: Financial Services
  • Type: Benchmarking study
  • Date: 1/29/2014

FATCA: Challenges and Insights for Pension Funds 

The Foreign Account Tax Compliance Act (FATCA) is a complex, new reporting and withholding regime enacted to encourage US persons to disclose their offshore accounts, investments, and income. FATCA imposes material US tax documentation, reporting, and withholding requirements on foreign (non-US) financial institutions, including foreign pension funds. If mismanaged, FATCA can have a severe negative impact on a pension fund’s investment returns.
The fundamental premise of FATCA is that a Foreign Financial Institution (FFI) will be subjected to a 30 percent rate of withholding on all withholdable payments, unless the FFI enters into an agreement with the Internal Revenue Service (IRS) and agrees to identify certain US persons and to report them annually to the IRS. Non-US pension funds will generally be FFIs for these purposes because of their investment activities. Fortunately, FATCA allows exemptions for otherwise within-scope FFIs. 
Given that FATCA withholding can apply as early as July 1, 2014, foreign pension funds should determine now whether they qualify for a FATCA exemption. Further, pension funds must understand the risk of including non-FATCA compliant investments in their portfolios.
Please speak to your KPMG contact or one of our FATCA advisors for further information or advice in respect of the legislation and the impact for you.

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Russell W. Crawford

Russell W. Crawford

Partner, Tax


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