The FATCA rules are important as they contain two strong levers to ensure compliance:
- : Foreign financial institutions may be required to withhold 30 percent on US source FDAP* income and the sale or other disposition of a US equity or debt obligation issued by a US person that is not adequately documented, and remit it to the IRS.
- : Where a financial institution is passing a payment onto a second financial institution that has not yet entered into an agreement with the IRS, the first financial institution will be required to withhold 30% on all US sourced payments unless the financial institution discloses all US account holders.
The FACTA challenge is unique for several reasons.
- . The FATCA legislation will impact financial institutions along several points in their client value chain. They will need additional client data, new reporting mechanisms and systems to deliver them. Implementing the necessary changes, that are required by the effective date, will be intensive and difficult to achieve as it crosses many different internal groups and requires different technical expertise.
- . To prepare for FATCA, financial institutions will need to coordinate FATCA implementation across different jurisdictions, reconciling several national legal frameworks.
Contact us for more information at FATCA@kpmg.com
*FDAP – Fixed, Determinable, Annual, Periodical