F.A.T.C.A. Compliance for Financial Institutions and Foreign Entities

The Foreign Account Tax Compliance Act (F.A.T.C.A.) was enacted in 2010 to promote transparency in the offshore banking system as a tool to detect and prevent tax evasion. F.A.T.C.A. is directed at financial institutions, although it affects industries across the board and even touches on entities that invest in U.S. real estate directly or through companies, partnerships, or L.L.C.’s.

F.A.T.C.A. imposes compliance obligations on depository institutions, custodians, investment entities, other foreign financial institutions (F.F.I.’s), and some nonfinancial foreign entities (N.F.F.E.’s) and provides the Federal government with broad authority to obtain financial information about U.S. taxpayers. F.A.T.C.A. reporting obligations are applicable to F.F.I.’s and certain N.F.F.E.’s in all countries around the world. Noncompliance with F.A.T.C.A. results in 30% withholding on certain U.S.-source payments including capital and principal payments for nonparticipating entities.

The Firm advises multinational entities that manage international cash flows, focusing on determining F.A.T.C.A. status of various entities within the group of corporations and each entity’s F.A.T.C.A. obligations.

The Firm’s F.A.T.C.A. practice includes:

  1. Advising offshore investment funds, including review of their on-boarding procedures for admitting new investors and review of pre-existing investors;
  2. Advising U.S. withholding agents;
  3. Advising foreign (non-U.S.) trusts and trust companies serving as trustees;
  4. Advising private and public holding companies;
  5. Advising foreign (non-U.S.) banks on due diligence procedures for new and pre-existing accounts;
  6. Advising N.F.F.E.’s on their F.A.T.C.A. obligations;
  7. Advising foreign (non-U.S.) insurance companies;
  8. Analyzing different Intergovernmental Agreements (I.G.A.’s) and the relationships between the I.G.A.’s and the non-U.S. domestic implementation legislation and between the I.G.A.’s and the Final Treasury Regulations; and
  9. Preparing a “white paper” to assist clients in adopting the right procedures for managing compliance.

We review the intrinsic dynamics of each organization to structure custom-tailored implementation procedures that suit each client’s specific needs. Specific focus is given to multinational entities in determining the relevant I.G.A. that applies to different entities in the group.

The Firm also advises U.S. citizens residing abroad on related F.A.T.C.A. and withholding tax overlap.

Sample Representations

  • We assisted a major publicly-traded European power company in determining the F.A.T.C.A. status of several of its group entities, determining the compliance and reporting requirements for each entity, and preparing a white paper for continued compliance. Special focus was given to insurance and reinsurance companies within the group, global retirement plans, and treasury centers.

  • We counseled a foreign advisory company that specializes in investments into foreign markets. Specifically, we assisted in determining the client’s F.A.T.C.A. status, as well as the F.A.T.C.A. status of its trust company and the trusts they serve.

  • We advised a major private bank concerning the F.A.T.C.A. status of its clients that are family trusts and private holding corporations.