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May, 2014
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  Amicorps FATCA services offering

The Foreign Account Tax Compliance Act (FATCA) becomes effective on July 1, less than two months from now.  Now is the time to take action on FATCA compliance and to discuss Amicorp’s FATCA services and solutions.  

FATCA is US legislation designed to prevent tax evasion by US Persons through the use of offshore accounts or via offshore investment vehicles.  The US Government concluded Intergovernmental Agreements (“IGA”) with many partner countries to effectively implement FATCA in their local jurisdictions.

FATCA and IGAs require non-US entities classified as Foreign Financial Institutions (FFIs) to register with the US Internal Revenue Service (IRS), to perform due diligence to identify US accounts and report certain information about these US account holders to the IRS or to the home country tax authority.  FATCA also requires passive Non-Financial Foreign Entities (NFFEs) to disclose the identity of their substantial (or controlling) US owners to their banking institutions where they hold a financial account. Failure to do so may cause the imposition of a penalty of 30% withholding on certain US source payments made to non-participating FFIs and to recalcitrant account holders who refuse to comply with FATCA. In IGA countries non-compliance may be in violation of the respective local law.

Impact to trust and investment companies

You may have a portfolio of clients, perhaps in Latin America or Asia, who are holding non-US entities with investment accounts either maintained with US banks or non-US banks, which under FATCA or IGAs may have to be classified as a Foreign Financial Institution (FFI), regardless the presence of any US beneficiaries or any US investments.  Registration of clients with FFI’s and subsequent identification and reporting of US accounts (if any) become important components in complying with the existing FATCA provisions.   

This impacts not only mutual funds and trusts with corporate trustees, but also many offshore Private Investment Companies (PICs) with a discretionary mandate granted to investment managers, which are all to be classified as FFIs. On the other hand, FATCA regulations and guidance on the IGAs indicate that PICs which have an investment account without such a mandate may also have to be classified as FFI-Investment Entities as well.   

Your challenges

The implementation of the FATCA legislation and IGAs poses significant challenges to the banking and financial services industry. They include:

  • Navigation through the complex regulations of FATCA and IGAs to determine entity classification;
  • Complying with verification and due diligence procedures to identify whether an account is maintained directly or indirectly by a US Person
  • Linking accounts of a US taxpayer across branches, subsidiaries and business units;
  • Implementation of new client on-boarding systems to collect required information about new customers;
  • Annual reporting of certain information of US reportable accounts, non-participating FFIs and/or recalcitrant account holders; and
  • Updating for changing circumstances the status of all FFIs, NFFEs and financial account holders.

Our response to these challenges

As one of the largest global service providers, Amicorp is well positioned to provide the services and solutions as we continue to maintain vigilant tracking of FATCA regulations, recent IGA entries and current industry standards.

In response to the challenges, our experienced and well-connected professionals comprised of lawyers, accountants and former bankers and financial advisors have built customized solutions for financial institutions to efficiently comply with FATCA regulations.  These FATCA services and solutions are primarily focusing on trusts, foundations and private investment companies.

Services and solutions offered

  •   Entity classification

The determination of whether an entity is an FFI is critical in implementing the proper methodology for FATCA compliance as it pertains to potential registration with the IRS.  Amicorp professionals are able to utilize in-house developed proprietary metrics to:

  1. Determine the initial classification of an entity as an FFI or NFFE under the FATCA regulations or IGAs;
  2. Analyze and verify relevant corporate governance documents and banking agreements; 
  3. Confirm with the client and the banks the classification findings.
  •   Sponsorship

For private clients it is essential to realize that only information will possibly be exchanged about client entities and their financial accounts to the extent required by the various regulations. A key element of our offerings include the so called FFI sponsorship facility, whereby Amicorp will act as sponsoring entity and will take care of all required FATCA compliance on behalf of the sponsored FFI-investment entities. One of the benefits will be that such entities will not be required to register at the IRS portal, provided there are no US Persons involved as shareholders.  Amicorp  can offer sponsorship through the use of the following sponsorship facilities:

  • Certified deemed compliant sponsored status as a 'closely held investment vehicle’.
  • Registered deemed compliant sponsored status.
  • Trustee Documented Trust facility, which is only applicable for Trusts resided in IGA Model 1.

Under these sponsorship facilities an Amicorp entity will act as sponsoring entity conducting all the required FATCA compliance activities on behalf of the sponsored FFI investment entity.  These activities include:

  1. Providing the sponsored entity with the Global Intermediary Identification Number (“GIIN”), which is required by banks and withholding agents to certify FATCA compliance;
  2. Due diligence of account holders in the sponsored entity in order to identify whether an account is maintained by a US person or not;
  3. Annual reporting of US reportable accounts, non-participating FFIs and/or recalcitrant account holders  and other annual filings, checking and updating for changing circumstances, etc.;
  4. Preparing the Form W-8BEN-E or other self-certification forms as may be required to provide to the banks, other financial institutions and withholding agents. 
  •  Entity registration

In cases where the above mentioned sponsorship facilities are not desired or not applicable, the entities classified as FFIs are obligated to register through a secured online portal with the IRS. 

Amicorp can perform these registration services through many of the various methods of registration (e.g., registered deemed compliant, owner documented registration, etc.) thus securing FATCA compliance. 

In addition to registration the FATCA services can include the following:

  1. Upon registration of the FFI the GIIN will be issued;
  2. Due diligence of account holders of the interest in the FFI investment entity; 
  3. Annual reporting of US accounts and other annual filings, checking of changing circumstances;
  4. Preparing the Form W-8BEN-E or other self-certification to establish the FATCA status.  

For entities that are identified as NFFEs, Amicorp can also prepare the necessary certification documentation required by the banks and withholding agents, including the due diligence of substantial US owners or controlling US persons as connected to the entity.

  •  Corporate directorship

Many clients initially establishing their investment entities may have chosen to not appoint corporate directors or officers for their ongoing corporate governance. Because entities under FATCA maintain registration requirements, Amicorp corporate director entities can not only fill this critical need for governance, but also as directors, provide the mentioned sponsorship facilities , provide the responsible officer for entity registration under FATCA for those clients who are uncomfortable in taking on such activities or for those who desire not to personally register their entity.

  •  Entity compliance review

In the current environment of FATCA, GATCA, the acceptance of automatic exchange of information between many jurisdictions and with the threat of local tax and compliance audits looming over clients’ heads,  it is now imperative to avoid the use of improper structures.

Accordingly, Amicorp will perform the review to ensure that the client’s structure coming under our management is compliant at the level of each entity. In addition, Amicorp will also verify the local reporting requirements in the country where the client is tax resident and, if needed, make recommendations to improve the clients’ investment structure, utilizing legally accepted solutions.  Upon acceptance, we will perform the services necessary in bringing the entities and the overall structure into a compliant position.

Other compliant solutions Amicorp can assist with:
  • Migrate the UBO to more robust structures
  • Providing asset protection, compliant tax deferral and/or estate planning
  • Add an insurance wrapper (Single Variable Life Insurance Plan)
  • Irrevocable Discretionary Trust
  • Private Foundation
  • Investment Holding Services – funds offering tax deferral
  • Pension Plan
  • POINT - Pooled Omnibus Investment Trust
  • Listing on stock exchanges
  • Relocation services
  • Assist with non-domiciled status or change of residency
  • Limited Liability Partnership

For more information on these and other services, please contact your Account Manager, Sales Manager or your closest Amicorp office.

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This document is prepared for general information purposes only. Amicorp Group does not provide tax or legal advice to its clients. Any opinions contained herein should not be construed or interpreted as advice provided by Amicorp Group.