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What is FATCA?
Foreign Account Tax Compliance Act (FATCA) is a 2010 United States (US) legislation aimed at improving compliance with US tax laws such as income tax law. It applies to U.S residents, U.S citizens, and green card holders residing in the US or in other countries.
The legislation requires all non-US financial institutions to identify customers with indicia of a connection to the US and report the assets and identities of such persons to the Internal Revenue Service (IRS).
What has NCBA done to date in compliance with the Act?
NCBA is registered with the IRS as a participating Foreign Financial Institution (FFI) and has been allocated a Global Intermediary Identification Number (GIIN)
Why was it necessary for NCBA to register with the IRS?
Where a Foreign Financial Institution does not enter into an agreement with the IRS, all relevant US-sourced payments, such as dividends and interest paid by US Corporations will be subject to 30% withholding tax. The same 30% withholding tax will also apply to gross sale proceeds from the sale of relevant US property. All FFI’s must comply with FATCA or be subject to withholding tax.
Why should NCBA comply with an American law?
- Non-compliant organizations/banks are likely to suffer a competitive disadvantage due to the application of the 30% withholding tax.
- Failure to comply with FATCA will make it difficult to do business with other compliant financial institutions.
Is NCBA the only Bank affected by FATCA?
No. All banks and other financial organizations worldwide are affected by FATCA.
Who is affected by FATCA?
FATCA legislation affects both personal and corporate customers who are considered “US persons” for US tax purposes. The FATCA legislation also affects certain types of businesses with US owners. The term US person includes the following:
- A citizen of the USA, including an individual born in the US but resident in another country (who has not given up their citizenship)
- A person residing in the US, including US Green cardholders.
- A person who spends a significant number of days in the US each year.
- US Corporations, US partnerships, US estates, and US trusts.
Are customers only affected if they are US Residents?
No. Customers (both corporate and individual) with any of the FATCA indicia listed below will be affected by FATCA.
- US citizenship or US residence.
- US place of birth.
- US address including US P.O Boxes.
- US telephone number.
- Repeated payment instructions to pay amounts to a US address or an account maintained in the US.
- Current Power of Attorney or signatory authority granted to a person with a US address.
- The U.S. “In care of” or “hold mail” address which is the sole address for the account holder
What does FATCA mean for a US person?
- If a customer is considered a US person, they are required to supply NCBA with additional information/ documentation pertaining to FATCA compliance.
- For US persons under FATCA, NCBA is required to report information about the customer and their accounts to IRS on an annual basis.
- NCBA is required to withhold tax on US-source payments coming into a FATCA non-compliant customer’s account.
What information will NCBA report to the IRS on US accounts?
The information reported to the IRS will include the customer’s name, address, US taxpayer Identification number, account number, account balances, and value.
What does FATCA mean to NCBA customers that are non-US persons?
For customers that are non-US, FATCA has no impact and no action is required.
What happens when an account is held by a US person and a non-US person?
A joint account that has one US owner is treated as a US account and is therefore subject to FATCA.
What documentation is a US person required to provide to the bank?
- Customer irrevocable authorization and waiver form- To be completed by ALL clients with US indicia to allow the bank to share the information provided with IRS.
- W-9 Request for taxpayers’ identification number and certification- To be completed by a U.S person. U.S person includes but is not limited to: An individual who is a U.S citizen or U.S resident alien; A partnership, corporation, company or association created or organized in the United States; any estate (other than a foreign estate); or a domestic trust. If an account is jointly held W-9 will be required from each U.S person.
- W-8 Ben-certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (individuals)- To be completed by a Foreign individual who is not a US person but has other US indicia to ascertain that the income which will be received in the account is:
- Not effectively connected with the conduct of a trade or business in the United States,
- Effectively connected but is not subject to tax under an applicable income tax treaty, or
- The partner’s share of a partnership’s effectively connected income.
- W8 Ben E- Certificate of the status of Beneficial owner for United States Tax Withholding and Reporting (Entities)
Will NCBA provide customers with all the forms they need to complete?
Yes. The bank will share relevant forms with customers, these are also available on the NCBA Website
When is a customer required to provide the requested information and or/documentation for FATCA?
Existing US customers should supply the requested documentation and/or information if they have not done it. Customers looking to open a new account will be requested to provide the same as part of the account opening application.
What will NCBA do if customers do not provide the information required under FATCA?
NCBA will report information about customers who do not provide the required documentation to the IRS as non-compliant or recalcitrant account holders. Additionally, NCBA will be required to withhold tax on US-source payments coming into the non-compliant customers’ accounts.