Appendix for more information for fatca purposes. FATCA forms
The fact that today it is becoming less and less popular to be a US citizen, we owe a lot to the law adopted in this country in 2010 and came into force on 01.07.2014 "On the taxation of foreign accounts" (Foreign Account Tax Compliance Act - FATCA). The idea of adopting this law arose when the US government calculated the lost taxes. Their amount was approximately $ 100,000 billion, and this is only offshore schemes, not taking into account the deposits of citizens in foreign banks. As a result of the calculation, it was decided to take measures to correct this problem in the form of a bill, which, after being signed by the head of the American state, entered into force. This was the main reason for the large number of renunciation of US citizenship among its residents living and working in other countries.
What is FATCA
FATCA - what is it? This is US taxation law that requires foreign financial institutions to be accountable to tax service of this country (IRS) about US taxpayer customers. The official goal of the adoption of FATCA is to prevent tax evasion of American citizens. Under US law, all individuals and legal entities who have citizenship or are residents of this country are required to pay tax, regardless of where they live and receive income from work, conduct business or own property. But this state of affairs does not suit many citizens, therefore financial activities they try to conduct through banks outside their home country.
Prior to the adoption of the law, the relevant US services were not able to somehow track their financial activities and obtain information on accounts in foreign banks. But the situation changed dramatically after the entry into force of FATCA. What did this give the special services? From now on, all countries or their financial institutions must submit information for FATCA purposes to the IRS about America's taxpayer clients. The law is, to put it mildly, arrogant, since it affects the interests of not only US citizens, but also legal entities of all other states.
Levers of influence, method of control over the execution of FATCA
In order to freely transfer information to FATCA, foreign financial institutions or countries are invited to enter into special agreements with the relevant US service to ensure control over the accounts of taxpayers of the American country. All those who refuse the offer will face a number of surprises, which include measures such as sanctions, forced withholding of 30% of the amount of customer transfers through the US banking system, as well as through banks that have signed such an agreement, or even closing access to the main reserve currency for entire countries. with a subsequent reduction in the part of international trade. Therefore, behind the signing of the agreement, an impressive line has lined up, consisting of various states and individual financial organizations that understand the importance of the US system in the movement of funds, but at the same time try to avoid violating the law on privacy. An agreement can be concluded not only with various countries in an intergovernmental form, but also with individual financial institutions, if the state on whose territory they operate cannot accept this agreement for some reason.
Agreement Models
Since the FATCA law provides for two options for intergovernmental agreements, there are also two models for the transfer of information provided by them:
- According to the first model, financial institutions submit reports on customer accounts related to American taxpayers to the internal services of their country. Subsequently, these services transfer the information to the special services of the United States.
- The second model implies the transfer of data on such customers by the financial institutions themselves, which have entered into a direct agreement with the US tax authorities.
By 2017, the Russian Federation had not signed an intergovernmental agreement for the transfer of information for the purposes of FATCA. What does this mean for Russian citizens? Formally, banks and other organizations are not required to report to the services of America. But this circumstance promises the clients of Russian financial institutions unwanted problems in settlements and transactions through American correspondent accounts in the form of sanctions.
Russian legislation gives the go-ahead for domestic banks to transfer information to US services
As a result of heated discussions Russian government On the subject of the entry into force of FATCA, its possible consequences and contradictions with the laws of the Russian Federation, the head of state signed a law designed to help domestic financial companies register on the website of the US tax services to comply with FATCA. How does this allow Russian organizations? Legally share the required US taxpayer information as part of an information exchange agreement, but only with the client's consent. In case of receiving a refusal to transfer data from him, any bank has the right not to work with this person. Before transmission, all data must go through the Central Bank and Rosfinmonitoring, which has the right to stop it.
FATCA reporting form
In an attempt to eliminate unwanted deductions from customer accounts, 90% of banks and organizations from Russia privately agreed to an agreement and registered with federal service USA. Therefore, when opening accounts in many banks today, one may encounter the inevitability of filling out a certain document. The FATCA form is a short questionnaire with which it is easy to determine the need to transfer information about this client to the American services. If the client has nothing to do with taxes in the United States, then information about him will remain closed to American services.
Bankers' fears
This information gathering mechanism may not be effective enough, resulting in fines, withholdings or losses incurred by companies when registering identification numbers (GIINs). The absence of such a number from a financial institution is the basis for the application of sanctions against it for non-compliance with FATCA. The number of domestic institutions that will manage to maintain the GIIN after data transfer remains unclear in 2017. Many bankers express fears that the American government, if it wants to, will find a lot of irregularities in its actions. Russian organizations... Therefore, the threat of sanctions in connection with FATCA violations is more real than the possible blocking of payment systems, which banks predicted. FATCA has many ambiguities and ambiguities that leave a wide margin of appreciation for the enforcement agencies.
Registration for FATCA purposes, Sberbank. What is it?
One of the first organizations to register with the US Tax Service (IRS) is Sberbank. The full company, which includes the main department and 208 institutions under its control, received the status of a financial institution that meets the requirements of FATCA. What does it mean? Sberbank is obliged to identify among its clients those who are involved in paying taxes in the States. At the date of registration, the bank has about 20,000 customers who are American citizens or are among the other categories liable to pay tax in this country. These include:
Legal entities:
- organizations where residents have a share of more than 10%;
- companies registered in America.
Individuals:
- American citizenship;
- green map;
- birth in America;
- mailing address in the United States;
- American phone number;
- issued power of attorney for a person with an address in the United States;
- the right to sign a person with the same address;
- instructions for transferring amounts in the United States;
- address "on demand", if it is the only one for the account.
In the future, the number of clients belonging to these categories may increase, since there are no obstacles to serving persons who are ready to consent to the transfer of information to the States. This information is required to fulfill the mandatory conditions of FATCA (Sberbank). What does this change in service? Sberbank asks to fill out an additional questionnaire attached to the package of documents.
Bank procedure
When working with clients, Sberbank determines the FATCA status for each based on the data from the completed questionnaires, and then generates a report. Based on the results of the information received, those who are related to American taxes are identified. Then what happens:
- Informing the client about the presence of signs of belonging to the American taxpayers.
- Customer confirmation of status using Form w-9 or w-8. Or documentary evidence of non-compliance with this.
- Obtaining consent from the client for the transfer of data to the IRS. Or, in the absence of refutation forms or documents, his transition to the status of refuseniks.
The fact of Sberbank's registration with the IRS obliges it to provide, if necessary, access to the American government to the accounts of US taxpayers located at the Sberbank institution in the Russian Federation. At the same time, Sberbank sees no obstacles to fulfilling its regular duties with the emergence of the need to inform the States about the savings of their taxpayers.
Russia's accession to the European FATCA
Soon Russia will have to join Euro-FATCA. This is a new bill, similar to the American one in regulation, but in contrast to which, in case of refusal to cooperate, it does not provide for penalties, but complete ban activities for refuseniks in the EU. Russia's accession is planned for 2018 within the framework of the European Convention of 1988, according to which the participants are obliged to provide each other with assistance and exchange information on tax matters. From the day of joining Euro-FATCA Russian services will be able not only to transmit data about EU taxpayers, but also to receive information about European accounts of domestic citizens.
FATKA is a Russified abbreviation with of English language, which stands for the Foreign Account Tax Compliance Act of the United States of America (FATCA). This law is also referred to as the Foreign Account Tax Law. In accordance with this law, foreign financial institutions (registered outside the United States) must inform the IRS (International Revenue Services) of so-called "US customers"
including those outside the United States.
- What is the purpose of FATKA?
The FATCA was adopted to prevent tax evasion by US taxpayers who hold accounts with financial institutions outside the US or investment offshore instruments.
FATCA requires financial institutions outside the United States to identify their customers based on certain criteria, collectively referred to as "United States characteristics," and provide the IRS with information about such customers in accordance with intergovernmental agreements signed between governments. USA and other countries.
- When do FATCA provisions start to apply?
CB COMERTSBANK JSC informs the US Internal Revenue Service directly (not through the Ministry of Finance of the Republic of Moldova), in accordance with the Type 2 Intergovernmental Agreement signed by the governments of the Republic of Moldova and the USA on November 26, 2014.
According to the Intergovernmental Agreement, KB KOMERTSBANK JSC registered on the IRS portal and received the GIIN (Global Intermediary Identification Number) code: VY0Z9.99999.SL.498 by fulfilling the requirements of FATKA.
- Who is affected by FATKA?
FATKA provisions affect individuals and legal entities, customers financial institutions Republic of Moldova with tax liabilities to the United States and receiving taxable income outside the United States, namely:
- American citizens and American tax residents;
- citizens without American citizenship, but staying in the United States for at least 183 days, which are calculated as follows: all the days during which you were in the country during the current year (at least 31 days), and 1/3 of the number of days during which you were in the country during the year immediately preceding the current year and 1/6 of the number of days during which you were in the country during the second year preceding the current year;
- US legal entities;
- foreign non-financial legal entities (non-SUA), the substantial owners of which (with a minimum interest of 10%) are US citizens and tax residents.
Non-residents of the United States for tax purposes: teachers, students, interns who are temporarily in the United States on the basis of visas of the following categories: F, J, M şi Q.
- What does the FATKA status mean?
The FATKA status is the status assigned by the Bank to those of its clients, individuals and legal entities, who meet the FATKA criteria and to which the Bank must apply the procedures provided for by the FATKA.
- How will FATKA affect clients?
All clients of CB "KOMERTSBANK" JSC will be subjected to an identification procedure to establish their affiliation with the holders of US accounts. US account holders will be assigned FATCA status as a result of identifying US attributes and will be required to provide the information requested by the Bank.
- What are the consequences for clients who refuse to provide the Bank with the information necessary to establish the FATKA status?
Clients who fail to provide information on the basis of which the Bank can make a decision on granting them FATCA status will be qualified as US account holders - refuseniks and information about them will be provided to the US Internal Revenue Service.
- What is meant by a “refuser client”?
A “refusenik client” means the owner of a bank account, an individual or legal entity, who:
- did not respond to the Bank's request for the submission of documents required to be assigned FATCA status or information required to be submitted to the IRS (valid form W-9, correct name and US taxpayer number, etc.);
- did not consent to the provision of his personal data by the Bank to the US Internal Revenue Service.
- What is the US Taxpayer Identification Number (US TIN)?
The US Taxpayer Identification Number (US TIN) is the US taxpayer identification number used by the IRS in tax administration.
A U.S. taxpayer number can be:
- SSN(Social Security Number) - number social insurance US citizen;
- ITIN(Individual Taxpayer Identification Number) - US taxpayer identification number;
- ATIN(Adoption Taxpayer Identification Number) - US taxpayer identification number for children adopted in the US.
- What are Forms W-9, W-8BEN, and W-8BEN-E?
The Bank uses the information provided by customers in Forms W-9, W-8BEN and W-8BEN-E to make a decision on granting them the FATKA status. Clients independently fill out and submit these forms to the Bank. Otherwise, the clients will be considered “refusenik clients”, which will entail the Bank's actions as described above.
To fill out these forms, customers must follow the instructions for filling them out, which are published on the website of the US Internal Revenue Service (https://www.irs.gov):
Form W-9 is completed by both individuals and legal entities and is a confirmation by the account holder of his status as a person related to the United States.
Form W-8BEN is filled in only by individuals and is a confirmation by the account holder of his status as a non-US person.
Form W-8BEN-E is filled in only by legal entities and is a confirmation by the account holder of his status as a person not related to the United States.
- I am a client of CB "KOMERTSBANK" JSC. The bank informed me that I have US signs. Am I obliged to provide the Bank with the requested documents?
You are advised to submit the requested documents to the Bank. In the event that you do not provide the Bank with the corresponding completed form, you will be considered a “refuser client” in relation to FATCA, and the Bank will be forced to report information about your accounts to the IRS, even if they are not signed
The FATCA (Foreign Account Tax Compliance Act) was passed in the United States on March 18, 2010. The main goal is to prevent tax evasion by US residents. For Russian banks and many other financial institutions, this means that, starting in 2016, it will be necessary to inform the US Internal Revenue Service (IRS) of all accounts and income of American tax residents in their possession.
By December 31, 2015, most banks need to decide: either join FATCA (PFFI is a foreign financial institution participating in FATCA) and report to the US tax authorities about the clients they are interested in, or not join and end up in NPFFI status (not a foreign financial institution that has joined FATCA). financial institution).
NPFFI status is associated with significant risks for banks. Most payments to a non-affiliated financial institution from PFFI (FATCA Affiliated Financial Institutions around the world) will be subject to a penalty of 30% of the payment amount. This applies to payments to both NPFFI and its clients.
The Russian financial community has made its choice. By the summer of 2015, more than 90% of Russian banks had joined FATCA (full list of affiliated financial institutions).
This material proposes specific steps that banks should take in the very near future - at the end of 2015 and the beginning of 2016.
Let's consider the basic business process for preparing and submitting to the IRS the form 8966 provided by the tax service. The process is summarized in the diagram below, the points of which we will refer to below.
First of all, it is necessary to identify the customers who may be American tax residents (clause 1.).
The main features of an American tax resident for an individual:
- US citizenship.
- Resident status, i.e. Green Card.
- Place of birth in the USA.
- US address, US mailing address (incl. PO Box).
- Telephone number in the United States.
- Standing guidelines for US transfers.
- Power of attorney issued to a person with a U.S. address.
- Signature Authority Granted to Person with a U.S. Address.
- On-demand address as the only address for the account.
The main features of an American tax resident for a legal entity:
- USA as the country of incorporation or registration.
- Organizations in which US tax residents have more than 10% ownership.
If a sign is found that indicates that the client can be an American tax resident (account holders with U.S. Indicia), the PFFI bank must determine the FATCA status of the client (clause 3). For this, the bank collects the necessary information for correct identification and preparation of 8966 forms (clause 2). Depending on the client's FATCA status, the bank generates an individual report for each client or a summary report for all clients of a certain type of FATCA status.
Ideally, the sequence of actions is as follows:
Stage 1 . The client is notified that he has signs of an American taxpayer.
Stage 2. Customer or confirms its tax status shape W-9 / W-8 or provides documents confirming that he not falls under US tax jurisdiction.
Stage 3. The client gives or does not give his consent to provide information to the IRS (clause 6). If at the first stage he did not provide either tax forms or confirmation that he is not an American resident, then he receives the status of Recalcitrant account holders with U.S. Indicia, and then there is no point in asking him for permission to provide data to the IRS, individual reports on him are not sent to the IRS.
The main FATCA statuses, on the basis of which the form 8966 is filled out, are as follows:
Customer |
Authorized to provide information to the IRS |
Did not allow submitting information to the IRS |
||
Description |
FATCA client status |
Fillable Parts of Form 8966 |
FATCA client status |
Fillable Parts of Form 8966 |
Individuals: Legal entities registered in the United States, in respect of which there are no established restrictions |
Specified U.S. persons |
Recalcitrant account holders that are U.S. persons |
Part 5 - one summary report for all clients for each FATCA status option |
|
Non-US companies (other than financial companies) that are controlled by Specified U.S. persons |
Passive NFFE with substantial U.S. owner (s) |
Recalcitrant account holders that are passive NFFEs |
||
Physical and legal entities showing signs of American taxpayers |
Recalcitrant account holders with U.S. Indicia |
|||
Financial companies(including bank) not participating in FATCA |
Non-participating FFI (NPFFI) |
|||
Customers holding inactive accounts with the bank |
Dormant Accounts |
It should be noted that the deadline when the bank must request documents from tax residents confirming their payment of taxes in the United States is June 30, 2016, and data must be sent to the IRS for all clients earlier - before March 30, 2016.
Therefore, some banks have decided to submit individual forms to the IRS for all clients who have allowed data to be submitted to the IRS who have submitted the required information for Form 8966, including the TIN - Taxpayer Identification Number. Forms W-9 and W-8, these customers can transfer to the bank later, by June 30, 2016.
Annually, by March 30 of each year, a financial institution must prepare information for the IRS in accordance with Form 8966 (clause 7) - individual for each resident (clause 7A) and consolidated by groups of residents (clause 7B), in accordance with the above FATCA -stats.
The generated report (which is an XML FATCA file) is encrypted and sent to the IRS using the International Data Exchange Service (IDES) (clause 8).
This general scheme, provided for by FATCA, has undergone changes in connection with the requirements of Russian legislation - Federal Law No. 173-FZ dated June 28, 2014 "On the specifics of financial transactions with foreign citizens and legal entities ... ".
The main legal requirements that affect the business process of preparing reports for the IRS:
Prohibiting disclosure of information to US tax authorities for certain types of clients: collecting and transmitting information to the IRS about accounts is prohibited individuals- citizens of the Russian Federation who do not have a second citizenship outside the countries - members of the Customs Union, or a residence permit in a foreign state.
The need to obtain permission from the regulator to transfer data to the IRS for each client.
Mandatory provision of all information sent to the IRS, also to Russian regulators.
To fulfill these requirements, after identifying the client and determining his FATCA status, the bank (clause 4) checks the possibility of transmitting data to the IRS, in accordance with 173-FZ, and, if there are no general restrictions, then directly requests the regulator about the possibility of providing information. And only in case of obtaining permission from the regulator (clause 5), the bank requests permission to provide information from the client himself (clause 6).
As a result, reporting to the IRS is a complex technological task, even in the simplest case described above. In practice, however, things can be much more complicated.
For example, in the given business process it is assumed that all data on customers, accounts, transactions and income is stored in a single information system where the entire business cycle is organized: from the selection of "suspicious" clients to the recording of the facts of correctly received IDS reports.
At the same time, in practice, there may be several accounting systems at the entrance (and in large banks this is more the rule than the exception). For example, the ABS records interest income received from deposit accounts, while financial back offices take into account dividends and coupon income. In this case, the import, control and consolidation of data is carried out in order to obtain all information structured by customers: for all their accounts, transactions and income.
Banks are already automating the sending of customer data to the IRS, and this is only the first, easiest part of the work to support FATCA requirements.
From January 1, 2017, penalties will begin on the income of “refuseniks” (those persons who refused to disclose their resident tax status) received from sources in the United States. The penalty will be a 30% deduction from the FDAP (Fixed, Determinable, Annual and Recurring Income). FDAP includes interest income, dividends, royalties, rent, payment for services rendered, proceeds from the sale of American assets (including, valuable papers) etc.
This will require the correct calculation of the FDAP income. To do this, it is necessary to determine the statuses of all "suspicious" payments and take into account all provided exceptions. In addition, it will be necessary to deposit withheld fines, to interact correctly with Russian regulators (while 173-FZ does not provide for withholding tax in favor of foreign tax authorities) etc.
At this point, the bank should have kept all tax forms submitted by clients who have received FATCA status. At the same time, the law provides not only for the obligation of the bank to request tax documents, but also regulates the minimum storage periods, requires fixing the date of receipt of the documents, etc.
Thus, meeting the FATCA requirements in 2017 will require efficient work with a large amount of information, which must be consolidated into a single solution. That is why many banks, especially large banks or those with an extensive IT structure, need a specialized solution to comply with FATCA requirements, which will allow accounting and analysis of primary data submitted to the IRS reports on all clients with various FATCA statuses, tax documents and their timing. receiving from customers, etc.
A year ago, having analyzed the entire package of requirements related to FATCA, we came to the need to create a specialized industrial solution "Programbank.FATCA» .
Of course, the first customers were large banks who quickly realized the scale of the problem and had already done the necessary preliminary work. We are currently running two FATCA projects in top 50 banks. One of them has Western shareholders, which poses a number of additional requirements for us.
Tax principles have many pitfalls. Citizens of one country can live in another state, and receive profits in a third. In such a situation, it is difficult to track them. cash flows... Some residents hide their true income and do not fulfill their tax obligations. The problem of American tax evasion was resolved in 2010, when the Foreign Account Tax Compliance Act was adopted in the United States. American FATCA law - what is it? Like normative act aimed at taxing money held in foreign banks. According to this law, all financial institutions are required to report to the American Revenue Service information about the accounts of American residents opened with them. The rule applies to all countries, including Russia.
Russian banks had two options: to join the program and report on the finances of their American clients, or to refuse and pay a fine of 30 percent of the profits of American assets. 90% of credit and financial institutions in Russia agreed to participate in this project. According to the requirements of American structures, they registered on the IRS website and became part of the project participants. According to the law, they are required to identify their American clients by their citizenship, place of birth, presence of a green card, address of permanent residence. Bank employees draw up all personal data and account transactions in individual reports, which are encrypted and sent to central bank RF, Rosfinmonitoring and Internal Revenue Service USA. Upon receipt of a request for a specific resident from the IRS Russian bank undertakes to forward the letter to the Central Bank and Rosfinmonitoring within two days. These structures, within ten days, make a decision on the provision or prohibition of the transfer of information on the required person to the foreign tax service.
FATCA Tracks American Citizens' Bank Accounts Abroad
Objectives of the law
The purpose of this initiative is to legalize and tax the hidden from the state finances of Americans, which are stored in foreign territory. Thanks to this law, banking organizations in all countries monitor their customers. They find Americans among them and provide information about their monetary manipulations on accounts opened in the bank to the American tax authorities.
Whom FATCA rules apply to
The law applies to individuals and legal entities who have a bank account in one country, and citizenship in another. The category of persons covered by the law includes:
- People who have been in the states for a long time.
- Green Card holders.
- Having a US passport.
- American phone number, address and other contacts provided to the bank.
The financial firm can request such data from the client at any time. In some cases, additional information will be required for FATCA purposes. What is it? This includes a certificate from the US Department of State on the form DS 4083, which indicates the loss or renunciation of citizenship of persons born in the United States. Optional documentation will also be required when the account holder does not hide his financial situation and the bank asks for a request for his identification number. To do this, the client fills out Form W-9 to form the name of the payee. In addition to her, you will need to prepare one more document.
Banks are required to report customer accounts
Filling out the questionnaire
Bank employees enter all personal data of their clients in a special form. It then goes to the state tax office. The FATCA questionnaire includes several sections:
- surname and name of the client;
- date of birth;
- passport details;
- permanent or temporary registration address;
- country of birth;
- indication of the states in which the client pays taxes.
The template is universal for all financial structures. Sberbank's FATKA questionnaire has been drawn up in strict accordance with the legislation of the Russian Federation. According to him, information about the movement Money on the deposit belong to bank secrecy.
The questionnaire contains a clause where the client can refuse to provide personal information. This is permissible if he has citizenship of the Russian Federation or a second citizenship in a member country of the EEC Customs Union.
Compliance with the requirements of the law
Banks that have adopted the America's regulation have registered on the US Internal Revenue Service website. After that, each organization was recognized as a financial institution that complies with the norms established by the United States. All participating banks received their GIIN (Global Intermediary Identification Number). So, Russian companies signed up to comply with the requirements of American structures, find in their client base foreigners and provide information on their deposits and contributions. Employees of Russian banks submit reports on accounts of American clients to the states every year.
There has been a lot of excitement in the banking environment since the entry into force of the American law known as FATCA. What does this mean and how does this abbreviation stand for? The Foreign Account Tax Act is federal law(Foreign Account Tax Compliance Act), aimed at forcing American citizens, including those permanently living outside the United States, to draw up annual declarations regarding their foreign financial assets.
The international cooperation
The practical application of this provision requires assistance from banking institutions all countries of the world. A 2010 law obliges foreign financial institutions to verify that their clients have US citizenship. It is important to note that it is not only the possession of an American passport that means the need to pay taxes in this country. The fact of birth in the United States and certain other conditions may lead to the assignment of the status of a person accountable to the Internal Revenue Service and subject to the FATCA law. What is this organization? The Internal Revenue Service is the main federal body responsible for tax collection and financial compliance.
Tasks
According to unofficial information, American citizens permanently living in other countries were not the main targets of FATCA. The main task was to identify the overseas assets of US residents who do not think about emigration, but prefer to keep their money outside their homeland. According to the calculations of the creators of the FATCA law, the return of such taxpayers to the attention of the fiscal authorities should have significantly increased the state budget... By some estimates, the new rules affect approximately 9 million people. FATCA even requires companies and corporations outside the jurisdiction of the United States if they include American citizens.
Analogies
It is almost impossible to find another state in the world that applies such draconian measures in the field of taxation. Eritrea has a similar policy for its citizens permanently residing abroad. But this African country offers ex-patriots a voluntary procedure for paying taxes. The uniqueness of the FATCA requirements lies in the fact that they apply not only to citizens. Persons designated by the unusual phrase "persons with tax obligations to the United States" are subject to this law.
According to unconfirmed reports, the loss of the state budget, which is caused by the concealment of foreign assets by citizens, amount to approximately $ 100 billion a year. However, it is not possible to reliably determine the amount of undeclared income.
Bank participation
The American FATCA law is implemented in practice in two main ways. It requires foreign financial organizations to conclude an agreement with the Internal Revenue Service. In accordance with this agreement, banks assume the responsibility of identifying customers who are classified as American taxpayers in their databases. Financial institutions are required to disclose the holders of FATCA-compliant accounts. What does this mean? The names, addresses and transactions of persons suspected by banks of being liable to pay taxes in the United States are disclosed to the Internal Revenue Service. Information on some types of accounts is not disclosed. This mainly concerns pension savings that are subject to tax incentives.
Individual disclosure of information
US citizens with overseas financial assets must independently report them to the Internal Revenue Service by filling out a special form. FATCA provides for a fine of 40% of the amount of funds stored in a foreign account in case of concealing information about its existence from the American authorities. Foreign assets may be cross-checked with financial institutions that have entered into an agreement with the Internal Revenue Service.
Identification
There is a list of standard signs indicating the likely affiliation of the client banking organization to the category of persons falling under the definition of FATCA status. What are these criteria? Financial institutions pay attention to the fact that the account holder was born in the United States. It is worth noting that this serves as a good reason for obtaining citizenship of this country. Another sign is the presence in the United States of a telephone number, residence or mailing address, even in the form of a rented PO Box. Customer-carried out suspicions Money transfers to accounts in American banks.
Examination
Financial institutions liaising with the US tax authorities ask their clients to complete a special FATCA questionnaire... What it is? This form contains questions to identify individuals who are subject to the law. The questionnaire that aroused suspicion becomes the subject of further investigation. In Russia, if the client is unable to documentarily refute the assumption of the status of an American taxpayer, the bank invites him to sign a formal consent to disclose personal data and information about transactions to the US authorities. If the account holder refuses to do so, the financial institution has the right to terminate the service.
Interaction methods
There are two options for banks to cooperate with the US tax authorities in the implementation of the FATCA law. What are these schemes? The first model provides for the transfer credit institutions information to the government of their country. The government then shares the information with the US fiscal authorities. The second model is based on direct interaction between banks and US tax authorities. Russian financial institutions participate in the practical implementation of the Foreign Assets Act in accordance with the first scheme and at the initial stage provide the Central Bank and Rosfinmonitoring with the necessary information, which make the final decision on the transfer of information to the US Internal Revenue Service.
How to apply pressure
The American government had to apply some harsh methods of influencing foreign banks in order to attract them to cooperate in the implementation of the FATCA law. What are these levers of influence? The Foreign Assets Law provides for serious fines and penalties for refusing to conclude an agreement, up to limiting access to the world's reserve currency. Measures of pressure include withholding 30% of transaction amounts for bank account holders who do not comply with US tax reporting requirements.
Budget receipts
Expert assessments of the financial effectiveness of the Foreign Assets Law differ greatly. According to the estimates of the Congressional Taxation Committee, the application of the act brings in about $ 800 million annually to the state budget. Independent analysts' assessments are more pessimistic. In their opinion, the implementation of this law in a voluntary and compulsory manner provides income to the US budget in the amount of 250 to 400 million dollars a year. However, even the most optimistic figures cannot be compared with the multibillion-dollar losses associated with tax evasion by placing capital in foreign jurisdictions.
Criticism
According to a number of experts, the costs of financial institutions caused by compliance with FATCA requirements are several times higher than the amount returned by this law to the US state budget. The Foreign Accounts Act reduced the number of tax evasion cases by about 1%.
Law enforcement mechanism based on punitive methods such as withholding sums of money when transactions in the American banking system, leads to the reluctance of financial institutions to make investments in the US jurisdiction.
The concept of taxation, the main criterion of which is citizenship, and not permanent residence, has been harshly criticized. From the point of view of the US authorities, American ex-patriots automatically turn into financial criminals. According to statistics, over the past few years, the number of cases of renunciation of the citizenship of this country has increased significantly.
The implementation of FATCA was contrary to the laws of some states. For example, until 2014, Russian banks were not allowed to transfer information about their customers to foreign authorities. This ban was lifted in order to protect financial institutions from fines and sanctions associated with the new US law.