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Foreign Account Tax Compliance Act

Foreign Account Tax Compliance Act (FATCA)

What is FATCA?

FATCA stands for the Foreign Account Tax Compliance Act.

Introduced by the United States Department of Treasury and the US Internal Revenue Service (IRS), the purpose of FATCA is to encourage US taxpayers to comply more effectively with tax rules. In this regard, FATCA requires non-US financial institutions to identify and report US taxpayers annually.

On 28 March 2014, Luxembourg agreed to enter into an Inter-governmental Agreement (IGA) with the US, published on 24 July 2015 (in Mémorial A - No 145 of 29 July 2015 and in Mémorial A – No 158 of 12 August 2015) and which entered into force on 29 July 2015 (Mémorial A – No 156 of 10 August 2015).

 

HOW DOES IT IMPACT THE BANK?

In accordance with the requirements of the abovementioned agreement, KBL epb documents all its customers in order to identify its so-called 'US' customers. To do this, KBL epb collects from each direct or indirect customer the appropriate US form (US form W-8BEN / W-8BEN-E / W-8BEN-E / W-8IMY / W-8EXP / W-9) and any other additional documents required.

Based on this identification process, each year KBL epb communicates reportable customers and reportable accounts to the US tax authorities (IRS) via the local tax authorities (Administration des Contributions Directes). This communication includes, for each person reported, information relating to the assets and financial accounts held directly or indirectly.

In addition, KBL epb may be required to report information about customers who are not US persons but who do not provide the required documentation.

Where clients fail to provide the appropriate documentation and/or when doing business with non-compliant entities, KBL epb may be required to apply a 30% US withholding tax on certain types of US income paid to such clients.

 

How does it impact you?

KBL epb contacts all its customers in order to collect the appropriate US form.

For the purposes of FATCA, the forms are only to be updated if there is a change in circumstances (change of country of tax residence, change of business, name, beneficial owner, etc.). This update must be made within a period of a maximum of 30 days under the risk of being classed as reportable and subject to higher taxation on income from US sources.

 

What exactly is reported to local tax authorities?

The information reported to the tax authorities will be of a non-financial nature (name, first name, address, date of birth, taxpayer identification number) and of a financial nature (account number, account balance, income paid into the account).

 

Which US forms should be completed?

ALL NATURAL PERSONS WHO ARE ACCOUNT OR JOINT ACCOUNT HOLDERS

  • A W-8BEN form for any natural person customer with no connection to the United States.
  • A W-9 form for any US Person customer (customer by nationality, birth or US residence).


ALL LEGAL PERSONS WHO ARE ACCOUNT HOLDERS

  • A W-9 form for any company defined as a US Person (created or organised in the United States or under the laws of the United States, or a US-based branch of a non-US company).
  • A W-8 form for any company which is not a US Person:
    • A W-8BEN-E form (Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting), for all companies acting on their own account.
    • A W-8IMY form for all companies acting as an intermediary or flow-through entity. Note: In most cases, the W-8IMY form must be accompanied for Q.I. needs by a Withholding Statement, which can be obtained from your manager.
    • If the company is a flow-through entity (e.g. partnership, société civile, grantor trust, simple trust, etc.), then a W-8BEN or W-9 form for each beneficiary, partner, or owner of the company is also required.

Please refer to the instructions on the IRS website for more information.


For legal reasons, KBL epb is not authorised to advise you on your tax situation or your FATCA status. In order to avoid the most common errors, we invite you to consult the IRS website or contact a professional tax advisor.