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 better tax compliance by preventing US persons from using banks and other financial organizations to avoid US taxation on their income and assets.

On 28 March 2014, Luxembourg agreed to enter into an Inter-governmental Agreement (IGA) with the US, which entered into force on 24 July 2015.

 

What actions will the bank be required to take?

In order to comply with FATCA legislation, KBL epb  conducts reviews of new and existing clients to identify those who are reportable under FATCA.

KBL epb  and the other financial organizations in Luxembourg report information on financial accounts held directly or indirectly by US persons to the US tax authorities (IRS) on an annual basis, through their local tax authorities.

In addition, KBL epb  may be required to report information about clients 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?

In line with FATCA, it is important that you provide us with the information and forms to establish your tax status under FATCA (please see the section on US forms). These forms have to be updated on a justified request from the Bank or when justified by a change in cirumstances (change of country of tax residence, change of business, name, etc.). This update must be made within a period of a maximum of 90 days under the risk of being classed as reportable and subject to higher taxation on income from US sources.

Due to legal restrictions, KBL epb  cannot offer advice on your FATCA tax status or classification. In order to  help you avoid common errors, please visit the IRS website or contact a professional tax advisor if you require assistance.

 

What exactly is reported to local tax authorities?

The information reported to the local tax authority will depend on your FATCA classification.

This information will typically be of a non-financial nature (for example, name, address, US taxpayer identification number), and of a financial nature (for example, 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

  • All non-US natural person clients must certify that they have no link with the United States by sending us a duly filled-in W-8BEN form.
  • All US natural person client must send us a duly filled-in W-9 form (whether you are a US citizen by country of nationality, birth or residence).
    Please refer to the INSTRUCTIONS available on the IRS website for more information.


ALL LEGAL PERSONS WHO ARE ACCOUNT HOLDERS

  • A company defined as a US person (created or organized in the United States or under the laws of the United States, or a US-based branch of a non-US company) should send us a W-9 form (Request for Taxpayer Identification Number and Certification).



    Please refer to the INSTRUCTIONS available on the IRS website for more information.

  • A company which is not a US person should send us the W-8 form corresponding to its type of company:

    • a W-8BEN-E form (Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting) for all companies acting on own account. In this document, the company itself declares its status under FATCA.



      Please refer to the INSTRUCTIONS available on the IRS website for more information.

    • A W-8IMY form for all companies acting as an intermediary or flow-through entity. In this document, the company itself declares its status under FATCA.
      Note: In most cases, the W-8IMY must be accompanied by a Withholding Statement, which can be obtained from your account manager.



      Please refer to the INSTRUCTIONS available on the IRS website for more information.

    • 

If the company is a flow-through entity (for example, partnership, société civile, grantor trust, simple trust, etc.), then a W-8BEN or W-9 per beneficiary, partner, or owner of the company is also required.



      Please refer to the INSTRUCTIONS available on the IRS website for more information.