y F INN D IXON & H ERLING LLP Who is Affected by FATCA? Presented by: Maury Cartine, JD, CPA, Partner, Marcum LLP Michael P. Spiro, Tax Attorney, Finn Dixon & Herling LLP
• A “financial institution” that is a • “foreign entity” y 2
An entity that: • • Accepts deposits in the ordinary course of a “banking or similar business”; • Holds as a “substantial portion of its business financial assets for the account of others”; • “Is engaged “primarily in the business of investing, reinvesting or trading” in securities, partnership interests, commodities, notional principal contracts, insurance or annuity contracts; or • Is an insurance company (or holding company of an insurance company) that issues or is obligated to make payments with respect to a “financial account.” y 3
Accepts deposits of funds; • M akes personal, mortgage, industrial or other loans; • Purchases, sells, discounts or negotiates accounts receivable, installment • obligations, notes, drafts, checks, bills of exchange, acceptances, or other evidences of indebtedness; Issues letters of credit and negotiates drafts thereunder; • Provides trust or fiduciary services; • Finances foreign exchange transactions; • Enters into, purchases or disposes of finance leases or leased assets; or • Provides charge and credit card services. • y 4
• Entity’s gross income attributable to the holding of financial assets and related financial services is 20% or more of the entity’s gross income during the shorter of: • The three year period ending on December 31 of the year in which the determination is made; or • The period during which the entity has been in existence. y 5
• Entity’s gross income from investing, reinvesting and trading is 50% of more of the entity’s total gross income during the shorter of: • The three-year period ending on December 31 of the year in which the determination is made; or • The period during which the entity has been in existence. y 6
A depository account; • A custodial account; • An equity or debt interest (other than interests that are regularly traded • on an established securities market) in a financial institution that is: • A financial institution solely by reason of being engaged primarily in the business of investing, reinvesting or trading; or • Any other financial institution, but only if the value of the debt or equity interest is determined directly or indirectly primarily by reference to assets giving rise to withhold able payments. Any cash value insurance contract. • y 7
An entity that is not a “U.S. Person” • “U.S. Person” • • a citizen or resident of the United States; • a partnership created or organized in the United States or under the law of the United States or of any State; • a corporation created or organized in the United States or under the law of the United States or of any State; • any estate with income that is effectively connected to a trade or business within the United States; • any trust if-- a court within the United States is able to exercise primary supervision over the � administration of the trust, and one or more United States persons have the authority to control all substantial � decisions of the trust. • the United States government; • a State or the District of Columbia. y 8
• A foreign entity that is not a financial institution. • A “Passive NFFE” is an NFFE that is not an “Excepted NFFE” (as described herein). y 9
Corporations • • Generally 1 or more chains of corporations connected through stock ownership with a common parent corporation if— � the common parent owns directly stock possessing more than 50% of the vote and more than 50% of the value of at least 1 of the other corporations, and � stock possessing more than 50% of the vote and more than 50% of the value of each corporation is owned directly by 1 or more of the other corporations. Partnerships and other entities • • A partnership is included in the expanded affiliated group if more than 50% of the value of the entity is owned by members of the expanded affiliated group. y 10
y Parent (UK corporation) y Sub 1 (Spanish y Sub 2 (French corporation) corporation) y 21% y 30% y Cayman limited partnership y 11
• Deemed Compliant FFIs (“DCFFIs”) • Registered Deemed Compliant FFIs • Certified Deemed Compliant FFIs • Owner Documented FFIs • Participating FFIs (“PFFIs”) • Non-Participating FFIs (“NPFFIs”) • Excepted FFIs (“EFFIs”) • Excepted NFFEs (“ENFFEs”) y 12
• Registered Deemed Compliant FFI: • M eets one of 4 criteria and complies with procedural requirements. • 4 types of Registered Deemed Compliant FFIs: � Local FFIs � Nonreporting M embers of PFFI Groups � Qualified Collective Investment Vehicles � Restricted Funds y 13
The FFI is licensed and regulated under the laws of its country of origin (which is � FATF compliant) as a bank or similar organization authorized to accept deposits in the ordinary course of business, a securities broker/ dealer, financial planner or investment adviser. The FFI has no fixed place of business outside its country of organization. � The FFI does not solicit account holders outside its country of organization. � The FFI is required under the tax laws of its country of organization to perform � either information reporting or withholding of tax with respect to accounts held by residents. At least 98% of the accounts held by the FFI are held by residents of the country � in which the FFI is organized. The FFI puts into place procedures to prevent the opening of accounts for any � specified U.S. Person or NPFFI. If the FFI is a member of an expanded affiliated group, each member of the group � must be incorporated or organized in the same country and must qualify as a local FFI. y 14
The FFI is a member of an expanded affiliated group that includes one or • more PFFIs. The FFI must review its accounts to identify any U.S. accounts or • accounts held by NPFFIs. If the FFI identifies any U.S account, it must within 90 days of identifying • the account, enter into an FFI Agreement, transfer the account to an affiliate that is a PFFI or U.S. Financial Institution or close the account. The FFI must implement policies and procedures to ensure that it will • identify U.S. accounts and transfer any such accounts to an affiliate that is a PFFI or U.S. Financial Institution. y 15
The FFI is an FFI solely because it is engaged in the business of investing, reinvesting or trading and must be regulated in its country • of organization as an investment fund. Each holder of record of direct debt interests in excess of $50,000 or equity interests in the FFI or any other account holder of a • financial account with the FFI must a PFFI, Registered Deemed Compliant FFI, U.S. Person described below or exempt beneficial owner. All other FFIs in the FFI’s expanded affiliated group must be PFFIs or Registered Deemed Compliant FFIs. • For this purpose a “U.S. person” is a U.S. person that is not a “specified U.S. Person”. This generally includes: • Publicly traded corporations and members of the expanded affiliated group of a publicly traded corporation; • Tax exempt organizations and IRAs; • The United States or any State or instrumentality thereof; • Any bank or real estate investment trust; • Any regulated investment company registered under the Investment Company Act of 1940; or • Any dealer in securities, commodities or derivatives. • Exempt Beneficial Owners • Foreign governments; • Political subdivisions of foreign governments; • Wholly owned instrumentalities and agencies of foreign governments; • International organizations and wholly owned agencies or instrumentalities of international organizations; • Foreign central banks of issue; • Governments of United States possessions; and • Certain foreign retirement plans. • y 16
The FFI is an FFI solely because it is engaged in the business of investing, reinvesting or • trading and must be regulated in its country of organization as an investment fund; Interests in FFI are only sold through “distributors” or redeemed directly by the restricted • fund. Distributors • The distributor is a PFFI, a Registered Deemed Compliant FFI or a restricted distributor. • Restricted Distributor • Provides investment services to at least 30 unrelated customers and no more than half of the � distributors customers can be related persons; The distributor is required to perform Anti-M oney Laundering due diligence under the laws of its � country of organization; The distributor operates solely in its country of organization and does not solicit customers � outside its country of organization; The distributor has no more than $175 million in total AUM and no more than $7 million gross � revenue for the most recent accounting year end; The distributor provides a Form W-8; and � The distributor is prohibited under its agreement from distributing securities to specified U.S. � persons. y 17
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