The Foreign Account Tax Compliance Act (FATCA) is due to be implemented in 2013 though the Investment Management Association (IMA) is pushing for it to be pushed back “to allow governments and Foreign Financial Institutions (FFIs) to work through the requirements and set-up the necessary systems and procedures”.
One of FATCA’s requirements is for overseas banks to give up financial details, including bank balances, receipts and withdrawals, for any US account holder to the Internal Revenue Service. Not doing so could end up with that organisation incurring a 30% withholding tax.
In a letter signed by Jorge Morley-Smith, the IMA’s head of tax, he outlines three main points:
- FATCA compliance should not require FFIs in partner countries to introduce significant, burdensome new processes for client identification and documentation.
- The intergovernmental agreements should ensure that the requirement to withhold on passthru payments is eliminated or significantly reduced.
- Intergovernmental agreements should be harmonised to ensure that multinational FFIs are not subject to different regimes in each partner country.
While remaining positive about the regulatory changes FATCA will introduce, the IMA goes on to say that some of the rules “remain unworkable in some places” and need changing.
Julie Patterson, the IMA’s director of authorised funds and tax, added: “Many of our members invest in the US markets on behalf of their clients. We want to ensure that the implementation of FATCA does not hinder cross-border investment or add unnecessary compliance and administrative burdens and costs to firms and investors.”
