Taxing Times (or “for FATCA’s sake!”)

In 2010 the Foreign Account Tax Compliance Act (FATCA) became law in the United States (US). This act focuses on non-compliant US taxpayers with foreign accounts and assets.

Overview:-

  • The Foreign Account Tax Compliance Act (FATCA) requires the reporting of financial data to the US Inland Revenue Service (IRS) for all US taxpayers holding foreign financial assets with an aggregate value exceeding $50,000
  • Foreign Financial Institutions (FIs) operating in a jurisdiction that has signed an Intergovernmental Agreement (IGA) with the US are required to provide this data
  • On 13th December 2013 the States of Guernsey signed an IGA with the US
  • FIs operating in Guernsey are therefore required to submit FATCA reporting for clients that meet FATCA inclusion criteria
  • Guernsey’s Income Tax authority will act as a report collation intermediary and submit directly to the IRS, to the following deadlines:-
    • 30th June 2015 – Guernsey FIs to have made their first data submission to Income Tax
    • 30th September 2015 – Guernsey FIs to have submitted FATCA reporting for all US taxpayers’ foreign financial assets for the tax year 2014 to Income Tax

Guernsey:-

  • The chosen submission format for FATCA data is Extensible Markup Language (XML)
  • XML is a rigidly structured markup language that defines a set of rules for encoding documents in a format which is both (allegedly) human-readable and machine-readable
  • Guernsey’s Income Tax authority have partnered with Digimap to develop a centralised online reporting platform named Information Gateway Online Reporter (IGOR)
  • IGOR allows subscriber FIs to manually submit individual FATCA XML files as well as providing a web service that allows secure upload from other external systems
  • FIs are identified & authenticated on IGOR using a Global Intermediary Identification Number (GIIN)
  • IGOR also provides a secure messaging system between the IRS and Guernsey FIs
  • Donkeylogic is in a unique position to convert your company’s data into the required compliant XML data format.

Requirements:-

  • Identify US taxpayers, or potential US taxpayers, that have a collective net worth of or exceeding $50,000 and submit appropriate client identification and account data, in FATCA XML format, to the IRS using the IGOR platform
  • This requires the following steps
    • Register with FATCA
    • Identify US citizens that need reporting
    • Ensure that sufficient identification information, i.e. GIIN, TIN (Taxholder Identification Number) and KYC/CDD data is held & provided
    • Produce a valid XML document for FATCA reporting on the specified US citizens
    • Submit the XML to the IRS (via IGOR)
    • Deal with any additional requests from the IRS

Donkeylogic have been developing a FATCA reporting tool called FRU (Financial Reporting Utility) that is intended to also cater for upcoming Financial Reporting Requirements (UK FATCA / CRS / Russian FATCA, etc.) – more on that in our next blog post.

Information for this post has been resourced from the following websites:-