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COMPLIANCE ACT
(FATCA)
.
Rizwan Yousuf
Manager-Taxation Summit Capital (Private) Limited
U-M Tax and Shared Services Center Departments 2
Agenda
• What is FATCA?
What is FATCA
• New Law - FATCA requires foreign banks and certain
foreign companies with substantial U.S. owners to report
to the IRS information about their U.S. account holders or
owners.
• The goal is to prevent U.S. citizens from hiding their income
overseas.
• FATCA allows the IRS to reach around the world and track
down money that is taxable to U.S. citizens.
• How can the IRS enforce foreign banks and
businesses to report this information? - The IRS puts
the onus on the US buyers to ensure compliance.
• For payments that fall under the FATCA umbrella, if the foreign
bank or business does not comply with the law, the payer (i.e.
U-M) must withhold 30 percent.
• These withholdings are reported on Forms 1042-S.
U-M Tax and Shared Services Center Departments 4
Other Questions?
• Are all foreign vendors subject to this requirement?
• FATCA excludes individuals but includes all other foreign
vendors.
• What is the Timeline for this withholding?
• January 1, 2015 - U.S. buyers must begin withholding on FATCA
payments to new accounts held by non-participating FFIs and
passive NFFEs.
• Accounts existing before then are not affected.
• Jan. 1, 2016: All foreign accounts which includes accounts existing
prior to January 1, 2015 are now subject to FATCA withholding.
• Please note that payees can no longer rely on pre-FATCA
Form W-8s.
U-M Tax and Shared Services Center Departments 10
Impact on U-M
• Central Units – SSC will request for a W-8 BEN-E for
foreign vendors in accordance with the timeline noted and
any other required information to determine whether a
withholding is proper.
• It will work with Procurement and Tax for appropriate
consulting resources.
• Campus Units – SSC will need to work with units to
collect and obtain the necessary information. These units
may assist the process by collecting this form directly.
• Note that the need to collect this information should be prior
to paying any vendor.
U-M Tax and Shared Services Center Departments 11
Recap
• Is it a Foreign Vendor?
• If so, what certification form do they provide?
• If U.S. sourced income (the vendor is providing the services
on U.S. soil) then one of the following:
• Form W-8BEN
• Form W-8ECI
• Form W-8EXP
• Form W-8IMY
• If Non-U.S. sourced income, then use the Form W-8BEN-E.
• If Form W-8BEN-E - if the box “Participating FFI” or
“Active NFFE” is not checked then it should be reviewed
by the tax department to determine the need to withhold.
U-M Tax and Shared Services Center Departments 12
Questions?