The introduction by the US of the Foreign Account Tax Compliance Act 2010 (FATCA) set the proverbial cat amongst the pigeons in the international loan financing markets by requiring foreign and domestic borrowers, lenders and agents suddenly to consider and deal with the application of this legislation to their transactions and allocate FATCA risks to one or other party even in cases where there is no obvious US nexus.
Under FATCA, certain specified categories of non-US financial institutions (FFIs) are ‘invited’ by the US Internal Revenue Service (IRS) to enter into an agreement under the terms of which they are required to provide certain information about their US account holders to the IRS (irrespective of whether or not their domestic laws allow the disclosure of such information). An FFI which accepts such an invitation is referred to as a participating FFI (PFFI) and one which does not is referred to, rather uninspiringly, as a non-participating FFI. Declining this invitation has its consequences – primarily FATCA imposes US withholding tax (currently 30%) on a wide variety of payments made to such a non-participating FFI. Furthermore, a PFFI (as reward for accepting such an invitation) is required to assume more obligations (namely to act as the taxing agent of the IRS) and to withhold US tax (currently 30%) on account of FATCA from both US and some non-US source payments to non-participating FFIs.
Originally published in Financial Instruments - April 2013.
Please see full article below for more information.
Firefox recommends the PDF Plugin for Mac OS X for viewing PDF documents in your browser.
We can also show you Legal Updates using the Google Viewer; however, you will need to be logged into Google Docs to view them.
Please choose one of the above to proceed!
LOADING PDF: If there are any problems, click here to download the file.