WIN Magazine - Winter 2013 - (Page 24)
JUST THE FACTS-
QUESTIONS ON THE FOREIGN
ASSETS TAX COMPLIANCE ACT
TRADE press has
reported on numerous aspects of the
Tax Compliance Act
(FATCA). The respective provisions,
compliance requirements, implementation date and enforcement penalties associated with the Act have,
unfortunately, been less than clear.
The following is a presentation of
frequently asked questions about
FATCA for the benefit of Wholesale
WHAT IS FATCA?
The Foreign Account Tax
Compliance Act (FATCA) became law
in March 2010 as part of the Hiring
Incentives to Restore Employment
(HIRE) Act. FATCA is a law designed
to prevent tax evasion by U.S. tax
payers through the use of offshore
accounts and companies. Both insurance and reinsurance premiums are
subject to FATCA.
WHAT IS ITS PURPOSE?
FATCA is essentially designed to
prevent tax fraud and more specifically, tax evasion, by U.S. taxpayers. FATCA targets U.S. taxpayers
with foreign accounts and requires
financial institutions to identify
and report U.S. persons who have
invested in either non U.S. financial accounts or non-U.S. entities.
The goal is to prevent U.S. taxpayers from hiding income and
HOW DOES IT WORK?
FATCA requires FFIs (Foreign
Financial Institutions) to identify
U.S. persons that are their customers and provide certain information
to the IRS about those U.S. persons.
Under FACTA, unless the FFI agrees
to provide information regarding
certain of its financial accounts, the
FFI will be subject to a 30% withholding tax on any U.S. payments it
receives (deposits, interest, dividend
or sales proceeds).
WHY IS EVERYONE
TALKING ABOUT IT?
First, everyone is talking about
it because it is new, relatively speaking. Reporting of foreign financial
accounts and offshore assets is now
part of the IRS' targeted enforcement strategy since the passage
of the Patriot Act. Prior to FATCA,
the United States relied upon the
requirements set forth in the Report
of Foreign Bank and Financial
2 4 | v i e w t h i s i s s u e a t | www.aamgawin.org
Accounts (31 CFR 103.24), or the
WHY ARE INSURANCE
BROKERS TALKING ABOUT IT?
* FATCA requires financial institutions to report information
about financial accounts held by
U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold
* U.S. excess and surplus lines
brokers will be considered "withholding agents" under the FATCA
rules. As the last U.S. entity with
custody of the money, U.S. brokers
will need to identify their "withholdable payments," confirm the
status of payees of these payments
(including non-U.S. brokers and
all non-U.S. insurance companies
and entities used for each placement), and document why the
30% withholding is unnecessary.
If unable to document the exception to withholding, the U.S. broker would need to withhold 30%
of the gross written premium for
the entire placement.
* Withholdable payments are defined
♦ Any payment of interest, dividends, annuities, licensing fees
and other FDAP income, gains
Table of Contents for the Digital Edition of WIN Magazine - Winter 2013
Disappearing…and Reappearing Risk: What Lies Ahead
An Innovative Solution for Reducing the Debt of College RMI Students
Does Politics Influence Regulatory Forebearance?
Predictive Analytics: The “Black Box” Used by Savvy Insurance Professionals
Just the Facts—On FATCA: Frequently Asked Questions on the Foreign Assets Tax Compliance Act
Your Reputation Matters, Online and Off
New Wholesale Insurance Product Focus: Protection from Hacked Bank Accounts: Protecting Small Business Policyholders
In the WIN-ner’s Circle
Index to Advertisers/ Advertisers.com
WIN Magazine - Winter 2013