Tax transparency for US persons

Tax transparency was one of the agenda items at the G8 summit held in June 2013, demonstrating how seriously governments are taking tax transparency. An exchange of information between tax authorities and a new global standard were agreed. FATCA is the implementation of G20 commitment in the United States.

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) is legislation introduced by the United States Government and is designed to encourage enhanced tax compliance. HSBC is committed to becoming fully FATCA compliant in all countries where we operate.

FATCA seeks to prevent US persons from using non-US accounts and non-US entities to avoid US taxation on their income and assets.

There are three key elements to HSBC’s FATCA compliance:

  • The classification, reporting and withholding obligations under the legislation relating to HSBC clients or counterparties.
  • The registration of affected HSBC entities with the IRS as foreign financial institutions (FFIs) and provision of HSBC’s FATCA documentation to our clients and counterparties.
  • The ongoing monitoring and certification of FATCA compliance.

Requirements under FATCA regulations will affect global financial institutions from 1 July 2014, when FATCA obligations to classify individuals will commence. The IRS website contains General FATCA FAQs, covering Qualified Intermediaries (QIs), Withholding Foreign Partnerships (WPs) and Withholding Foreign Trusts (WTs).

The IRS website also contains all FATCA timelines.

iFrom Notice 2014-33: Comments received after the publication of the temporary Chapter 4 regulations have indicated that the release dates of the final Forms W-8 and accompanying instructions present practical problems for both withholding agents and FFIs to implement the new account opening procedures beginning on 1 July 2014. In consideration of these comments, the US Treasury and the IRS intend to amend the Chapter 4 regulations to allow a withholding agent or FFI to treat an obligation held by an entity that is issued, opened, or executed on or after 1 July 2014, and before 1 January 2015, as a pre-existing obligation for purposes of implementing the applicable due diligence, withholding, and reporting requirements under Chapter 4. The proposed amendments to the Chapter 4 regulations will only be available to obligations held by entities.

Last updated: 2 August 2016