The Foreign Account Tax Compliance Act (FATCA), enacted in 2010 and effective from 2013, mandates U.S. persons to report financial accounts held outside the U.S. and requires foreign financial institutions (FFIs) to report U.S. clients to the IRS. FATCA aims to enhance IRS transparency regarding U.S. persons' investments through foreign institutions and imposes a 30% withholding tax for non-compliance. The legislation has significantly impacted FFIs, leading to considerable costs for compliance, as well as ongoing negotiations for intergovernmental agreements among countries like Jamaica and other CARICOM states.

2. • FATCA stands for the Foreign Account Tax Compliance Act. It
was signed into law on March 18, 2010 and is effective
from January 1, 2013.
• FATCA is a United States federal law that requires United States
persons including individuals who live outside the U.S, to report
their Financial Accounts Held outside the U.S.
• It further requires FFI (Foreign Financial Institutions) to report
to the IRS (Internal Revenue Services) about their U.S clients.

3. • FATCA is intended to increase transparency for the Internal
Revenue Service (IRS) with respect to U.S. persons that may be
investing and earning income through non-U.S. institutions.
• While the primary goal of FATCA is to gain information about
U.S. persons.
• FATCA imposes tax withholding where the applicable
documentation and reporting requirements are not met.
• While FATCA certainly affects U.S. withholding agents and U.S.
multinational companies, the greatest impact will likely be to
Foreign Financial Institutions (FFIs).

4. • An FFI is any foreign entity that :
 Accepts deposits in the ordinary course of a banking or similar
business
 As a substantial portion of its business holds financial assets for
the account of others; or
 Is engaged (or holding itself out as being engaged) primarily in
the business of investing, reinvesting, or trading in securities,
partnership interests, commodities, or any interest (including a
futures or forward contract or option) in such securities,
partnership interests, or commodities.

5. • Non-Financial Foreign Entity: A foreign entity that is excluded
from the definition of FFI.
• TYPES :
A. Corporation with stock traded on established securities market
B. Affiliated group of those corporations
C. Entity organized in U.S. Territory and owned by its residents
D. Foreign government
E. International organization
F. Foreign Central Bank of Issue
G. Any other specifically identified class, including those posing a
low risk of tax evasion, as determined by the IRS.

6. • GIIN means a Global Intermediary Identification Number assigned
to a PFFI or Registered Deemed Compliant FFI.
• A separate GIIN will be issued to the FI to identify each jurisdiction,
including the FI’s jurisdiction of residence, in which the FI maintains a
branch that is not treated as a Limited Branch.
• The GIIN may be used by an FI to identify itself to withholding agents
and tax administrations for FATCA reporting.

7. GIIN Financial Institution
Name
Country of FFI or
Branch
0L1BZ6.99999.SL.356 State Bank Of India INDIA
CI6DGF.99999.SL.356 Diligent Power Private
Limited
INDIA
H8JE86.00106.ME.356 J.P. Morgan Securities
India Private Lim
INDIA
• Format: XXXXXX.XXXXX.XX.XXX
• The GIIN is a 19-character identification number that is a composite
of several other identifiers.
• For Example-

8. • Preliminary guidance from the IRS indicates that a grandfathered obligation is
defined as any legal agreement that produces or could produce withholdable
payments, but does not include any instrument that is treated as equity for US
tax purposes, or any legal agreement that lacks a definitive expiration or term
(examples include savings, deposits, demand deposits , and other similar
accounts).
• A grandfathered obligation is an obligation that is outstanding on March 18,
2012 (two years from the date that FATCA was signed into law).
• Interest on a grandfathered obligation is exempt from FATCA withholding, and
gross proceeds from the sale or other disposition of a grandfathered obligation
is also exempt from FATCA withholding.

9. • "Due diligence" is an investigation of a business or person prior to signing a
contract, or an act with a certain standard of care .
• The FATCA rules impose detailed due diligence and reporting requirements for
FFIs.
• An FFI generally will be subject to the 30% U.S. withholding tax on
withholdable payments unless it becomes a “participating FFI” by entering into
an agreement with the IRS .
• The due diligence requirements under an FFI agreement:-
 For preexisting entity accounts, a participating FFI generally must complete
the required diligence within 6 months of the effective date of its FFI
agreement(generally June 30, 2014) for any account holder that is a “prima
facie FFI .
 For preexisting individual accounts, a participating FFI generally must
complete the required diligence within one year of the effective date of its
FFI agreement(generally December 31, 2014) for “high-value accounts”
(i.e., accounts having a balance or value that exceeds $1 million).

11. • Any financial account held by specified U.S. Persons or U.S. Owned
Foreign Entities.
• Any of the following which may indicate U.S. status:
A. U.S. citizenship or permanent residence
B. U.S. address (resident or correspondence)
C. U.S. place of birth
D. U.S. telephone number
E. Power of Attorney or signatory authority granted to person
with U.S. address
F. Standing instructions to transfer funds to account maintained in
the U.S. or directions received from a U.S. address.

12. • Any Account with a holder who:
 Fails to comply with FFI requests for information to confirm
identity, or
 Fails to provide a waiver allowing disclosure of information
to the IRS where such disclosure is prevented by a foreign
privacy law.
 Fails to provide the name, address, and TIN of each
“specified United States person” and each substantial United
States owner of a United States owned foreign entity.

13. • In general, a withholding agent is required to withhold 30% on a
withholdable payment made to a Foreign Financial Institution
(FFI) or to a Non-Financial Foreign Entity (NFFE), unless the FFI
or NFFE meets certain requirements.
• In addition, an FFI must withhold 30% on any passthru payment it
makes to a recalcitrant account holder, as well as to payments it
makes to another FFI unless that FFI meets certain requirements

14. • All persons having control, receipt, custody, disposal or payment
of any withholdable payment.
• Any of the following:
A. U.S. source dividends, interest and other periodic payments
B. Gross proceeds from the sale of property that can produce
U.S. source income
C. Deposit interest paid by foreign branches of U.S. banks.

15. • Under the Model IGA, Foreign Financial institutions (FFIs) in
partner jurisdictions will report information on U.S. account
holders to their national tax authorities, which in turn will provide
this information into the U.S. under an automatic exchange of
information.
IGA
MODELS
IGA 1 IGA 2

16. Intergovernmental Agreement Model 1
• In July 2012, the U.S. Treasury Department issued the first model
for an Intergovernmental Agreement (IGA) which makes it easier
for partner countries to comply with the provisions of FATCA.
• The IGA provides for a partnership agreement between the U.S.
and a FATCA Partnership jurisdiction, namely France, Germany,
Italy and Spain with the United Kingdom first to sign the IGA
agreement.
Intergovernmental Agreement Model 2
• On November 15, 2012, the U.S. Treasury Department issued the
second model of the Intergovernmental Agreement (IGA) for
complying with the FATCA provisions.
• The model 2 IGA reflects the framework that was described in the
joint statements by U.S. and Switzerland and U.S. and Japan earlier
in the year.

18. Countries with IGAs Date signed
Type of IGA— Status of enabling
legislation in home
country
Model 1 or Model 2
Australia 28-Apr-14 Model 1 (Reciprocal)
Published "Regulation impact
statement"
Austria 29-Apr-14 Model 2
Belgium 23-Apr-14 Model 1 (Reciprocal)
Bermuda 19-Dec-13 Model 2
British Virgin Islands 30-Jun-14 Model 1 (Reciprocal)
Canada 05-Feb-14 Model 1 (Reciprocal)
Cayman Islands November 29, 2013 Model 1 (Nonreciprocal) Published draft guidance
Chile 05-Mar-14 Model 2
Costa Rica November 29, 2013 Model 1 (Reciprocal)
Denmark 15-Nov-12 Model 1 (Reciprocal)
Estonia 11-Apr-14 Model 1 (Reciprocal)
Finland 05-Mar-14 Model 1 (Reciprocal)
France 04-Nov-13 Model 1 (Reciprocal)
Germany 31-May-13 Model 1 (Reciprocal)
Gibraltar 08-May-14 Model 1 (Reciprocal)
Guernsey 13-Dec-13 Model 1 (Reciprocal)
Honduras 31-Mar-14 Model 1 (Reciprocal)
Hungary 04-Feb-14 Model 1 (Reciprocal)
India 04-Nov-14 Model 1 (Reciprocal)

19. Ireland 21-Dec-12 Model 1 (Reciprocal)
Published draft of the
"Financial Accounts
Reporting Regulations 2012"
Isle of Man 13-Dec-13 Model 1 (Reciprocal)
Israel 30-Jun-14 Model 1 (Reciprocal)
Italy 10-Jan-14 Model 1 (Reciprocal)
Jamaica 02-May-14 Model 1 (Reciprocal)
Japan 11-Jun-13 Model 2
Jersey 13-Dec-13 Model 1 (Reciprocal)
Latvia 27-Jun-14 Model 1 (Reciprocal)
Liechtenstein 19-May-14 Model 1 (Reciprocal)
Published draft legislation
on July 1, 2014
Luxembourg 28-Mar-14 Model 1 (Reciprocal)
Malta 16-Dec-13 Model 1 (Reciprocal)
Mauritius 27-Dec-13 Model 1 (Reciprocal)
Mexico 19-Nov-12 Model 1 (Reciprocal)
Netherlands 18-Dec-13 Model 1 (Reciprocal)
New Zealand 12-Jun-14 Model 1 (Reciprocal)
Norway 15-Apr-13 Model 1 (Reciprocal)
Slovenia 02-Jun-14 Model 1 (Reciprocal)
South Africa 09-Jun-14 Model 1 (Reciprocal)
Spain 14-May-13 Model 1 (Reciprocal)
Switzerland 14-Feb-13 Model 2
United Kingdom 14-Sep-12 Model 1 (Reciprocal)
Published the “International
Tax Compliance Regulations
2013.”

20. • For Individuals, accounts less than $50k is deemed out of scope
for FATCA purposes.
• Fund managers will also only have to manually review paper
records where the accounts are in excess of $1 million USD.
• Similarly for entities, it is $250k and FFI’s can use existing KYC
processes to identify the FATCA status of their existing accounts.

21. Aggregate Balance: It means that an amount which is made up of
several smaller amounts added together . It is the
combined total of all account or loan relationships
with the credit union.
• An electronic search for U.S. indicia generally suffices for all accounts
with aggregate balances up to $1 million; accounts aggregating $50,000
or less ($250,000 or less in the case of cash value insurance or annuity
contracts) need not be searched at all until the account balance exceeds
$1 million.

22. • The Caribbean financial executives have bemoaned what they deem
as an uneven playing field in negotiations towards compliance of the
US Foreign Account Tax Compliance Act (FATCA).
• The controversial law demands that foreign banks provide
information to America's Internal Revenue Service (IRS) on any
customer deemed a "US person" if they have more than US$50,000.
• It aims to crack down on tax dodgers who hide hundreds of millions
of US dollars in offshore accounts annually in an effort to avoid
paying Washington its due.
• Jamaica and other Caricom member states are currently negotiating
individual inter-governmental agreements (IGAs) with the
Americans.

23. • Jamaican financial institutions face a cost-crunching dilemma in the
form of a new US tax compliance rule requiring them to release personal
financial information of clients to American authorities.
• It has costed banks tens of millions of dollars.
• For they choose to comply with the Foreign Account Tax Compliance
Act (FATCA), which became effective on January1st 2013.
• The act required financial institutions around the world to report the
names and tax identification numbers of "US persons" with balances
above US$50,000 ($4.3 million) to the Internal Revenue Service (IRS).
• Implementation costs of FATCA alone – when financial institutions
choose to comply - was from US$100,000 to upwards of US$1 million.