Firms are thinking about the ways and means of complying with Fatca foreign tax withholding rules, even with incomplete guidance and preparation, as a key July 1 deadline approaches
In past columns, I tracked the progress of the Foreign Account Tax Compliance Act (Fatca) regulation from when US regulators first set out on their effort to collect withholding tax from foreign holdings by US entities, through efforts to institute compliance plans.
With the new postponed compliance date of July 1 fast-approaching, the industry is looking at a two-part endgame. The first piece is getting the last parts of guidance from the US Internal Revenue Service on all the details of what Fatca requires, including details of the W-8BEN-E form firms will have to file under the Act. The second part is getting data management technology up and running and ready in time for the looming deadline.
At Inside Reference Data's March 18 breakfast event covering Fatca developments, sponsored by SIX Financial Information, Dax Philbert, global Fatca loans program manager at Deutsche Bank, advanced the idea of a "Fatca hub" that gathers the necessary data and distributes it to different groups within a firm.
Workarounds may be necessary, Philbert said. "Then have a phase two or plan B that will get you the future phase [of a complete Fatca system]," he explained. The global landscape is one that includes markets with stricter privacy regimens, such as Saudi Arabia, Dubai, Hong Kong, Singapore, Luxembourg and some other Middle Eastern and North African markets. The "Fatca hub" concept could be a way to cope with varied levels of privacy rules.
"You have to think systematically about how you address sharing of information, manage the business effectively and also have consistency in your processes," Philbert cautioned.
Before anyone can advance theories on how to structure or change data management operations concerning Fatca filings and information, however, there appear to be a lot of unanswered questions about Fatca requirements—more than just the nature of the "W-8BEN-E" form, said Jon Watts, director and head of banking and securities, Fatca, at Deloitte & Touche, who gave a keynote address at the event.
Numerous intergovernmental agreements (IGAs) between the US and other countries are now in place, but standards bodies, especially in Europe, may emerge to tie together the various IGAs and provide consistency, according to Watts. He sees this development and other uncertainties about Fatca rule information needing three or maybe even five years to achieve that consistency.
Undoubtedly, there will be "a lot of noise" after July 1, said Watts, "because a lot of companies have thought about [Fatca] for a long time but have only just started the process of reaching out to customers." That will also become evident in the need to figure out whether firms need only collect documentation for compliance or remediate their processes completely, as Watts sees it.
Beyond July 1, a February 2015 deadline also must be adhered to, for getting reporting processes and customer remediation set up. What will occur if the IRS or US Treasury should decide that Fatca does not go far enough and other requirements should be added to the purview of Fatca? That could further confuse anyone trying to do their level best to be ready, both on July 1 and for the latter deadline about a year away.
While at Sibos Toronto, James shares some interviews covering topics on blockchain, fintechs and cybersecurity.Subscribe to Weekly Wrap emails