Menu
Tax Notes logo

U.K. Bankers' Group Raises FATCA Compliance Issues

MAR. 9, 2015

U.K. Bankers' Group Raises FATCA Compliance Issues

DATED MAR. 9, 2015
DOCUMENT ATTRIBUTES
U.K. Bankers' Group Raises FATCA Compliance Issues

 

09 March 2015

 

 

Mr B Stack

 

Deputy Assistant Secretary (International Tax Affairs)

 

Office of the International Tax Counsel

 

Department of the Treasury

 

1500 Pennsylvania Avenue, NW, Room 3058

 

Washington, DC 20220, USA

 

Robert.Stack@do.treas.gov

 

 

Mr D O'Donnell

 

LB&I Deputy Commissioner (International) (Acting)

 

Internal Revenue Service

 

1111 Constitution Avenue, NW

 

Large Business and International Division, Attn: SE:LB:IN

 

Washington, DC 20224, USA

 

douglas.w.odonnell@irs.gov

 

 

Dear Mr Stack and Mr O'Donnell,

FATCA compliance issues

The British Bankers' Association (BBA) is the leading association for the UK banking and financial services sector, speaking for 200 banking members, headquartered in 50 jurisdictions and operating in over 180 territories worldwide jurisdictions.

FATCA compliance

BBA member banks remain committed to timely FATCA compliance in support of US goals to tackle tax evasion, and have made significant progress in achieving compliant FATCA processes.

We last wrote to you in May 2014, regarding the late publication of regulatory guidance and concerns about the pace of Intergovernmental Agreement (IGA) developments; both of which were concerning BBA members and delaying implementation work within the financial services industry. We appreciated the important and helpful measures subsequently undertaken by the IRS and US Treasury to mitigate these concerns, specifically:

  • A deferred timetable for entity customers;

  • Defining 2014 and 2015 as transitional years; and

  • The creation of a list of countries (often referred to as 'the white list') which enabled FFIs to act in anticipation of an IGA being concluded in the near future.

 

We would like to offer further information about the challenges which remain for banks in relation to FATCA compliance and would offer the following points for your consideration on behalf of BBA members.

The publication of IRS Notices extending the transitional arrangements for countries still negotiating IGAs has delayed the negative impacts highlighted in our previous correspondence. If, however, IGAs are not signed by the time FATCA reporting for 2014 is required in 2015, our members are concerned that, absent further concessions or guidance, FFIs in these countries will be unable to report. This will be the result of prevailing legal restrictions or the absence of domestic legislation implementing the terms of the IGA. Whilst FIs may be able to carry out some aspects of FATCA compliance, they may not be able to report to the IRS under these circumstances and hence it is not clear whether the white list protection would continue to be available.

This would give rise to significant problems for entities in those jurisdictions and also where entities in those jurisdictions have dealings or accounts with other jurisdictions. We would therefore urge the US to try and get as many regimes as possible to sign IGAs and to expeditiously produce local law and guidance. In the meantime, we would welcome a clear statement from the IRS allowing FIs to continue to be considered compliant, even in the absence of reporting, until the affected territories have enacted or amended the appropriate local laws. This could also be achieved by requiring FIs operating in these countries to apply for additional filing extensions as a result of exceptional circumstances (namely, being legally prohibited from reporting). Regardless of the method used to achieve this, it would be helpful for the IRS and US Treasury to confirm that that extensions will be granted under these circumstances and that FIs applying for them will not be considered to be failing to comply with their obligations under FATCA.

Whilst we recognise that the conclusion of IGAs with these jurisdictions is dependent on a number of factors, we would ask the IRS and US Treasury to indicate as soon as possible whether any country is at risk of being removed from the white list. The current arrangements of a monthly review do not provide FIs and withholding agents with sufficient time to take the necessary action to ensure their compliance with FATCA and local law requirements. This would also enable them to discuss the matter directly with the appropriate regulators and government in the affected territories and highlight the consequences that this would have on FIs operating in that country before the jurisdiction is formally removed from the white list.

Recently updated IRS FAQ on account opening

We note that the IRS recently updated Q10 as part of FAQ section1 (copied below) which relates to the account opening process. It is unclear whether the FATCA regulations or the IGAs require FFIs to always obtain a self-certification at account opening and, in the event this is not provided, not open the account. Many FIs have opted for a model which only obtains a self-certification subsequent to the opening of the account, a "day 2" model. This approach was previously considered acceptable and is reflected in local Guidance, existing business practice and complies with local laws concerning the provision of account services. The BBA would welcome the opportunity to discuss this matter further with the IRS to ensure that there is clarity amongst FIs about their obligations.

 _____________________________________________________________________

 

 

 Q10.      If a Reporting Model 1             No. Pursuant to section

 

           FFI or a Reporting Model           III, paragraph B, of

 

           2 FFI that is applying             Annex I of the IGA, the

 

           the due diligence                  FFI must obtain a

 

           procedures in section              self-certification at

 

           III, paragraph B, of               account opening. If

 

           Annex I of the IGA cannot          the FFI cannot obtain a

 

           obtain a self-certification        self-certification at

 

           upon the opening of a              account opening, it

 

           New Individual Account,            cannot open the account.

 

           can the FFI open the account

 

           and treat it as a U.S.

 

           Reportable Account?

 

 

           Added: 02-02-2015

 

 _____________________________________________________________________

 

 

Should you have any questions about the points raised in this letter we would be happy to provide further information or arrange a convenient discussion.
Yours sincerely,

 

 

Sarah Wulff-Cochrane

 

Director of Tax Policy

 

British Bankers' Association

 

sarah.wulff-cochrane@bba.org.uk

 

Cc:

 

 

Ms M McLeod

 

Principal Deputy Legal Adviser

 

The Office of the Assistant Legal Adviser for Treaty Affairs

 

Department of State, L/T Room 5420, 2201

 

C Street, N.W

 

Washington, D.C, 20520, USA

 

Mary.McLeod@state.gov

 

 

Mr. Brett York

 

Office of International Tax Counsel

 

United States Department of the Treasury

 

1500 Pennsylvania Ave., NW

 

Washington, DC 20220

 

brett.york@treasury.gov

 

 

Mr. John Sweeney Office

 

of Chief Counsel Internal

 

Revenue Service

 

1111 Constitution Ave., NW

 

Washington, DC 20224

 

john.j.sweeney@irscounsel.treas.gov

 

 

Ms. Danielle Rolfes

 

International Tax Counsel

 

United States Department of the Treasury

 

1500 Pennsylvania Ave, NW

 

Washington, DC 20220

 

danielle.rolfes@do.treas.gov

 

 

Ms. Quyen Huynh

 

Office of International Tax Counsel

 

United States Department of the Treasury

 

1500 Pennsylvania Ave., NW

 

Washington, DC 20220

 

Quyen.Huynh@treasury.gov

 

FOOTNOTE

 

 

1 http://www.irs.gov/Businesses/Corporations/Frequently-Asked-Questions-FAQs-FATCA--Compliance-Legal#General

 

END OF FOOTNOTE
DOCUMENT ATTRIBUTES
Copy RID