The US Foreign Account Tax Compliance Act will affect almost all Financial Institutions!

All banks and life insurance companies which have US source income or handle US source income on behalf of its customers will be affected since all US source income might be subject to 30% US withholding tax if they are not FATCA compliant.

To be FATCA compliant Foreign Financial Institutions (FFIs) have to sign an agreement with the US tax authorities (IRS) that they will identify all US tax payers in their customer base and report certain data to the IRS on a regular basis (name, income, value of the account, SSN, ITIN). This agreement has to be prepared between July 1^st and December 31^st 2013 to be effective from January 2014.

Therefore all affected companies have to review their business model and products to understand how they will be affected. Since the FATCA rules generally impact all group companies the analysis has to be done on a group level.

It might sound that there is still plenty of time until these rules come into effect, but the required steps to analyze the impact on your organization may identify some fundamental changes to the way you operate.

KPMG’s seminar on November 16^th in the Movenpick hotel covered the key elements of FATCA and what Financial Institutions, are, and should be doing now. KPMG is strongly recommending their Clients to do an impact analysis ASAP to have enough time to amend and stream line the business model.

Please note that the definition of a FFI under the FATCA rules is much broader than just banks and insurance companies, the definition includes all entities whose main purpose is to handle cash and cash equivalents on behalf of an individual, Company, private equity funds, hedge funds, trade of partnership interest etc. This means that any structured investments into the USA have to be reviewed to determine whether they need to be FATCA compliant. This can also affect your decision to continue certain products or maintain certain investments after 2014. Entities and individuals with existing structured US investments have to determine whether such investments would be effected by FATCA or not. New investments into the USA or via the USA must consider the FATCA rules