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FATCA


Watch out: Uncle Sam’s about…


As the deadline for a piece of US legislation approaches, there’s still uncertainty as to what the final repercussions may be, leaving some financial companies in the Channel Islands in limbo, as Liz Salecka discovers


W Not ready


For all Jersey- and Guernsey-based funds, administrators and investment businesses with US source income, FATCA poses huge challenges in ensuring they have the systems and data-management processes in place to meet its requirements on time.


None of this, however, is being made any easier by the lack of guidelines on how to meet the regime’s requirements, nor, more importantly, detailed FATCA regulations, which aren’t anticipated until at least November this year.


34 businesslife.co October/November 2011 ➔


HILE THE Channel Islands may have welcomed the recent scrapping of a list of 34 ‘secrecy jurisdictions’ in the US Government’s revised Stop Tax Haven Abuse Act, major concerns are emerging over its increased focus on engaging Foreign Financial Institutions (FFIs) to close tax loopholes.


The US announced in July that it will emphasise the use of the Foreign Account Tax Compliance Act (FATCA) of 2010 to uncover the tax liabilities of US investors with assets deposited abroad – a move that places a huge onus on FFIs to disclose US investor information. This means that all Channel Island funds, trusts and other companies with American depositors will be required to identify both direct and indirect US investors and report on their transactions and investments to the US’s Internal Revenue Service (IRS). Even more alarming, the funds and businesses that choose not to participate, and don’t register with the IRS by 30 June 2013, will be liable for a hefty tax penalty, equivalent to 30 per cent of all their US source income – a measure that will come into effect on 1 January 2014. “The US has made this penal by imposing a 30 per cent withholding tax on gross payments made to FFIs,” says Grant Cameron, Managing Director at Investec Asset Management, Guernsey. “Everyone here is now waking up to the full implications of FATCA and what it is, and recognising that it is of no benefit to anyone in the Channel Islands.”


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