HMRC releases information on notification requirements for reporting UK institutions

On 8 July 2015, HM Revenue & Customers in the UK released a notification to  for “Financial institutions, tax advisers and other professionals that may be aware of, or have given advice in respect of, an offshore account (Link).  The general description of the measure is cited as follows:

  • The UK will begin to receive information on offshore accounts in 2017 and at the same time will begin to share information with other tax authorities on accounts held in the UK. This will allow HM Revenue and Customs (HMRC) and other tax authorities to check that the right amount of tax is being paid on money held abroad.
  • HMRC will open a time-limited disclosure facility in early 2016 to allow non-compliant taxpayers to correct their tax affairs under certain terms before HMRC start to receive data under the Common Reporting Standard. This new facility will be on tougher terms than the previous offshore disclosure facilities HMRC have operated.
  • If non-compliant taxpayers continue to conceal their tax affairs, HMRC will enforce tough penalties for offshore evasion through the existing offshore penalty regime, new civil penalties for tax evaders and the new simple criminal offence for failing to declare taxable offshore income and gains.

India signs the MCAA for the Common Reporting Standard

On 3 June 2015, the Ministry of Finance of India released a statement on the signing of the Multilateral Competent Authority Agreement (“MCAA”) on Automatic Exchange of Financial Account Information (Link).  India has signed as an “Early Adopter” with reporting beginning in 2017.  Currently, there are 61 countries listed by the OECD as signatories to the MCAA (Link).

India issues FAQs on the Black Money and Imposition of Tax Act, 2015

On 6 July 2015, the Department of Revenue of the Government of India released clarifications on tax compliance for undisclosed Foreign income and assets (Link) in the form of frequently asked questions. There are 32 questions and answers to help taxpayers and financial institutions understand their responsibilities under the Black Money and Imposition of Tax Act, 2015.

Brazil passes IGA legislation with reporting deadline set for 15 August

On 25 June 2015, the Brazilian Congress enacted Legislative Decree 146, approving the agreement with the United States (Link) concerning enforcement of the Foreign Account Tax Compliance Act (FATCA), which provides a basis for the exchange of account information from financial institutions between the United States and Brazil.

On 3 July 2015, the Brazilian Secretary of Federal Revenue issued Normative Instruction (NI) No. 1,571/2015 (Link – Portuguese), which requires filing of certain information of financial transactions. The NI enables the collection of relevant information required under the Intergovernmental Agreement (IGA) between Brazil and the U.S. Below we summarize some of the most relevant aspects included in the NI:

e-Financiera filing: This is the new electronic filing which FIs must file with the Federal Revenue Secretary including the relevant reportable information. For this purpose, FIs will have to upload the e-Financeira filing to the mandatory electronic bookkeeping and tax file (“ECD”, for its Portuguese acronym)—which was recently implemented.

Reporting FIs: The e-Financeira filing must be filed by:

  • Entities
    1. that are authorized to structure and offer complementary retirement benefits plans;
    2. that are authorized to establish and administer individual retirement funds (“FAPIs”, for its Portuguese acronym); or
    3. whose core or non-core business includes taking, intermediating or investing financial assets, including so-called “consorcio” transactions, in Brazilian or foreign currency; or the custody of third party’s securities.
  • Insurance companies that are authorized to structure and offer insurance plans to individuals.

Additionally, the NI also establishes who is responsible for providing relevant reportable information for the e-Financeira filing, such as fund administrators, custodial institutions, “consorcio” administrators, among others.

Reportable information: FIs are required to report, among other information, the balance of a depositary or investment account on the last business day of a reporting year; name, nationality, address, and tax residency of the accountholder(s). The reportable information increases gradually every year, and beginning on calendar year 2016 it will be extremely detailed and extensive.

Due date:  In general, reportable information should be reported semi-annually:

  • by the last business day of February, with respect to the period July – December of the preceding calendar year; and
  • by the last business day of August, with respect to the period January – June of the current year.

However, in the case of reportable information for the calendar year 2015, the e-Financeira filing may be filed by the last business day of May 2016.

Attention: Exceptionally, for purposes of the IGA, the e-Financeira filing must be made by 15 August 2015 with respect to reportable information corresponding to the period July – December of calendar year 2014.

Penalties: Failure to file the e-Financeira by the due date or otherwise filing incorrect, inexact or incomplete information may result in penalties equal to (a) $5 thousand Brazilian Reais for month or fraction thereof in case of failure to file and (b) an amount of up to 3% of a relevant transaction or operation in case of filing incorrect, inexact or incomplete information. The penalties may be doubled where a notice of assessment is issued by the tax authority.

DIMOF filing: Beginning 1 January 2016, the financial transactions return (DIMOF, for its Portuguese acronym) will no longer be required to be filed.

Cayman Islands Tax Information Authority releases updated Guidance Notes

On 1 July 2015, the Tax Information Authority of the Cayman Islands released Version 2.1 of the Guidance Notes (Link) under the Tax Information Authority (International Tax Compliance) (United Kingdom) Regulations, 2014 and the Tax Information Authority (International Tax Compliance) (United States) Regulations, 2014 by the Tax Information Authority as the Competent Authority for the purposes of the legislation.

Luxembourg parliament adopts the law to ratify the US-Luxembourg IGA

On 30 March 2015, the Luxembourg parliament published the FATCA draft law (Link – French). The draft was amended as a results of the opinion of the National Commission for Data Protection.  On 1 July 2015, the Luxembourg parliament adopted the FATCA Law and the State Council has granted a second vote waiver.  Now that the FATCA law has been voted, we would expect the Luxembourg tax authorities to issue their guidance very soon.

Link to PwC Flash News

German Ministry of Finance (“BMF”) releases a draft circular on FATCA implementation guidance. Feedback requested by 17 July 2015

On 26 June 2015, the German Ministry of Finance (“BMF”) released a draft circular on FATCA implementation guidance (Link – German). The BMF requests feedback on the draft circular from the market by until 17 July 2015.

On 31 May 2013, the Federal Republic of Germany and the United States of America entered into an intergovernmental agreement (German-US IGA) to improve International Tax Compliance and with respect to the United States Information and Reporting Provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). This agreement regulates the automatic exchange of the tax related information, which should be obtained from Financial Institutions (FIs), in an effort to increase international tax compliance. Pursuant to § 117c of the German Fiscal Code (Abgabenordnung – AO), the BMF enacted the German-US FATCA implementation regulation (FATCA-USA-UmsV dated 23 July 2014 (BGBl. I S. 1222)).

Some initial observations from the perspective of (i) Scope and Governance; (ii) Customer Due Diligence and Documentation; (iii) Reporting; and (iv) Withholding are below:

i.     Scope and Governance:

  • According to the draft BMF-Circular (para. 38) the US and the German government are required to enter into a mutual agreement procedures (as provided in Article 3. Section 6 of the German-US IGA) in order to exclude additional entities, accounts, and products that present a low risk of being used for tax evasion. Hence, reliance on low risk entities and products which are not included in the Annex II of the German-US IGA and which are included in the draft BMF-Circular, should be subject to such mutual agreement procedures (para. 47/ para. 144).
  • According to the draft BMF-Circular (para. 112) accounts which are maintained by the FI exclusively for internal purposes and within which transactions are not booked against a client account, should not constitute a financial account for FATCA purposes. Examples include interim and auxiliary accounts.
  • In order to support the classification of Passive NFFEs, the draft BMF-Circular provides for certain income types considered to be passive income, including, i.a. dividends, interests, rents, royalties, profits from derivative transactions, profits from FX transactions and profit distributions (para. 97).
  • The draft BMF-Circular further confirms that collective investment vehicles are only eligible for a deemed-compliant (non-reporting) FI status if such investment vehicles are being held by or through participating FIs; i.e. it must be ensured that the financial institution maintaining the custody account through which the investment vehicle is being held, performs the necessary FATCA reporting (para. 70/71).
  • FIs may not automatically rely on more beneficial provisions maintained in other IGAs. The draft BMF-Circular confirms that applicable, more beneficial, provisions will be communicated by the US government to the German government  and be subsequently confirmed in a separate BMF-Circular (para. 282 et.seq.).

ii.     Customer Due Diligence and Documentation

Several new details are given and illustrated by examples with regard to Customer Due Diligence and Documentation:

  • The draft BMF-Circular (para. 98; para. 182) now confirms the reliance on industry coding for classifying entity account holders as an acceptable practice. This reliance (i) includes assessment of active/passive NFFE status; (ii) may also be relied on in the context of broader obligations within the due diligence process; and, (iii) refers to both preexisting and new entity account holders.
  • A self-certification may be in German language and may be a part of the account onboarding process (para. 193). The FI may also rely on US-tax forms, including W-8 and W-9 Forms (para. 201/ 202). Furthermore, FIs are allowed to collect self-certification for confirming the tax residency of the account holder when opening a new non-financial account. The self-certification may be pre-populated by the FI to include the account holder’s information, except for the jurisdiction(s) of residence for tax purposes, to the extent already available in its records (para. 196). Finally, Furthermore, entity account holders are allowed to provide relevant information on their website for downloading purposes (para. 199).
  • Subject to certain requirements, documentation provided by the account holder for the necessary status assessment may be used to classify multiple financial accounts within an FI group / branch structure. Relevant requirements include an aggregated view on such accounts as well as the relevant account being subject to a unified account maintenance and / or information system (para. 214 et.seq.).

iii.     Reporting

The draft BMF-Circular confirms reporting dates and relevant reporting data. Additional details provided include:

  • According to the draft BMF-Circular the reporting with respect to closed depository or custody accounts includes payments made to such accounts during the reporting period prior to closing the account as well as any payments made in connection with the closing or with respect to the transitioning of such accounts (para. 259 et.seq.).
  • If the holder of a new individual account is identified as a US resident and provides neither the US TIN nor documentary evidence confirming its non-US status, the account will be considered to be a reportable account. (para. 272).
  • The draft BMF-Circular further confirms that FIs may limit the interim reporting to payments made with respect to the accounts maintained by such FI. FIs are not required to further differentiate between such payments but may just report any payments made with respect to such account (para. 281.)
  • The draft BMF-Circular announces that further details with respect to the XML Data Schema and further technical aspects of reporting will be published in a separate BMF-Circular (para. 285).

iv.     Withholding

The draft BMF-Circular does not further comment on withholding obligations in Germany.

Automatischer Informationsaustausch mit den Vereinigten Staaten von Amerika / Anwendungsfragen im Zusammenhang mit dem FATCA-Abkommen

Am 26. Juni 2015, hat das Bundesministerium der Finanzen (“BMF”) einen Entwurf des BMF-Schreibens bzgl. Anwendungsfragen im Zusammenhang mit dem German-US IGA veröffentlicht  (Link). Über die verschiedenen Verbände bittet das BMF um schriftliche Stellungnahme bis zum 17. Juli 2015.

Am 31. Mai 2013 haben Deutschland und die Vereinigten Staaten von Amerika das Abkommen zur Förderung von Steuerehrlichkeit bei internationalen Sachverhalten und hinsichtlich der als Gesetz über die Steuerehrlichkeit bezüglich Auslandskonten bekannten US-amerikanischen Informations- und Meldebestimmungen (German-US IGA) geschlossen. Dieses Abkommen regelt den automatischen Austausch steuerlich relevanter Daten, die von Finanzinstituten (FIs) erhoben werden, um die Steuerehrlichkeit auch in internationalen Sachverhalten zu erhöhen. Auf Grundlage des § 117c der Abgabenordnung (AO) hat das Bundesministerium der Finanzen mit Zustimmung des Bundesrates die Verordnung zur Umsetzung der Verpflichtungen aus dem FATCA – Abkommen (FATCA-USA-UmsV vom 23. Juli 2014 (BGBl. I S. 1222)) erlassen.

Einige erste neue Aspekte in Bezug auf (i) Anwendungsbereich und Governance; (ii) Sorgfaltspflichten und Dokumentation; (iii) Meldewesen; und (iv) Steuerabzug werden im folgenden beleuchtet:

i.    Anwendungsbereich und Governance:

  • Nach dem Entwurf zum BMF-Schreiben (Rn. 38) bedarf es einer Verständigungsvereinbarung nach Artikel 3 Absatz 6 des German-US IGA um zusätzliche (neben den in Anlage II FATCA Abkommen aufgezählten) Rechtsträger, Konten oder Produkte auszunehmen, bei denen ein geringes Risiko auf Hinterziehung von US Steuern besteht. Hiernach ist das Vertrauen auf nicht im Annex II German-US IGA genannte Produkte oder Rechtsträger, die im BMF-Schreiben als„lowrisk“ für die Hinterziehung von US Steuern aufgezählt sind,   von einer zukünftig zu erlassenden  Verständigungsvereinbarung abhängig (Rn. 47 / 144) .
  • Der Entwurf BMF-Schreiben stellt rein intern geführte Konten, auf denen Transaktionen nicht gegen ein Kundenkonto verbucht werden (Interimskonten, Auxilliaries etc.), kein Finanzkonto i.S.d. Abkommens dar (Rn. 112). Der Umfang von Finanzkonten wird somit weiter eingeschränkt und klarer definiert.
  • Um die Identifizierung von passiven NFFE zu erleichtern, zählt der Entwurf zum BMF-Schreiben bestimmte Einkommenstypen ausdrücklich als “passiv” auf, u.a. zählen hierzu Dividenden, Zinsen, Mieten, Lizenzgebühren, Gewinne aus Transaktionen mit Derivaten, Gewinne aus Währungsgeschäften und Gewinnausschüttungen (Rn. 97).
  • Weiterhin bestätigt der Entwurf zum BMF-Schreiben, dass kollektive Investmentunternehmen nur den “deemed-compliant” Status erlangen können und damit als FATCA-konform gelten, wenn alle Anteile an den Vermögen von Finanzinstituten (oder über Finanzinstitute) gehalten werden und diese Finanzinstitute keine nicht teilnehmenden Finanzinstitute sind. Hiernach muss u.a. immer gewährleistet sein, dass die depotführende Verwahrstelle den erforderlichen FATCA- Meldeverpflichtungen nachkommt (Rn. 70/71).
  • FIs sollten nicht automatisch auf die Anwendung von günstigeren Bedingungen aus IGAs anderer Länder vertrauen. Stattdessen bestätigt der Entwurf zum BMF-Schreiben, dass es einer Kommunikation der US Regierung gegenüber der deutsche Regierung bedarf und mögliche Begünstigungen im Nachgang durch weitere BMF-Schreiben verkündet werden (Rn. 282 ff.).

 

ii.     Sorgfaltspflichten und Dokumentation

Verschiedene neue Details zu Sorgfaltspflichten und Dokumentationen wurden im Entwurf zum BMF-Schreiben adressiert und durch Beispiele illustriert.  Hierbei sind u.a. die folgenden Punkte hervorzuheben:

  • Der Entwurf BMF-Schreiben (Rn. 98 / Rn. 182) bestätig nunmehr die Nutzung und Zuteilung von Branchenschlüsseln als anerkannte Praxis. Die Bestätigung der Nutzung von Branchenschlüsseln umfasst (i) die Bewertung eines Rechtsträgers als aktiv /passiv; (ii) jedoch auch in einem breiteren Kontext die Erfüllung der Sorgfaltspflichten sowie (iii) die Anwendung bei beiden – Bestands- und Neukonten.
  • Die vom FI einzuholende Selbstauskunft kann in deutscher Sprache verfasst sein und kann außerdem Teil der Kontoeröffnungsunterlagen sein (Rn. 193). Auch die originalen US Steuerformulare, inkl. der W-8 und W-9 Formulare, können durch deutsche FIs genutzt werden (Rn. 201 / 202). Außerdem ist eine Selbstauskunft generell zur Bestimmung der steuerlichen Ansässigkeit einholbar, auch wenn das Konto, das eröffnet werden soll, kein Finanzkonto i.S.d.German-US IGA ist. Weiterhin darf eine Selbstauskunft mit bereits vorhandenen Informationen vorausgefüllt werden; hiervon ausgenommen sind jedoch etwaige Angaben zur steuerlichen Ansässigkeit  (Rn. 196). Darüber hinaus ist es möglich, dass Rechtsträger die für die Selbstauskünfte relevanten Informationen auf ihrer Website zum Download bereitstellen. (Rn. 199).
  • Unter bestimmten Voraussetzungen kann die vom Kontoinhaber vorgelegte Dokumentation zur Feststellung seines FATCA -Status für mehrere durch ihn gehaltene Finanzkonten genutzt werden. Dies gilt bei Erfüllung verschiedener Voraussetzungen innerhalb der FI Konzern- / Zweigestellenstruktur. Relevante Voraussetzungen sind u.a. die Möglichkeit der Kontenaggregierung  sowie die Nutzung von niederlassungsinternen -, universellen- oder gemeinsamen Kontensystemen. (Rn. 214 ff.)

iii.     Meldewesen

Der Entwurf des BMF Schreibens bestätigt die relevanten Meldezeitpunkte und die zu meldenden Daten. Zusätzliche Details werden zu den folgenden Themen gegeben:

  • Laut Entwurf zum BMF-Schreiben umfasst die Meldung bei Kontenschließung und Übertrag von Verwahr- und Einlagenkonten auch Zahlungen und Einkünfte, die auf das Konto eingezahlt oder dem Konto gutgeschrieben wurden. Darüber hinaus unterliegen der im Zusammenhang mit der Auflösung oder Übertragung des Kontos abgebuchte oder übertragene Betrag oder Wert einer Meldung (para. 250 / 263 ff.).
  • Legt ein als US Person identifizierter künftiger Kontoinhaber eines Neukontos natürlicher Personen weder eine US amerikanische Steueridentifikationsnummer noch einen Nachweis seines nicht US amerikanischen Status vor und wird das Konto dennoch aktiv, gilt dieses Konto als meldepflichtig (para. 272).
  • Der Entwurf zum BMF-Schreiben bestätigt weiterhin die Limitierung des Interim„NPFFI“ Reportings auf Zahlungen, die auf einem bei dem meldenden deutschen FI geführten Konto geleistet werden. FIs müssen daher nicht weitergehend zwischen den verschiedenen Zahlungen unterscheiden, sondern vielmehr nur die Zahlungen im Zusammenhang mit dem geführten Konto melden (Rn. 279 ff.).
  • Laut Entwurf zum BMF-Schreiben werden weitere Details bzgl. des XML Data Schemas und anderer technischer Aspekte in einem separaten BMF-Schreiben adressiert werden (Rn. 285).

iv.     Steuerabzug

Der Entwurf zum BMF-Schreiben kommentiert nicht die FATCA-Steuerabzugsverpflichtungen in Deutschland.

German Ministry of Finance (“BMF”) releases a draft circular on FATCA implementation guidance. Feedback requested by 17 July 2015.

On 26 June 2015, the German Ministry of Finance (“BMF”) released a draft circular regarding FATCA implementation guidance (Link – German). The BMF requests feedback on the draft circular from the market by 17 July 2015. Initial observations from the perspective of (1) Scope and Governance; (2) Customer Due Diligence and Documentation; (3) Reporting; and, (4) Withholding are below:

Scope and Governance

  • In order to support the classification of Passive NFFEs, the draft BMF-Circular provides for certain income types considered to be passive income, including, i.a. dividends, interests, rents, royalties, profits from derivative transactions, profits from FX transactions and profit distributions (para. 97).

Customer Due Diligence

  • The draft BMF-Circular (para. 98; para. 182) now confirms the reliance on industry coding for classifying entity account holders as an acceptable practice. This reliance (i) includes assessment of active/passive NFFE status; (ii) may also be relied on in the context of broader obligations within the due diligence process; and, (iii) refers to both preexisting and new entity account holders.

Reporting

  • The draft BMF-Circular further confirms that FIs may limit the interim reporting to payments made with respect to the accounts maintained by such FI. FIs are not required to further differentiate between such payments but may just report any payments made with respect to such account (para. 281.)

Withholding

  • The draft BMF-Circular does not further comment on withholding obligations in Germany.