Fatca company status. Sanctions against European banks

02.08.2014

Summer 2014: a new round of banking sanctions against Russia

By introducing economic sanctions against Russia, the United States great attention focus on sanctions against Russian banks. The first sign was the decision to blacklist Rossiya Bank in Washington, although the bank did not suffer from these US actions. Moreover, its profits have increased over the past few months, despite the fact that Rossiya Bank has completely curtailed its international operations (at least dollar ones).

Actions against Rossiya Bank are an example of targeted sanctions. In addition, Washington threatens Russia with sectoral sanctions. In relation to banks, this means that everything Russian banks would be subject to restrictions, prohibitions and/or penalties. However, Washington has not yet announced sectoral sanctions against Russian banks. There were even soothing publications about this in the Russian media. However, there is no reason to calm down.

Last week, another batch of targeted sanctions was issued, which captured two new Russian banks, much larger than Rossiya Bank. These are Gazprombank and VEB. Both are state-owned banks. Sanctions include prohibitions on US companies and banks providing long-term (over 90 days) financing to specified Russian banks; the latter were denied the right to place new issues of their shares on the US stock market. It is difficult to say how sensitive these sanctions will be. The rating agency Moody's noted that US sanctions will have a limited impact on VEB and Gazprombank due to the high liquidity indicators of banks and the moderate need for refinancing in international markets. There are, however, assessments by independent experts, according to which the decision taken by Washington will affect the rating assessment of the entire banking sector of Russia. The heads of Gazprombank and VEB refrained from publicly assessing the consequences of the sanctions.

As stated by Deputy Chairman of the State Duma Committee on the Financial Market Anatoly Aksakov, VEB, which has the status state corporation, “will not feel the effect at all in terms of capital,” since a decision was recently made to convert the deposit of the National Welfare Fund (NWF) into its capital. “He has sources to replace external funding,” noted A. Aksakov. At the end of June, Gazprombank raised 1 billion euros on foreign markets at 4% per annum. Placement took place on Irish stock exchange, the organizers were Credit Suisse, Deutsche Bank, GPB-Financial Services and SG CIB. Gazprombank attracted liquidity abroad more often than other Russian companies in the financial sector: the bank currently has 78 issues of Eurobonds in circulation, denominated in dollars, Swiss francs, euros, rubles and Chinese yuan. However, despite the relative health of the two banks at present, threats to them remain. The same National Welfare Fund, which became a support for VEB, is partially placed (through the Bank of Russia) in US treasury securities. And in this direction, Washington can strike a new blow by blocking Russian package papers Closing American market Gazprombank will reschedule, but it’s closing European market, which Washington insists, would be critical for him.

For Washington, sectoral banking sanctions are a kind of bogeyman used in the information war against Russia. However, this does not mean that there are no threats to the Russian banking sector from the United States. There are threats, and they are increasing. Washington today no longer needs to loudly announce sanctions in order to strike at Russian banks. All banks of the Russian Federation that carry out transactions in foreign currency (primarily in dollars) find themselves under the sword of Damocles of prohibitions, arrests, fines, confiscations, freezes, blocking, etc. Such sanctions can be called informal, and they are much more dangerous than formal sanctions.

Global Bank Management System

Over the course of many decades, the United States has created a system of global governance for banks and other financial institutions.

The most important element of this system is the dollar. Since the dollar handles the vast majority of all international payments, these payments pass through the US banking system, and Washington has the ability to block them if necessary.

The second important element of the system is Washington’s financial control over the banking systems of other countries. The control scheme is as follows: the US Federal Reserve System (FRS) issues dollars, the first recipients of which are Wall Street banks (they are also the main shareholders of the Fed). Wall Street banks place the money they receive both within the United States and abroad. Placement abroad is the provision of loans to non-residents, investments in debt securities of non-residents, participation in the capital of foreign companies and banks. If it is necessary to punish a particular country, foreign company or bank, the signal comes from supreme authority USA through the Federal Reserve Banks to those foreign companies and banks that are under financial control USA. They can be called Washington’s financial “fifth column,” which can carry out targeted attacks on certain companies in the host country. They can also organize destabilization of the entire financial and economic sphere of the host country.

The third important element of the global banking management system created by the United States is the ideological justification for using the ability to block dollar transactions of foreign banks and financial organizations. Such blocking is carried out under the pretext of “protecting human rights”, “fighting international terrorism”, “promoting democracy”, etc. Punitive actions against other countries, foreign companies and banks can be carried out in these cases without official announcement sanctions.

FATKA – new element global banking management system

And now, before our eyes, the fourth element of the system is being built, which involves direct administrative control from Washington. It's about on the FATCA law, the full name of which is “Taxation Law foreign accounts"(adopted in 2010). The law obliges banks and financial institutions all countries of the world to provide information about those of its clients who fall into the “US taxpayer” category. This is a law of extraterritorial effect, directly encroaching on the sovereignty of other states.

Coincidentally or not, the FATCA law came into full force on July 1, 2014. From that moment on, all Russian banks working with dollars found themselves under the sword of Damocles by the US financial authorities. If necessary, it is not at all difficult to punish any Russian bank, so Washington’s reports about certain Russian banks included in the blacklists serve, rather, to create a noise effect. Such noise effects may even be useful Russian side— they stimulate the overdue reform of the financial and banking system Russian Federation. FATKA is a much more powerful weapon of economic warfare against Russia than sectoral sanctions. If a bank refuses to cooperate with the IRS and does not sign a withholding agreement with the IRS, then any transaction by that bank through the US banking system will be subject to penalties. Specifically: 30% of the transaction amount will be automatically transferred to the American budget. After some time, the correspondent accounts of such a bank in the USA may be closed, that is, its operations will be completely blocked. The absence of a bank in the FATCA system will actually mean its transformation into a pariah of the banking world. No one will risk providing him with loans, and international banking consortia may demand early repayment liabilities of such banks for previously received loans.

Russian banks prepared ahead of time to comply with the FATCA law, but they hoped that they would not have to interact directly with the US Tax Service. It was assumed that Russia would conclude a bilateral agreement with the United States on FATCA, according to which the Russian tax service would act as an intermediary between Russian banks and the American tax service. However, events in Ukraine changed everything. Washington to unilaterally interrupted negotiations on such a Russian-American agreement. Russian banks found themselves face to face with the American tax service. Sberbank has so far spent several million dollars on training personnel to carry out necessary operations in connection with FATKA. Total costs for events of this kind banking system RF are valued at tens of millions of dollars. However, neither advanced software nor well-trained personnel can be a reliable guarantee and protection against possible sanctions against the bank under FATCA. We are not even talking about the fact that FATCA calls into question the institution of bank secrecy in Russia.

Sanctions against European banks

Washington does not blacklist European banks, but this does not stop it from fining European banks billions of dollars every year for carrying out certain transactions in favor of “rogue” countries. Since January 1, 2009, American financial regulators have fined European banks 32 times per year. total almost 25 billion dollars. Thus, in 2012, one of the oldest credit institutions in Europe, Standard Chartered Bank, paid US federal authorities $327 million for violating US sanctions against Iran, Libya, Myanmar and Sudan between 2001 and 2007, plus paid $340 million to New York regulators for dismissal of similar charges. On June 30, 2014, the French bank BNP Paribas, which ranks fourth in terms of assets in the world and second in France, agreed to pay an unprecedented fine of $9 billion to the US authorities. The bank's management is charged with helping Sudanese, Iranian and Cuban clients conduct dollar transactions that were prohibited by the US sanctions regime. In the coming months, such giants of the European banking business as the German Commerzbank and Deutsche Bank, the French Credit Agricole and Societe Generale, the Italian Unicredit, etc. may be subject to fines. The reasons are the same - violation of sanctions, cooperation with banks of rogue countries. Let us emphasize: some countries have “rogue” status only from the point of view of US laws establishing unilateral sanctions. From point of view international law they are not “outcasts” at all - there are no decisions of the UN Security Council on this matter. However, in the Western banking world, life has long been organized not on the basis of international law, but on the basis of certain “concepts”. Due to the hegemony of the dollar, European banks have to agree to fines imposed by Washington in order not to incur even greater losses: after all, the United States can prohibit them from conducting transactions in dollars and confiscate their assets in America (the US President has the right to do this). Such penalties are provided for by the International Emergency Disasters Act. economic powers", adopted by the United States in 1977.

Sword of Damocles of informal sanctions over Russian banks

Most likely, the United States will not officially introduce full-scale sectoral sanctions against Russian banks. Instead, Washington will put increasing pressure on European banks to limit or stop cooperation with Russian banks and companies. The BNP Paribas case showed how obedient European banks are to Washington. In addition, using the Foreign Account Tax Compliance Act (FATCA), which came into full force on July 1, 2014, Washington can “punish” any Russian bank that carries out international payments. Even if there had been no events in Ukraine, the Russian banking sector would still have found itself under the sword of Damocles of informal US sanctions. There should be no illusions here...

We will try to answer the question that is relevant for Russian credit institutions: is it possible to comply with FATCA requirements without violating Russian legislation.

The Foreign Account Tax Compliance Act (hereinafter referred to as FATCA), adopted in the United States, which comes into force on January 1, 2013, provides for the introduction of significant changes in the procedure for taxation of transactions carried out by US residents through foreign financial organizations. Application of FATCA requires foreign financial organizations to enter into special agreements with the US Internal Revenue Service (hereinafter referred to as the IRS) to control the availability of accounts opened by US taxpayers in foreign banks, and about informing the US Tax Service about them.

The purpose of FATCA is to implement a mechanism aimed at preventing tax evasion on income received by American citizens and residents outside the United States. In this regard, the United States wants customer identification procedures similar to those provided for by FATCA to be established at the level of domestic legislation of other states. The Foreign Account Tax Act strengthens the IRS reporting requirements applicable to foreign financial institutions and other financial intermediaries receiving certain types income from US payment sources.

FATCA Compliance: Benefits and Risks

Non-participation of Russian banks in FATCA may create additional reputational risks for them associated with possible sanctions by the IRS and foreign financial organizations, in particular, in the form of forced withdrawal of 30% of the amounts of international bank transfers. Banks and financial institutions that do not participate in this system will be considered by the international community as potentially risky counterparties that may be involved in crimes related to tax evasion, money laundering by criminal means, etc.

In addition, doing business with non-aligned banks will require banks participating in FATCA additional costs related to the need to fulfill certain administrative functions, and may make them want to support business relationship only with people similar to themselves. And the more banks join FATCA, the more difficult it will be for those who have refused such participation to function.

But the main contradiction is this. Compliance with FATCA requirements is associated with violations of Russian legislation on banking, tax secrecy and personal data. There are also legislative restrictions related to the fulfillment of the bank’s obligations to clients - the legitimacy of withholding 30% tax.

Position of Russian departments

According to the Russian Ministry of Foreign Affairs and the Bank of Russia, FATCA violates the principle of sovereign equality of states and is contrary to Russian legislation, which does not provide for the enforcement of requirements of the US tax authorities, but contains provisions on liability, including compensation for damage, for disclosure of bank secrecy, which will lead to compliance with FATCA provisions Russian organizations. The Russian Ministry of Foreign Affairs considers unacceptable “the conclusion by Russian banking structures of any direct agreements with the US Internal Revenue Service regarding the implementation of the requirements of the FATCA law.” This is stated in a letter from the Russian Ministry of Foreign Affairs, published in April in response to a request from the Association of Russian Banks.

The Russian Ministry of Finance, in letter No. 03-08-07 dated April 24, 2012, noted that the OECD has not formed a joint position of its members regarding FATCA. At the same time, the financial department fundamentally proceeded from the fact that the mutual exchange of information with the American side should not be built on the basis of any special intergovernmental agreement, but strictly within the framework of the already existing Treaty between the Russian Federation and the United States of June 17, 1992 on the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital and be subject to all restrictions that are established in relation to such an exchange by Russian legislation, the modification of which in order to comply with FATCA requirements must be absolutely excluded. This agreement provides for a limited list of cases when income may be subject to taxes in one of the contracting states at the source of payment. In this regard, the legality of the requirement to unilaterally introduce an additional 30% withholding tax on all payments to Russian residents is controversial.

Positions of European countries

Meanwhile, the five economic leaders of Europe - Germany, France, Great Britain, Italy and Spain - have already concluded an agreement with the United States. According to American law, banks in FATCA partner countries are exempt from the need to enter into separate agreements with the IRS, since the service will receive information from government regulators in these countries. 30% will not be deducted from transactions of banks from partner jurisdictions without acceptance, and it is prohibited to close the accounts of their clients. In addition, the United States will begin to transfer information about American accounts of citizens from FATCA partner countries to European tax authorities. According to The Financial Times, Ireland and Luxembourg want to join the agreement.

And in June of this year, such a pillar of the banking industry as Switzerland was broken, which made a far-reaching statement about its readiness to reach the same agreement with the United States. True, Switzerland chose a slightly different tactic than other European countries, trying to get a few winning points for itself.

Here is a translation of the communiqué between Switzerland and the United States dated June 21, 2012 on the framework agreement on cooperation in the implementation of the FATCA law. The text of this document is very interesting1.

1. General Provisions.

Based on their relationship in the field of tax policy, Switzerland and the United States seek to strengthen and deepen cooperation to combat international tax evasion.

On March 18, 2010, the United States passed the Foreign Account Tax Act, which imposes reporting obligations on foreign financial institutions (FFIs) regarding certain accounts. However, certain statutory or contractual restrictions in Switzerland may prevent Swiss FFIs from fulfilling their reporting, taxation and account closure obligations.

Interstate cooperation to facilitate the implementation of FATCA requirements can overcome such legislative or contractual restrictions, as well as reduce the costs incurred by FFIs.

To support the goals of FATCA, the United States is ready to achieve interested states either an intergovernmental agreement for direct measures to implement FATCA (including the transfer of information from FFIs to their own governments and subsequent automatic transfer of information to the United States), or an agreement for intergovernmental cooperation to facilitate the implementation of FATCA (including direct communications from FFIs to the United States as prescribed by FATCA in combination with the exchange information on the relevant application).

Hoping to contribute to improving cooperation in tax area with the USA, Switzerland advocates the creation framework agreement on the implementation of FATCA.

Based on this, Switzerland and the United States express their intention to develop a framework agreement for cooperation to ensure the effective and proper implementation of FATCA by Swiss FFIs.

2. Main provisions of the framework agreement.

A. Switzerland and the United States enter into an Agreement (Cooperation), on the basis of which Switzerland, while reserving the right to certain conditions, agrees:
1) all Swiss financial institutions that do not already comply with FATCA requirements or are not exempt from compliance under this Cooperation Agreement are instructed to enter into an appropriate FFI agreement with the US Internal Revenue Service (IRS);
2) enable the designated Swiss financial institutions by granting them consent, as specified in Art. 271 of the Swiss Penal Code, comply with the requirements of FATCA and the FFI agreement, including the transfer of information about American accounts to the IRS;
3) on the basis of Art. 3 of the Protocol of September 23, 2009 to unconditionally accept group applications from the relevant American organization for Additional information about the accounts of US clients identified by Swiss financial institutions in aggregate form as likely to be material, and to promptly provide them with appropriate official assistance.

B. Subject to the foregoing, the United States agrees:
1) within the framework of the Cooperation Agreement, establish certain categories Swiss FFIs considered FATCA compliant or FATCA exempt (particularly certain small, local FFIs or insurance entities/plans);
2) waive FATCA's imposition of U.S. tax on payments by Swiss FFIs by recognizing all of them as participants or eligible for FATCA;
3) agree on some other measures to reduce costs and simplify the application of FATCA.

C. In addition, Swiss financial institutions, based on the Cooperation Agreement, are not obliged to:
1) close accounts of owners who do not support FATCA;
2) deduct tax on transit transfers to the accounts of non-FATCA clients or to the accounts of other FFIs in Switzerland or in other countries with which the United States has entered into FATCA accession agreements.

D. A sample Cooperation Agreement will be developed that meets these elements of interstate cooperation on the implementation of FATCA; the terms and conditions of this Agreement shall be applied both by Switzerland and by the other States concerned.

E. Switzerland and the United States agree to quickly and constructively develop and sign a Cooperation Agreement.

On the day of the conclusion of the intergovernmental framework agreement, the Union of Swiss Bankers (Basel) issued a statement in which it welcomed its signing, but emphasized that “ necessary exchange information from Swiss financial institutions should not occur through some central bank data as agreed with the five largest European states, but directly with the US Internal Revenue Service. Thus, the peculiarities of Switzerland as one of the financial centers will be taken into account”1.

It is interesting that in response to the claims of other countries (Germany, Austria, France), whose citizens keep their money in Swiss banks, Switzerland responded with intergovernmental agreements on transferring to these countries part of the income from the use of such capital. And according to such an agreement, for Germany, in particular, it is much more convenient and comfortable to receive a known fixed amount of compensation (Abschlagszahlung) from Switzerland than to deal with the accounts of its “unpatriotic” citizens. At the same time, Switzerland also saved its face without sacrificing the sanctity of banking secrecy.

However, as we see, this does not work out in relation to the United States, and Switzerland is gradually moving away from its previously so unshakable positions. Moreover, the United States constantly reproaches the small Alpine country for helping Americans hide from taxes.

Adaptation of Russian rules to FATCA

And now the ice has apparently broken in Russia too. In July, NP National payment advice"in his letter he proposed to Prime Minister Dmitry Medvedev possible options settlement of this problem at the interstate level, as well as measures to organize centralized control for the specified accounts within payment system Russian Federation.

The first steps have been taken to remove legislative restrictions.

Federal Law of June 29, 2012 No. 97-FZ “On Amendments to Part One and Part Two Tax Code of the Russian Federation and Article 26 of the Federal Law “On Banks and Banking Activities”, the powers of the tax authorities have been expanded, namely, according to the new edition of Art. 86 of the Tax Code of the Russian Federation “Responsibilities of banks related to the accounting of taxpayers” “... tax authorities may request certificates of the availability of accounts, deposits (deposits) and (or) cash balances in accounts, deposits (deposits), statements of transactions on accounts , on deposits of organizations, individual entrepreneurs and individuals who are not individual entrepreneurs, in the bank, certificates of electronic money balances and on transfers of electronic money of organizations, individual entrepreneurs and individuals who are not individual entrepreneurs, in the bank based on a request from an authorized body of a foreign state in cases provided for by international treaties of the Russian Federation.”

In accordance with the new edition of Art. 26" Banking secrecy", adopted by Law No. 97-FZ: "Certificates on the availability of accounts, deposits (deposits) and (or) cash balances in accounts, deposits (deposits), statements of transactions on accounts, on deposits (deposits) of individuals, certificates information on electronic money balances and on electronic money transfers of individuals are issued by a credit institution in the order established by law of the Russian Federation on taxes and fees, upon requests from tax authorities sent on the basis of requests authorized bodies foreign countries in cases provided for by international treaties of the Russian Federation.”

From the changes to the above articles, it is clear that precisely such provisions have been added that allow the transfer of information to foreign departments in cases where Russia has concluded a corresponding international agreement with the country where this department is located. Perhaps FATCA will be the first experience of such a mechanism for a country to control the taxation of its citizens at the global level.

Implementation of FATCA procedures in banks

Time flies quickly and the FATCA effective date of January 1, 2013 is rapidly approaching. Changing the law is only the first and not the most expensive step in complying with the requirements of the Foreign Account Tax Law. It will be much more labor-intensive to work out specific measures directly in banks. Russian banks doing business internationally should seriously consider participating in the FATCA system. Here are just some of the problems that analysts point out and that will need to be resolved after the Russian Ministry of Finance, the Bank of Russia and the Federal Tax Service of Russia decide on the strategy:
— appoint employees who will be responsible for implementing FATCA requirements;
- analyze client base and the types of products the bank handles to determine which FATCA compliance option is most preferable;
— determine the procedure for further work with the bank’s counterparties, taking into account FATCA requirements;
— analyze discrepancies between FATCA requirements and the information that the bank has about existing clients, as well as between the procedures for accepting new clients prescribed by FATCA and existing procedures at the bank;
— consider possible options for interaction with the US Tax Service or the Russian regulator;
— estimate the bank’s costs for restructuring business processes to comply with FATCA requirements;
— compare the bank’s costs for restructuring business processes with the volume of revenue from the US market;
— determine new functional requirements for the bank’s IT systems;
— develop algorithms for searching for accounts of US persons investing funds through offshore companies, anonymous participation in foreign partnerships, investing funds in assets outside the United States;
— determine the procedure for submitting reports to the IRS by affiliated structures of Russian credit organizations, including subsidiaries located outside Russia in countries with different order interaction with the IRS under FATCA, since reporting requirements also apply to members of the FFI group. Members of the FFI group are those who are at least 50% owned by the parent company; if any FFI from the group has not entered into an agreement with the IRS, then this reporting is done by the remaining members of the group; if they fail to account for this FFI, it will mean that they are not complying with their agreements with the IRS;
— test the data collection process from the point of view of reporting integrity for the IRS.

It’s worth thinking about this now, since the implementation of a project to implement FATCA requirements in a large bank can take from three to six months.

Estimate:

The FATCA (Foreign Account Tax Compliance Act) law was adopted in the United States on March 18, 2010. The main goal is to prevent tax evasion by US residents. For Russian banks and many other financial institutions, this means that from 2016 it will be necessary to inform Tax Office United States (IRS) of all accounts held by them and income of US tax residents.

By December 31, 2015, most banks need to decide whether to join FATCA (PFFI is a foreign financial institution participating in FATCA) and report to the US tax authorities about the clients they are interested in, or not to join and be in the status of NPFFI (foreign financial institution that has not joined FATCA). financial institution).

NPFFI status comes with significant risks for banks. Most payments coming to a non-joining financial institution from PFFIs (FATCA acceded financial institutions worldwide) will be subject to a penalty of 30% of the payment amount. This applies to payments to both NPFFI and its clients.

The Russian financial community has made its choice. By the summer of 2015, more than 90% of Russian banks joined FATCA (full list of acceding financial institutions).

This material proposes specific steps that banks should take in the very near future - at the end of 2015 and the beginning of 2016.

Let's look at the basic business process for preparing and submitting Form 8966 to the IRS. The process is summarized in the diagram below, which we will refer to below.

First of all, it is necessary to identify clients who can be American tax residents(clause 1.).

The main characteristics of a US tax resident for an individual:

• US Citizenship.

• Resident status, i.e. Green Card.
• Place of birth in the USA.
• Address in the USA, postal address in the USA (incl. PO Box).
• US phone number.
• Standing instructions for transferring amounts to the United States.
• A power of attorney issued to a person with an address in the United States.
• A signature authority issued to a person with a U.S. address.
• Demand address as the only address for the account.

The main characteristics of a US tax resident for a legal entity:

• USA as the country of establishment or registration.
• Organizations in which US tax residents have an ownership interest of more than 10%.

If a sign is detected indicating that the client may be an American tax resident (account holders with U.S. Indicia), the PFFI bank must determine the client’s FATCA status (clause 3). To do this, the bank collects the necessary information for correct identification and preparation of forms 8966 (clause 2). Depending on the client’s FATCA status, the bank generates an individual report for each client or a consolidated report for all clients of a certain type of FATCA status.

Ideally, the sequence of actions is as follows:

Stage 1 . The client is notified that he has the characteristics of a US taxpayer.

Stage 2. Client or confirms his tax status Form W-9/W-8 or provides documents confirming that he Not falls under US tax jurisdiction.

Stage 3. The client gives or does not give his consent to provide information to the IRS (clause 6). If at the first stage he did not provide either tax forms or confirmation that he is not an American resident, then he receives the status of Recalcitrant account holders with U.S. Indicia, and then there is no point in asking him for permission to provide data to the IRS, individual reports on him are not sent to the IRS.

The main FATCA statuses on the basis of which Form 8966 is filled out are as follows:

Client	Authorized to provide information to the IRS		Not allowed to provide information to the IRS
Description	FATCA client status	Completed Parts of Form 8966	FATCA client status	Completed Parts of Form 8966
Individuals: US citizens; other US tax residents (Green Card holders; persons declaring long-term stay in the United States). Legal entities registered in the United States for which there is no established restrictions	Specified U.S. persons		Recalcitrant account holders that are U.S. persons	Part 5 - one summary report for all clients for each FATCA status option
Non-US companies (other than financial ones) that are controlled by Specified U.S. persons	Passive NFFE with substantial U.S. owner(s)		Recalcitrant account holders that are passive NFFEs
Individuals and legal entities that have the characteristics of American taxpayers			Recalcitrant account holders with U.S. India
Financial companies (including bank) not participating in FATCA			Non-participating FFI (NPFFI)
Clients holding inactive bank accounts			Dormant Accounts

It should be noted that deadline when the bank must request documents from tax residents confirming their payment of taxes in the United States - June 30, 2016, and data must be sent to the IRS for all clients earlier - before March 30, 2016.

Therefore, some banks have decided to transfer customized forms to the IRS for all IRS-authorized customers who provided the required information for Form 8966, including a TIN - Taxpayer Identification Number. These clients can submit Forms W-9 and W-8 to the bank later, until June 30, 2016.

Annually, before March 30 of each year, the financial institution must prepare information for the IRS on Form 8966 (clause 7) - individual for each resident (clause 7A) and consolidated for groups of residents (clause 7B), in accordance with the FATCA indicated above -statuses.

The generated report (which is an XML FATCA file) is encrypted and sent to the IRS using international service IDES (International Data Exchange Service) data exchange (clause 8).

This general scheme, provided for by FATCA, has undergone changes in connection with the requirements of Russian legislation - the federal law No. 173-FZ dated June 28, 2014 “On the specifics of carrying out financial transactions with foreign citizens and legal entities...".

The main legal requirements that affect the business process of preparing reports for the IRS:

Prohibition of disclosure of information to the US tax authorities for certain types of clients: it is prohibited to collect and transfer information to the IRS about the accounts of individuals - citizens of the Russian Federation who do not have a second citizenship outside the countries - members of the Customs Union, or a residence permit in a foreign state.

The need to obtain permission from the regulator to transfer data to the IRS for each client.

Mandatory provision of all information sent to the IRS to Russian regulators as well.

To fulfill these requirements, after identifying the client and determining his FATCA status, the bank (clause 4) checks the possibility of transferring data to the IRS in accordance with 173-FZ, and if there are no general restrictions, then directly requests the regulator about the possibility of providing information. And only in case of obtaining permission from the regulator (clause 5), the bank requests permission to provide information from the client itself (clause 6).

As a result, reporting to the IRS is a complex technological task, even in the simplest case described above. In practice, everything can be much more complicated.

For example, in the above business process it is assumed that all data on clients, accounts, transactions and income is stored in a single information system, where the entire business cycle is organized: from selecting “suspicious” clients to recording the facts of correctly accepted IDS reports.

Moreover, in practice, there may be several accounting systems at the entrance (and in large banks this is rather a rule than an exception). For example, in the ABS, interest income received on deposit accounts is taken into account, in financial back offices - dividends and coupon income. In this case, data is imported, controlled and consolidated in order to obtain all information structured by client: for all their accounts, transactions and income.

Banks are already automating the sending of customer data to the IRS, and this is only the first, most simple part work to support FATCA requirements.

Starting January 1, 2017, the income of “refusers” (those individuals who refused to disclose their resident tax status) received from sources in the United States will begin to be fined. The penalty will be a withholding of 30% of FDAP (fixed, determinable, annual and recurring revenues). FDAP includes interest income, dividends, royalties, rent, payment for services provided, proceeds from the sale of American assets (including securities), etc.

This will require correct calculation of FDAP income. To do this, it is necessary to determine the status of all “suspicious” payments and take into account all the exceptions provided. In addition, it will be necessary to deposit withheld fines, correctly interact with Russian regulators (until 173-FZ does not provide for tax withholding in favor of foreign tax authorities), etc.

At this point, everything should be stored in the bank tax forms, submitted by clients who have received FATCA status. At the same time, the law provides not only for the bank’s obligation to request tax documentation, but also regulates minimum terms storage, requires recording the date of receipt of documentation, etc.

Thus, meeting FATCA requirements in 2017 will require efficient work With big amount information that should be consolidated into single decision. That is why for many banks, especially large ones or those with an extensive IT structure, a specialized solution is needed to comply with FATCA requirements, which will allow recording and analysis of primary data submitted to the IRS reports for all clients with different FATCA statuses, tax documentation and its deadlines receiving from clients, etc.

A year ago, after analyzing the entire package of requirements related to FATCA, we came to the need to create a specialized industrial solution "Programbank.FATCA» .

Of course, the first clients were large banks, which quickly realized the scale of the problem and had already carried out the necessary preliminary work. We are currently running two FATCA projects in top 50 banks. One of them has Western shareholders, which poses a number of additional requirements for us.

Talkwith Bankir

By December 31, 2015, most banks need to decide whether to join FATCA (PFFI - a foreign financial institution participating in FATCA) and report to the US tax authorities about the clients they are interested in, or not to join and end up with the status of NPFFI (Non-FATCA Foreign Financial Institution). financial institution).

NPFFI status comes with significant risks for banks. Most payments coming to a non-joining financial institution from PFFIs (FATCA acceded financial institutions worldwide) will be subject to a penalty of 30% of the payment amount. This applies to payments to both NPFFI and its clients.

The Russian financial community has made its choice. By the summer of 2015, more than 90% of Russian banks joined FATCA.

This material proposes specific steps that banks should take in the very near future - at the end of 2015 and the beginning of 2016.

Let's look at the basic business process for preparing and submitting Form 8966 to the IRS. The process is summarized in the diagram below, which we will refer to below.

First of all, it is necessary to identify clients who can be American tax residents (clause 1.).

The main characteristics of a US tax resident for an individual:

• US Citizenship.
• Resident status, i.e. Green Card.
• Place of birth in the USA.
• Address in the USA, postal address in the USA (incl. PO Box).
• US phone number.
• Standing instructions for transferring amounts to the United States.
• A power of attorney issued to a person with an address in the United States.
• A signature authority issued to a person with a U.S. address.
• Demand address as the only address for the account.

The main characteristics of a US tax resident for a legal entity:

• USA as the country of establishment or registration.
• Organizations in which US tax residents have an ownership interest of more than 10%.

If a sign is detected indicating that the client may be an American tax resident (account holders with U.S. Indicia), the PFFI bank must determine the client’s FATCA status (clause 3).

To do this, the bank collects the necessary information for correct identification and preparation of forms 8966 (clause 2). Depending on the client’s FATCA status, the bank generates an individual report for each client or a consolidated report for all clients of a certain type of FATCA status.

Ideally, the sequence of actions is as follows:

Stage 1. The client is notified that he has the characteristics of a US taxpayer.

Stage 2. Client or confirms your tax status with a W-9/W-8 form or provides documents confirming that he Not falls under US tax jurisdiction.

Stage 3. The client gives or does not give his consent to provide information to the IRS (clause 6). If at the first stage he did not provide either tax forms or confirmation that he is not an American resident, then he receives the status of Recalcitrant account holders with U.S. Indicia, and then there is no point in asking him for permission to provide data to the IRS, individual reports on him are not sent to the IRS.

The main FATCA statuses based on which Form 8966 is filled out are:
look like this:

Client	Allowed to provide IRS information		Not allowed to provide IRS information
Description	FATCA client status	Completed Parts of Form 8966	FATCA client status	Completed Parts of Form 8966
Individuals: US citizens; other US tax residents (Green Card holders; persons declaring long-term stay in the United States). Legal entities registered in the United States for which there are no established restrictions	Specified U.S. persons		Recalcitrant account holders that are U.S. persons	Part 5 - one summary report for all clients for each FATCA status option
Non-US companies (other than financial ones) that are controlled by Specified U.S. persons	Passive NFFE with substantial U.S. owner(s)		Recalcitrant account holders that are passive NFFEs
Individuals and legal entities that have the characteristics of American taxpayers			Recalcitrant account holders with U.S. India
Financial companies (including bank) not participating in FATCA			Non-participating FFI (NPFFI)
Clients holding inactive bank accounts			Dormant Accounts

It should be noted that the deadline for the bank to request documents confirming the payment of taxes in the United States from tax residents is June 30, 2016, and it is necessary to send data to the IRS for all clients earlier - before March 30, 2016.

Therefore, some banks have decided to submit individual forms to the IRS for all IRS-authorized customers who provide the required information for Form 8966, including a TIN. These clients can submit Forms W-9 and W-8 to the bank later, until June 30, 2016.

Annually, before March 30 of each year, the financial institution must prepare information for the IRS on Form 8966 (clause 7) - individual for each resident (clause 7A) and consolidated for groups of residents (clause 7B), in accordance with the FATCA indicated above -statuses.
The generated report (which is an XML FATCA file) is encrypted and sent to the IRS using the international data exchange service IDES (International Data Exchange Service) (clause 8).

This general scheme, provided by FATCA, has undergone changes in connection with the requirements of Russian legislation - federal law No. 173-FZ of June 28, 2014 "On the specifics of financial transactions with foreign citizens and legal entities".

The main legal requirements that affect the business process of preparing reports for the IRS:

• Prohibition of disclosure of information to the US tax authorities for certain types of clients: it is prohibited to collect and transfer information to the IRS about the accounts of individuals - citizens of the Russian Federation who do not have a second citizenship outside the countries - members of the Customs Union, or a residence permit in a foreign state.
• The need to obtain permission from the regulator to transfer data to the IRS for each client.
• Mandatory provision of all information sent to the IRS to Russian regulators as well.
• To fulfill these requirements, after identifying the client and determining his FATCA status, the bank (clause 4) checks the possibility of transferring data to the IRS in accordance with 173-FZ, and if there are no general restrictions, then directly requests the regulator about the possibility of providing information. And only in case of obtaining permission from the regulator (clause 5), the bank requests permission to provide information from the client itself (clause 6).

As a result, reporting to the IRS is a complex technological task, even in the simplest case described above. In practice, everything can be much more complicated.
For example, in the above business process, it is assumed that all data on clients, accounts, operations and incomes are stored in a single information system where the entire business cycle is organized: from the selection of "suspicious" clients to fixing the facts of correctly received IDS reports.

At the same time, in practice, there may be several accounting systems “at the entrance” (and in large banks this is more a rule than an exception). For example, the ABS records interest income received from deposit accounts, while the financial back offices account for dividends and coupon income. In this case, data is imported, controlled and consolidated in order to obtain all information structured by clients: for all their accounts, operations and incomes.

Banks are already automating sending customer data to the IRS, and this is only the first, easiest part of supporting FATCA requirements.

Starting January 1, 2017, the income of “refusers” (those individuals who refused to disclose their resident tax status) received from sources in the United States will begin to be fined. The penalty will be a withholding of 30% of FDAP (fixed, determinable, annual and recurring revenues). FDAP includes interest income, dividends, royalties, rent, payments for services provided, proceeds from the sale of US assets (including securities), etc.

This will require correct calculation of FDAP income. To do this, it is necessary to determine the status of all “suspicious” payments and take into account all the exceptions provided. In addition, it will be necessary to deposit withheld fines, correctly interact with Russian regulators (until 173-FZ does not provide for tax withholding in favor of foreign tax authorities), etc.

At this point, the bank must store all tax forms submitted by clients who have received FATCA status. At the same time, the law provides not only for the bank’s obligation to request tax documentation, but also regulates the minimum storage period, requires recording the date of receipt of documentation, etc.

Thus, meeting FATCA requirements in 2017 will require effective work with a large amount of information, which must be consolidated in a single solution. That is why for many banks, especially large ones or those with an extensive IT structure, a specialized solution is needed to comply with FATCA requirements, which will allow recording and analysis of primary data submitted to the IRS reports for all clients with different FATCA statuses, tax documentation and its deadlines receiving from clients, etc.

A year ago, after analyzing the entire package of requirements related to FATCA, we came to the need to create a specialized industrial solution "ProgramBank.FATCA".

Of course, the first clients were large banks, which quickly realized the scale of the problem and had already carried out the necessary preliminary work. We are currently running two FATCA projects in top 50 banks. One of them has Western shareholders, which puts a number of additional requirements before us.

The "ProgramBank.FATCA" solution allows you to automate all processes related to FATCA in banks of any size, ownership structure and client policy.

In connection with the above, we strongly recommend that even small banks do not delay the start of FATCA projects. According to our estimates, the entire cycle from the beginning of customer identification to the correct sending of data to the IRS will take at least three months, even for a small bank. In particular, it is important to understand that the deadlines will not be moved, since this process concerns the whole world and is being implemented within the framework of a long-agreed plan.

Of course, in such a brief material it is impossible to describe the entire range of tasks associated with meeting FATCA requirements, not to mention the solution technologies we offer.
We welcome your questions and opinions

When opening a bank account in a foreign or large Russian bank, many today are faced with the need to fill out a FATCA form. But what is it and why should we fill it out?

In accordance with American law The Foreign Account Tax Compliance Act (FATCA) of 2010, which went into effect on July 1, 2014, requires American citizens to report and provide information about their foreign accounts. In addition, the obligation to report tax service States (IRS) about the presence of accounts of American taxpayers arises from all foreign (non-American) financial institutions (primarily banks, as well as depositories, Insurance companies and other financial institutions, which I will write about in more detail later). Thus the States organized full control for the activities and income arising from these activities of its citizens (please note that America is the only country in which all citizens, without exception, are tax residents of the country by citizenship, regardless of place of residence).

For other states, the obligation to provide information on the accounts of American citizens arises on the basis of intergovernmental FATCA agreements, which have been concluded (or are in the process of approval) by almost all European, and not only European, countries. There are two models of such an agreement:

• Model 1 IGA - the country's financial institutions report on American clients to local tax authorities, and they, in turn, automatically transmit information to the US federal tax service.
• Model 2 IGA - the country's financial institutions report American clients directly to the IRS.

In case of failure to provide information, sanctions are applied, which will be discussed below. Moreover, if a specific bank has not fulfilled the FATCA requirements, then the sanctions will be applied specifically to its clients, and if the whole country has not signed FATCA, then this measure withholding tax will be applied to all bank customers in a given country.

To date, Russia has not signed the FATCA intergovernmental agreement. And due to the international situation and the sanctions imposed against Russia, signing is not expected in the near future. Accordingly, Russian banks (and other financial institutions) are not required to report information on US clients. But not everything is as good as we would like. Because as a result, when settling with American banks, sanctions may be applied to clients of Russian banks. To avoid this, many Russian financial institutions (90%) have privately joined the FATCA requirements (by registering with the federal tax service and obtaining a global intermediate identification number (GIIN)) and collect the necessary information from their customers. I will write about the correlation of the actions of these banking structures with domestic Russian and international legislation in a separate article.

Let us dwell a little more on the application of sanctions to non-FATCA participants (the so-called unscrupulous account holders). Tax agents in the States charge 30% tax deductions from specific US taxable payments made to non-compliant parties under the FATCA Act, and such payments include:

• U.S. source payments on interest, dividends, premiums, annuities, etc., and other regular payments (FDAP) from U.S. sources effective July 01, 2014 (because all willing financial institutions had to register on IRC before July 1, 2014).
• Gross proceeds from the sale or disposal of property on which interest or dividends may accrue from sources within the United States, effective January 1, 2017
• Since 2017, 30% tax payments will also be levied on specific foreign pass-through payments. Tax agents will submit reports on relevant deductions to the Federal Tax Service.

So, if when opening an account the bank asks you to fill out a FATCA form, then do not be surprised or alarmed. Especially if you are not a US taxpayer, you can safely fill it out. If you do not represent a company that is a financial institution and does not work in the interests of American beneficiaries, then information about you will never be received by the federal tax service. 'Cause it's better to fill out the form otherwise the bank may refuse to open an account or conduct transactions.

In order to identify you, the bank asks you to indicate in the questionnaire the type of company you belong to (applicable to legal entities). Main types: financial company and non-financial company. If a non-financial company, then an active or passive non-financial company. Determining your affiliation is necessary to understand the amount of information that needs to be obtained from you. If you are a passive non-financial company (such as a holding company), then you must provide information about the beneficiaries of your business to confirm that there are no US residents. If you are an active non-financial company, then the amount of information you provide is minimal (in fact, you are limited to checking one box on the form).

There should be no difficulties in determining the type of company to which your organization belongs, because a dictionary with detailed definitions is attached to the form. In short:

Financial companies- banking, depository, investment, specialized insurance organizations, as well as holding companies that are included in the same group as the organizations listed above.

Non-financial companies- all others not related to financial, in particular various non-profit organizations(public, administrative, charitable, cultural, etc.).

Active non-financial companies- these are companies that meet one of the following criteria:

• Less than 50% is passive income or assets that provide passive income;
• Securities are quoted at organized auctions;
• Founded in the States and its shareholders are American;
• The government of any country and its divisions;
• Holding companies, financing subsidiaries that lead active business and are not engaged in financial activities as defined in the definitions above;
• Companies carrying out financial activities in the interests of affiliates other than financial companies;
• Companies that have stopped conducting financial activities for five years.

Passive non-financial companies- all companies that do not meet the above criteria. And accordingly, more than 50% is profit in the form of passive income (interest, dividends, royalties, rental payments, etc.).

Thus, if you see that your company is a financial institution, then you have an obligation to join FATCA and report on your American clients. If your company is a passive non-financial company, then you need to inform the bank about your beneficiaries. If you are an active non-financial company, then you minimum requirements- just confirm your status in the form. Feel free to fill it out. If suddenly you made a slight mistake or your company changed its status, then there’s nothing wrong with that, the bank will notify you about it as errors are identified. There are no sanctions for this.