FATCA and implications for Trusts
Ireland concluded an Intergovernmental Agreement (“IGA”) with the United States in December 2012 to Improve International Tax Compliance and Implement the US’s Foreign Account Tax Compliance Act (“FATCA”). This IGA provides for a bilateral and reciprocal exchange of information with the US in relation to accounts held in Irish financial institutions by US persons, and accounts held in US financial institutions by Irish residents. In order for this exchange of information to take place, Irish financial institutions must report to Revenue details of such accounts held by them
The legislation to implement the IGA – Section 891E, TCA 1997 – was inserted by Section 32, Finance Act 2013. The Regulations to allow Financial Institutions to commence the required due diligence and account information gathering from 1 July 2014, were recently enacted. The Irish Guidance Notes have recently issued and are available atwww.revenue.ie/en/business/aeoi/guidance–notes–fatca-ireland.pdf
The definition of financial institutions under FATCA is extremely broad and would include trusts in many cases. Regardless of whether those trusts have any US connectivity, there is still an obligation to register with the IRS and obtain a global intermediary identification number (“GIIN”) by 25 October 2014. Pursuant to the IGA and Regulations, compliance will then be in the form of annual reporting to the Irish Revenue Commissioners, who would then exchange all relevant information with the IRS. The implications for non-registration could result in withholding tax being applied by withholding agents to payments to such trusts at the rate of 30%. It is important that practitioners are aware of the scope of breadth of FATCA and note that it could apply to situations where there is a Will Trust with no US beneficiaries or a US settlor.
Practitioners should review the Guidance Notes to further consider their clients’ obligations. We have reproduced some helpful commentary on FATCA which has been produced by STEP in the UK in conjunction with the Law Society of England and Wales and the accountancy body, the ICAEW. It should be noted that the commentary is produced for information purposes only and the position in Ireland should be reviewed in the context of the Irish/US IGA, the Regulations and the Guidance Note. Specialist advice should be sought in all cases.
FATCA – Guide for Practitioners
FATCA – Flowchart
Financial Accounts Reporting ( United States of America) Regulations 2014