FATCA – the U.S. Foreign Account Tax Compliance Act.

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) is a U.S. federal law that aims to obtain information about U.S. taxpayers and combat tax evasion by U.S. tax residents.

What are the main FATCA requirements?

FATCA requires foreign financial institutions (FFI) worldwide:

  • to enter into an agreement with the IRS (the U.S. Internal Revenue Service) on reporting in case an Intergovernmental Agreement (IGA) is not signed;
  • to perform due diligence of existing and new customers in order to identify customers with any of the following U.S. indicia:
    • U.S. resident (Green Card holder)
    • U.S. citizen
    • U.S. place of birth
    • U.S. resident address
    • U.S. postal address (including PO Box)
    • U.S. telephone number
    • Standing instructions to transfer funds to an account maintained in the U.S.
    • Power of attorney granted to a person with a U.S. address
    • Signatory authority granted to a person with a U.S. address
    • a U.S. "in-care-of" or "hold mail" address that is the sole address provided for an account
  • to report on accounts held by customers deemed to be U.S. taxpayers and account balances of the customers and partners that are FATCA non-participating foreign financial institutions, to the IRS (the U.S. Internal Revenue Service) or, in case of the signed IGA – to the tax authority of the respective jurisdiction where the reporting FFI is established.

What sanctions are applicable in case of non-compliance with the FACTA requirements?

  • Withholding at the rate of 30% on payments arising from sources in the U.S. and made in favour of a beneficiary who holds an account with a non-participating financial institution.

What are the FATCA enforcement terms?

  • Latvian financial institutions are entitled to register by 3 June 2014 on the IRS website – www.irs.gov and apply for a GIIN (Global Intermediary Identification Number – a registration number of a financial institution incorporated outside U.S.) and entering into the IRS FFI List.
  • Financial institutions are obliged to enforce the FATCA requirements by 1 July 2014.
  • As of 2015, financial institutions shall start reporting to the IRS about U.S. accounts and accounts of non-compliant account holders.

Is Rigensis Bank AS deemed a compliant financial institution?

Rigensis Bank AS is deemed a compliant financial institution. Rigensis Bank AS is registered as a FFI on the IRS website in line with the FATCA requirements and has obtained its GIIN 1UWEWX.99999.SL.428.

In view of the fact that Latvia (the country of incorporation of Rigensis Bank AS) is currently in the final stage of signing the IGA, Rigensis Bank will report as per the FACTA requirements directly to the Latvian State Revenue Service rather than the IRS.

To ensure compliance with the FATCA requirements and maintain a high level of customer service, Rigensis Bank AS is actively reorganizing and improving its existing business processes, amending internal regulations and developing new procedures and policies.

Useful links.

  • A list of jurisdictions that have entered into IGAs.
  • Information about participating and non-participating FFI is available on the IRS website www.irs.gov

Please note that the information presented herein is for informative purposes only and may not be used for assessing the impact of FATCA on your business.