Regulation FATCA (USA)
Foreign Account Tax Compliance Act
DDIF Broker is already registered on the US IRS portal as „ FFI – Foreign Financial Institution – IGA Model 1”. The IRS (American Tax Authority) grants to DIF Broker the title of „Global Intermediary Identification Number (GIIN): DIF Broker Sociedade Financeira de Corretagem S.A. : EKNLNB.99999.SL.620 . Therefore, DIF Broker complies with the FATCA requirements under the terms of the Law regulation.
International Tax Compliance:
We support all efforts to harmonise international tax compliance and transparency whilst maintaining high standards of client data security and confidentiality.
Please note – It is your responsibility to establish whether or not you may be liable for any taxes in the country in which you are resident during the term of any account held with us or on their closure. If you are uncertain as to how or whether you will be affected, you should seek appropriate independent professional advice. DIF Broker Sociedade Financeira de Corretagem SA cannot provide you with any advice.
Intergovernmental Agreement between Portugal and the United States implementing the Foreign Account Tax Compliance Act (US IGA):
The Portuguese Government signed an Intergovernmental Agreement (IGA) with the United States (US) to implement FATCA (Foreign Account Tax Compliance Act). FATCA is a legislation introduced by the United States (US) Department of the Treasury and Internal Revenue Service (IRS). It requires Financial Institutions outside the US to report information on Reportable Financial Accounts held by Specified Persons in Financial Institutions outside the US. Under the US IGA, all Financial Institutions in Portugal, including ourselves, are obliged to identify all account holders who are Specified US Persons for tax purposes and to exchange certain information with the Portuguese Tax Authorities in respect of those US account holders and the accounts held by them.
European Union Saving Tax Directive (EUSTD):
The EUSTD came into effect on 01 July 2005 and is an agreement between the Member States of the EU to exchange information with each other about EU residents who earn interest on savings and investment income in one EU Member State but live in another.
Although the legal scope of the EUSTD does not extend outside the EU, certain jurisdictions, such as Switzerland, Jersey, Guernsey and the Isle of Man, have agreed to put in place legislation that supports the aims of the EUSTD with bi-lateral agreements with all EU Member States.
The Savings Directive will continue to be operational until the end of 2015 to be replaced by Council Directive 2014/107/EU as from 1 January, 2016, which provides for automatic exchange of financial account information between Member States, including income categories contained in the Saving Directives.
1. What is FATCA?
FATCA stands for the Foreign Account Tax Compliance Act. It colloquially refers to some provisions included in the Hiring Incentives to Restore Employment (HIRE) Act signed into law on March 18, 2010. It adds a new chapter to the Internal Revenue Code (Chapter 4) aimed at addressing perceived tax abuse by US persons through the use of offshore accounts. The new rules require foreign financial institutions (“FFI”s) to provide the Internal Revenue Service (“IRS”) with information on US persons investing in accounts outside of the US.
The FATCA Final Regulations were published by the US IRS on January 17, 2013.
2. Who is impacted by FATCA?
Any entity which makes a payment of US source income must consider whether it is subject to FATCA. FATCA may apply to both financial and non-financial operating companies.
S entities, both financial and non-financial, that make payments of most types of US source income to non-US persons will also be impacted as they may now be required to withhold a 30% tax on that income paid to a non-US person under FATCA. This will require US entities to maintain documentation on those non-US persons and also track how those persons are classified under FATCA.
3. DIF Broker is a Foreign Financial Institution (FFI) what does it mean?
An FFI is a foreign financial institution, non-US, that:
1. Accepts deposits in the ordinary course of business(Depository Institution);
2. Holds, as a substantial portion of its business (more than 20%), financial assets for the benefit of one or more other persons (Custodial Institution);
3. Meets the requirements of points A, B or C (Investment Entity):
A. Primarily (more than 50%) conducts as a business one or more of the following activities or operations for or on behalf of a customer:
Trading in money market instruments (checks, bills, certificates of deposit, derivatives, etc.);
foreign currency; foreign exchange interest rate, and index instruments; transferable securities; or
Individual or collective portfolio management; or
Otherwise investing, administering, or managing funds, money, or financial assets on behalf of other persons.
B. Has a gross income primarily (more than 50%) attributable to investing, reinvesting, or trading in financial assets and the entity is managed by any of the entities described above;
C. Functions or holds itself out as a collective investment vehicle, mutual fund, exchange traded fund, private equity fund, hedge fund, venture capital fund, leveraged buyout fund, or any similar investment vehicle established with an investment strategy of investing, reinvesting, or trading in financial assets;
4. Is a life insurance company (or a holding company that is a member of an expanded affiliated group that includes an insurance company) that issues cash- value or annuities products (Specified Insurance Company);
Generally, non-US entities such as banks, brokers, dealers, insurance companies, pension funds, private equity funds and any other investment vehicle will be considered FFIs.
4. When will FFIs have to start reporting information?
The reporting rules regarding FFIs will be implemented gradually. With respect to US accounts and recalcitrant accounts, the deadline for the first report is November 30, 2015 with reference to the year 2014 (account balance as of December 31, 2014) and must include the following information (regarding accounts that have been identified by December 31, 2014).
5. What is a substantial US owner?
A substantial US owner refers to any US person who owns, directly or indirectly, more than 25% of the stock of an entity (by vote or value).
6. What are US accounts?
It is any financial account held by, at least, one US person, even if the remaining account holders are non-US persons.
7. What is a US Person?
The concept of a US Person includes: US citizens, including those with dual citizenship and holders of a US passport even if residing outside the USA; a person born in the USA unless having renounced US citizenship; permanent residents in the USA (including green card holders) or with substantial presence (having been present in the USA for at least 183 days during the last 3 years based on a specific method of computation); entities incorporated under US law.
Therefore, the concept of US person under FACTA is much broader than the one used under other regimes, such as the one foreseen in US law that prohibits foreign entities from selling securities to US persons. Under this regime, only US residents are considered US persons. Additionally, also foreign entities that have US shareholders who own, directly or indirectly, more than 25 treated as having US accounts.
8. If a joint account is held by a US person and a non-US person, is it considered 50% US or 100% US?
A joint account which has one U.S. owner is treated as a U.S. account and the entire account is subject to reporting as a U.S. person, regardless if the other account holders are non-US persons.
9. For a U.S. account holder, am I supposed to report to the IRS only its U.S. income and proceeds or also income and proceeds from non-U.S. assets?
The latter. The FFI is required to report world-wide income and proceeds received by specified US persons.
10. What does this mean for you?
If our records indicate that you are a Specified US Person, we will have to provide information about you and your account to the Portuguese Tax Authorities. They will then pass this information on to the Internal Revenue Service (IRS) in the US. We will report the following information to the Portuguese Tax Authority:
Date of Birth
Tax Identification Number (TIN) (for Specified US Persons, where available) or National Tax Number (NIF) (for Specified Persons, where available)