What is FATCA?
FATCA stands for the Foreign Account Tax Compliance Act. It is a new piece of legislation designed to prevent tax evasion by US persons who hold financial accounts outside the US or invest through non-US entities, effective as of July 1, 2014. Enacted by the United States Congress in March 2010 and implemented through regulations and guidance issued by the United States Department of Treasury (Treasury) and the US Internal Revenue Service (IRS), the purpose of FATCA is to encourage better tax compliance by preventing US Persons (see Glossary) from using accounts held at foreign (non-US) financial institutions (FFIs) and investments in nonfinancial foreign entities (NFFEs) to avoid US taxation on their income and assets.
What is the impact of FATCA?
US financial institutions will be required to obtain new tax forms (Form W-8 or W-9) and additional documentation in certain cases, withhold tax from certain income payments, and report additional information to the IRS.
HSBC has made a commitment to being fully FATCA compliant in all countries where we operate. We will therefore be requesting all of our non-US customers to provide a new Form W-8 within the next three years (as per timelines defined in the regulation).
How do I know if I am affected?
FATCA legislation will affect businesses organized outside the US, who will have to provide a new Form W-8 and additional documentation as required. HSBC policy will not permit undocumented customers; withholding and/or account closure will be triggered if the new Form W-8 is not provided in the advised timeline.
When will the FATCA legislation become effective?
The FATCA legislation is due to become effective on July 1, 2014.
Is HSBC the only bank to be affected by FATCA?
No. All banks and other financial institutions worldwide will be affected by FATCA; however, their approach to adopting FATCA may differ. HSBC is committed to being fully FATCA compliant in all countries where we operate.
What does HSBC have to do to comply with FATCA?
To comply with FATCA, HSBC in the US will:
- Conduct a review of new and existing customers to identify those that are reportable and/or are subject to withholding under FATCA.
- Require businesses incorporated outside of the US to provide a new Form W-8 no later than June 30, 2016 (different timelines will apply depending on type of business).
In certain circumstances where customers fail to provide the appropriate documentation or when doing business with non-compliant entities, HSBC may be required to apply 30% US withholding tax on certain types of US income paid to such customers.
Is FATCA applicable to personal or business customers?
FATCA will impact both personal and business customers who hold an account, policy or agreement with HSBC.
Am I only affected if I am a US entity?
No. HSBC in the US will be reaching out to customers organized outside the US to determine their status under FATCA. The aim of this exercise is to update all Forms W-8 to the new version released by the IRS in 2014.
What do I need to do as a business customer?
In order to establish your tax status under FATCA, we will need you to provide new IRS tax forms (such as Form W-8) and in some instances additional information / documentation (including, if applicable, a Global Intermediary Identification Number (GIIN)) (see Glossary). We will be communicating with customers that need to complete these forms, detailing by when they will need to be completed.
Does FATCA replace existing tax rules I already follow?
FATCA does not replace the existing US tax regimes. It may however, add additional requirements and complexity to the existing tax rules you may already follow (including completion of new IRS tax forms, such as new versions of Form W-8). Should you need further advice on your US or non-US tax status or FATCA status/classification, you should contact a professional tax advisor.
Why has my other Bank asked for different documentation than HSBC?
The way in which banks and other financial institutions collect information from their customers in order to confirm their tax status under FATCA may vary. This may mean that in some instances you are asked for different documentation from HSBC than from another Bank. US banks will generally require you to complete a new IRS Form W-8, and may request additional documentation to establish your non-US tax status or FATCA status / classification.
HSBC cannot offer advice on your FATCA tax status or classification. If you need further support you should visit the IRS website or contact a professional tax advisor.
How frequently will I have to provide information for FATCA purposes?
FATCA is an ongoing process. If your account information changes, we may be required to contact you to obtain additional information/documentation so that we are able to update your account classification under FATCA.
What information will HSBC report to the IRS?
The information reported to the IRS will depend on the FATCA classification of the customer. For US owners of non-US entities that are specified US Persons or substantial US owners, this information will typically be of a personal nature (for example, name, address, US taxpayer identification number) and of a financial nature (e.g., account number, balance and amounts paid to the account). The IRS may also, pursuant to an Inter-governmental agreement (IGA), automatically share information about non-US customers that it receives from US financial institutions with the tax authorities in the customers’ countries of residence.
What types of information and/or documents can I expect to supply to HSBC?
We will be communicating with the affected customers and provide full details of the IRS tax forms (such as Form W-8) and other information / documentation HSBC needs for FATCA purposes.
Will HSBC supply me with all the forms I need to complete?
Yes. If HSBC requires further information from you, we will either send you the relevant forms or direct you to a website where you can download them.
When do I have to provide the requested information and/or documentation for FATCA?
Customers should supply the requested documentation and information by the date contained within the communication received from HSBC. In general, the regulations require all non-US entities to have a new Form W-8 by June 30, 2016.
What will HSBC do if I do not provide the information required under FATCA?
HSBC is committed to being fully compliant with FATCA.
HSBC may not open new accounts or offer additional products and services to customers who choose not comply with HSBC’s requests for documentation to establish a customer’s status under FATCA.
In accordance with the FATCA regulations, HSBC may exit the relationship with customers who decide not to provide the necessary information and documentation within the requested timeframe.
HSBC may also need to withhold tax on certain US-source payments paid to you or your account if the requested documentation is not provided. This information will also be reported to the IRS. (Please see the Glossary for further information on withholding tax.)
What do I need to do if I am affected by FATCA?
We will continue to review the impact of the legislation for our customers and will communicate with affected customers in due course. For more information regarding FATCA, please visit the IRS website or contact your professional tax advisor for advice.
Please note that you may receive more than one request for documentation if you have multiple relationships with different members of the HSBC Group. Local privacy laws may prevent the sharing of certain information within HSBC Group across national borders; thus it is important that you respond to all requests, even if you believe you have already supplied the requested information.
HSBC is unable to offer tax advice. For tax related questions please contact your professional tax advisor or refer to the IRS website.