What is FATCA?
FATCA stands for the Foreign Account Tax Compliance Act. It is a new piece of legislation to help counter tax evasion in the US.
Introduced 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 banks and other financial organisations to avoid US taxation on their income and assets.
A significant number of countries worldwide including New Zealand, have signed Inter-Governmental Agreements (IGAs) relating to FATCA compliance with the United States government. These IGAs have resulted in the FATCA legislation becoming part of these countries’ local laws (please refer to the glossary for IGA definition). In New Zealand, the principles of FATCA have been brought in to our local law. This means that HSBC may need to provide information on US accounts to the local tax authority, the Inland Revenue Department (IRD).
What is the impact of FATCA?
On an annual basis, banks and other financial organisations will be required to report information on financial accounts held directly or indirectly by US persons.
HSBC is committed to being fully FATCA compliant in all countries where we operate. In order to establish your tax status, we may need to obtain certain documents. These documents are HSBC declarations and/or IRS forms that will enable you to declare and confirm your tax status to us for the purposes of FATCA.
How do I know if I am affected?
FATCA legislation will affect both personal and business customers who are treated as a US person (see glossary) for US tax purposes. The FATCA legislation will also affect certain types of businesses with US owners.
The term ‘US person’ includes the following (but is not limited to):
- a citizen of the US, including an individual born in the US but resident in another country (who has not given up their US citizenship)
- a person residing in the US, including US green card holders
- certain persons who spend a significant number of days in the US each year
- US corporations, US partnerships, US estates and US trusts
For more information regarding FATCA, please visit the IRS website: External site: Link opens in an overlay or contact your tax professional.
When did the FATCA legislation become effective?
The FATCA legislation became effective on 1 July 2014.
HSBC is committed to being fully FATCA compliant in all countries where we operate, in accordance with the legislative timeline.
Is HSBC the only bank to be affected by FATCA?
No. All banks and other financial organisations 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 will:
- Conduct a review of new and existing customers to identify those that are reportable under FATCA. Business customers will be classified according to the FATCA legislation (for example, as US persons, foreign financial institutions or non-financial foreign entities).
- Report information to the IRD on all accounts held directly or indirectly by US persons. In addition, HSBC may also need to report information about customers who do not provide the required documentation to us.
In certain circumstances and where customers fail to provide the appropriate documentation or when doing business with non-compliant entities, HSBC may be required to apply 30 per cent US withholding tax on certain types of US income paid to such customers.
(Please refer to the Summary of Key Terms for the definitions of US persons, foreign financial institutions, non-financial foreign entities and withholding tax.)