Retail Banking and Wealth Management

United States of America

FATCA overview

The Foreign Account Tax Compliance Act (FATCA) is a new piece of legislation administered by the United States Department of Treasury and the US Internal Revenue Service (IRS) to counter tax evasion by US persons. FATCA will ensure that US taxpayers holding financial assets outside the United States will report those assets and related income to the IRS as required.

HSBC is committed to being fully FATCA-compliant in all countries where we operate.

In order to be FATCA-compliant, HSBC in the US is required to have an updated IRS Form W-8 and, in certain cases, additional documentation, from all non-US individuals and non-US entities.

In addition, HSBC will have to withhold up to 30% US tax from certain income payments when required and report additional information to the IRS.

If you have any questions, please consult with your local tax adviser or visit the IRS FATCA website.

Attachment X: A completed Attachment X is required for non-US individuals who complete an IRS Form W-8BEN tax form and who have a US mailing address; and/or a permanent US address; and/or US telephone number(s) without any foreign telephone number. A copy of Attachment X is available here.

Additional Information

W-9: This is a link to the withholding certificate referred to as a ‘W9’ on the IRS website. This form is completed to confirm US tax status.

W-8: This is a link to the withholding certificates referred to as ‘W8s’ on the IRS website. This is a series of forms that are completed to confirm non-US tax status.

FAQ

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 non-financial foreign entities (NFEEs) 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 and 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). In general all customers must self-certify on the appropriate US tax form (Form W-9 or W-8) to their US or non-US status and, if they are entities, to their FATCA status or classification.

How do I know if I am affected?
FATCA will affect US RBWM personal customers who are treated as non-US Persons for US tax purposes who may be requested to provide new tax forms and/or additional documentation. FATCA will also require additional information and/or documentation from US individuals who are specified US owners of certain non-US entities that are considered to be foreign financial institutions and substantial US owners of passive nonfinancial foreign entities. (See Glossary for definition of the terms specified US owners and substantial US owners.)

The term US person includes the following (but is not limited to) (refer to Glossary for more detailed definition):

  • 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)
  • An individual residing in the US, including US permanent resident aliens (non-US citizens) (i.e., US green card holders)
  • Certain alien individuals who spend a significant number of days in the US each year and meet the substantial presence test for US tax residency (see Glossary),
  • US corporations, US partnerships, US estates and US trusts (generally entities organized in the US)

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 tax professional.

When will the FATCA legislation become effective?
The FATCA legislation is currently 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 becoming 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:

  • Document with new tax forms all new and existing non-US customers to identify those that are reportable and/or are subject to withholding under FATCA. US RBWM personal and business customers will be classified according to current and FATCA regulations based on the US tax forms they provide (for example, as US Persons or non-US Persons).
  • Report required information to the IRS on accounts held by certain non-US entities and, when applicable, their US owners. In addition, HSBC will generally need to report information about customers, including those 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 customers, HSBC may be required to apply up to 30% US withholding tax on certain types of US income paid to such customers.

Does FATCA replace existing US tax rules that 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 advice on your US or non-US status or FATCA status/classification (if applicable), we recommend you contact a professional tax adviser to discuss your personal tax situation.

Is FATCA applicable to personal or business customers?
FATCA legislation will impact both personal and business customers who hold an account, policy or agreement with HSBC.

Are only non-US persons affected?
Generally, yes. In addition to supplying a valid Form W-8 BEN, if an individual’s account indicates any of the following four US connections (or US Indicia), HSBC may request further information/documentation to establish that you are a non- US Person.

  • US citizenship or US residence
  • US place of birth
  • US address including US PO boxes
  • Only US telephone number(s)

What does FATCA mean for me if I am a US person?
For most US individual customers, FATCA will have minimal impact, and there will be no action required. However, if you are a US owner of a non-US entity, the entity may be required to provide information about you to HSBC that will be reported to the IRS.

What happens if a joint account is held by a US person and a non-US person?
A joint account between individuals which has one owner who is a US person is treated as the US person's account and therefore the entire income from that account will be reportable to the US individual on a Form 1099.

What information will HSBC in the US report to the IRS?
The information reported to the IRS will depend on the US/non-US status and, if applicable, FATCA classification of the customer. For US owners of certain non-US entities, 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 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.

How frequently will I have to provide information for FATCA purposes?
FATCA is an on-going process. If your account information changes, we may be required to contact you to obtain additional information so that we are able to update your account’s tax status.

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 Forms 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?
In general, customers should supply the requested documentation and information by the date contained within the communication.

What will HSBC do if I do not provide the information required under FATCA?
HSBC is committed to being fully compliant with FATCA.

HSBC Group may not open new accounts or offer additional products and services to customers who choose not to 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 adviser 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.

Please note that HSBC is unable to offer tax advice. For tax related questions please contact your professional tax adviser or refer to the IRS website.

Glossary

Foreign Financial Institution (FFI)
FFI is the abbreviation for Foreign Financial Institution. It refers to a non-US Financial Institution. The FATCA legislation contains an extensive definition of FFI and includes entities such as banks, custodian institutions, investment funds, certain trusts, and certain types of insurance companies

Global Intermediary Identification Number (GIIN)
A GIIN is an identification number that the IRS provides to participating FFIs, registered deemed compliant FFIs, sponsoring entities, direct reporting nonfinancial foreign entities (DRNFFEs) and sponsored DRNFFEs and any other entities required to register on the IRS FATCA portal website. This identification number will be used to identify the registered entity FFI to withholding agents.

IRS Forms
Withholding certificates, also referred to as W-forms, are US IRS tax forms.

Form W-9 is a Request for Taxpayer Identification Number and Certification. This US Tax Form is provided by an account holder to confirm and certify their US status and provide their TIN and other tax certifications. The W-8 series forms are used by foreign persons (individuals and entities) to certify their non-US status. The form establishes that one is a non-resident alien or foreign corporation, and is used to eliminate or reduce US tax withholding from US source income (e.g., under an income tax treaty). These forms will permit a non-US customer to self-certify their status under FATCA.

Inter-Governmental Agreement (IGA)
An IGA is an agreement between the US and specific countries to build FATCA compliance into the country’s legal framework so that the country can implement FATCA. An IGA will require that country’s financial institutions to provide the information on US accounts which they hold either:

  • directly to the IRS
  • to the local tax authority of the resident country for further transmission to the IRS.

Internal Revenue Service (IRS)
The IRS is the United States government agency responsible for tax collection and tax law enforcement.

Non-financial Foreign Entity (NFFE)
A NFFE (Nonfinancial Foreign Entity) is an entity organized outside the US that does not meet the definition of an FFI and includes:

  • Privately held operating businesses
  • Professional service firms
  • Any other non-publicly-traded foreign entity not involved in banking or investing

A passive (non-active) NFFE that is not otherwise exempted from FATCA must provide information about its “substantial US owners” to be disclosed to the IRS or certify it has no such owners.

Specified United States (US) Person
The term specified United States person means any United States person other than:

  • a corporation the stock of which is regularly traded on one or more established securities markets for a calendar year;
  • any corporation which is a member of the same expanded affiliated group as a corporation the stock of which is regularly traded on one or more established securities markets for the calendar year;
  • any organization exempt from taxation under US federal tax law or an individual retirement plan;
  • the United States or any wholly owned agency or instrumentality thereof;
  • any State, the District of Columbia, any US territory, any political subdivision of any of the foregoing, or any wholly owned agency or instrumentality of any one or more of the foregoing;
  • any bank incorporated and doing business under the laws of the United States (including laws relating to the District of Columbia) or of any state thereof;
  • any real estate investment trust;
  • any regulated investment company, or any entity registered with the Securities Exchange Commission under the Investment Company Act of 1940;
  • any common trust fund;
  • any trust that is exempt from tax or is deemed a charitable trust;
  • a dealer in securities, commodities, or derivative financial instruments that is registered as such under the laws of the United States or any State;
  • a broker; and
  • any tax exempt trust under a tax exempt or public school annuity plan or governmental plan.

Substantial Presence Test
In general, an alien (non-US citizen) individual meets the substantial presence test for US tax residency if the individual is physically present in the US for

  • at least 31 days during the current calendar year, and
  • at least 183 days during the three-year period that includes the current calendar year and the two immediately preceding years (counting all days in the current year, 1/3 days in preceding year and 1/6 days in the second preceding year),
  • subject to special exemptions for those with F, J, M, Q or diplomatic visas (i.e., foreign students, teachers, diplomats), international organization employees and certain other exemptions (see IRS Publication 519 for more details).

Substantial US Owner
A substantial US owner generally is a US person owning more than a 10% interest in a corporation, partnership or non-grantor trust, or any ownership interest in a grantor trust or a certain type of investment vehicle (e.g., a real estate investment vehicle or non-professionally managed trust).

Tax Identification Number (TIN)
For an individual, a US TIN would be the individual’s US social security number (SSN) or Individual Taxpayer Identification Number (ITIN). For an entity, a US TIN would be its employer identification number (EIN).

US Person (USP)
The term "United States person" means:

  • A citizen or resident of the United States (including a green card holder and an individual that meets the “substantial presence test”),
  • A partnership created or organized in the United States or under the law of the United States or of any State, or the District of Columbia,
  • A corporation created or organized in the United States or under the law of the United States or of any State, or the District of Columbia,
  • Any estate other than a foreign estate,
  • Any trust if: a court within the United States is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust, or
  • The United States government, a State or the District of Columbia (including any agency, instrumentality or political subdivision thereof).

US Citizen
The term "United States Citizen" means:

  • An individual born in the United States,
  • An individual whose parent is a US citizen,
  • A former alien who has been naturalized as a US citizen,
  • An individual born in Puerto Rico,
  • An individual born in Guam, or
  • An individual born in the US Virgin Islands.

Withholding Tax
A 30% withholding tax applies under FATCA on ‘withholdable payments’ in respect of financial institutions that do not comply with the FATCA requirements and/or customers who do not provide the requisite FATCA documentation.

The term withholdable payment means:

  • Fixed or determinable, annual or periodical (FDAP) income, if such payment is from sources within the US – this will include any payment of interest and dividends by a US corporation. This will apply from July 1, 2014.
  • Any gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources within the US. This will apply no earlier than January 1, 2017.

Various exceptions apply, including for income connected with a US business, interest/OID paid on short-term obligations (i.e., obligations with a term of 183 days or less) and income from grandfathered obligations (certain obligations outstanding on June 30, 2014).

(Last updated October 2014)