Frequently asked questions about FATCA
Retail Banking and Wealth Management – United States
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 from using accounts held at foreign financial institutions (FFIs) and investments in non-financial foreign entities (NFFEs) to avoid US taxation on their income and assets.
Please refer to the glossary for the definitions of US persons, foreign financial institutions and non-financial foreign entities.
What is the impact of FATCA?
US financial institutions will be required to obtain new IRS tax forms (see glossary) and additional documentation in certain cases; withhold tax from certain income payments and report any relevant additional information to the IRS.
HSBC is committed 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 W-8 series form within the next three years (as per the timelines defined in the regulations). In general, all customers must self-certify on the appropriate tax form (W-9 and W-8 series forms) 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 legislation will affect US personal customers who are treated as non-US persons for US tax purposes, who may be requested to provide new tax forms and additional documentation as required.
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 (FFIs) and who are substantial US owners (see glossary) of passive non-financial foreign entities (NFFEs).
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: External site: Link opens in an overlay or contact your tax professional.
When will the FATCA legislation become effective?
The FATCA legislation became effective on July 1 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 institutions 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
- classify personal and business customers according to the FATCA regulations based on the new US tax forms they provide (for example, as US persons, non-US persons, foreign financial institutions or non-financial foreign entities)
- require businesses incorporated outside of the US to provide new US tax forms within the regulatory timeframes
- report the required information to the IRS on accounts held by certain non-US entities and, where applicable, their US owners.
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 up to 30% US withholding tax on certain types of US income paid to such customers. This information will also be reported to the IRS.
Please refer to the glossary for the definitions of US persons, foreign financial institutions, non-financial foreign entities and withholding tax.
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 W-8BEN form, if an individual’s account indicates any of the following four US connections (or US indicia), HSBC may request further information and/or 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 a US telephone number (or numbers).
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 substantial US owner (see glossary) of a non-US entity, the entity may be required to provide information about you to HSBC, that will then be reported to the IRS.
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 US tax rules you may already follow (including the completion of new IRS W forms). Should you need advice on your US or non-US status or FATCA status and/or classification, we recommend that you contact a professional tax advisor.
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.
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 or documentation so that we are able to update your account classification under FATCA.
What information will HSBC report to the IRS?
For US persons (see glossary), this information will typically be of a personal nature (for example, name, address, US taxpayer identification number), and of a financial nature (for example, account number, account balance, amounts paid into the account).
The IRS may also, pursuant to an inter-governmental agreement (see glossary), automatically share information about non-US customers that it receives from US financial institutions with the tax authorities in these 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 to provide details of the IRS tax forms (see glossary) and any other information and/or 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 FATCA compliant in all countries where we operate.
The 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 regulatory timeframe.
HSBC may also need to withhold tax (see glossary) 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.
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 the 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 advisor or refer to the IRS website: External site: Link opens in an overlay.
(Page last updated: February 2020)