Piguet Galland & vous.

Navigation

What does FATCA mean?

The Foreign Account Tax Compliance Act (FATCA) is a key part of the Hiring Incentives to Restore Employment (HIRE) Act enacted by the US Congress and signed into law by President Barack Obama on 18 March 2010.

The main purpose of FATCA is to combat tax evasion by US taxpayers, i.e. US Persons. FATCA relies on institutions in the financial and banking sector around the world to identify and provide data on US Persons to the US tax authority (the IRS) in accordance with agreements signed by each country.

Switzerland and the United States signed a FATCA agreement on 14 February 2013. Under the FATCA implementing Act, passed by the Swiss Parliament on 27 September 2013, all financial institutions in Switzerland must comply with the agreement.

US Persons who refuse to have their identity and data concerning them provided to the IRS will be classified as “recalcitrant”. A 30% withholding tax shall be applied to their US-source revenues and to gross proceeds from the sale of US securities.

In order to comply with their obligations under FATCA, all banks, including Piguet Galland & Cie SA, must determine the US or non-US status of individual accounts and the FATCA status of entities wishing to open an account.

Download the information circular

How to choose the appropriate FATCA form?

Non-US entity

If the entity you are representing is a non-US entity, one of those 2 forms should be completed:

  • Either a form W-8BEN-E;
  • Either a form W-8IMY.

IRS Form W-8BEN-E: This form is used by foreign entities that are deemed the beneficial owner of the income they receive according to US tax principles to certify their non-US tax payer status within FATCA context (e.g. irrevocable and discretionary trust or corporation). Download form W-8BEN-E (download instructions).

IRS Form W-8IMY: This form is used by foreign entities that act as intermediary or that are flow-through entities for US tax purposes to certify their non-US taxpayer status as well as their particular FATCA status (e.g. grantor trust or simple trust, broker). Download form W-8IMY.

US entity

If the entity you are representing is a US entity, you should complete a form W-9.

IRS Form W-9: This form is used by the third parties to collect and transmit identifying information on US taxpayers to the IRS (such as the taxpayer’s name, address and Tax Identification Number). Download form IRS W-9

According to the chosen category , which additional documents are necessary?

Depending on the FATCA categories, you are required to complete the appropriate US Forms:

If the entity is an entity created, organized, registered or incorporated in the USA, you need to provide the Bank with:

If the entity is non-US entity, some additional documents to the form W-8BEN-E and form W8-IMY:

Depending on the status provided on the Form W-8BEN-E or W-8IMY, the following additional documentation may be required by the Bank:

If the entity concludes on Form W-8BEN-E that its FATCA status is that of a passive NFFE:

  • a W-9 Form for the US substantial owners/US controlling persons listed on Part XXX of the Form W-8BEN-E;
  • a Banking Secrecy Waiver Appendix 2 Formulaire de consentement must be provided to the Bank by the account holder if there are US substantial owners/controlling persons.

If the entity concludes on Form W-8IMY that its FATCA status is that of a passive NFFE:

If the entity concludes on Form W-8BEN-E or W-8IMY that its FATCA status is that of an owner-documented FFI:

If the entity concludes on Forms W-8BEN-E or W-8IMY that its FATCA status is that of a non-participating FFI:

A couple of helpful definitions

Controlling Person

The term Controlling Person means the person who exercises control over an entity. Consistent with the Financial Action Task Force Recommendations, a controlling ownership interest is assumed for any person owning more than 25% of an entity.

In the case of a trust such term may apply to the settlor, the trustees, the protector (if any), the beneficiaries or class of beneficiaries, and any other natural person exercising ultimate effective control over the trust, and in the case of a legal arrangement other than a trust, such term means persons in equivalent or similar positions.

Investment Entity

The term “Investment Entity” means any entity that conducts as a business (or is professionally managed by an entity that conducts as a business) one or more of the following activities or operations for or on behalf of a customer (for example an account holder):

  • Trading in money market instruments (cheques, bills, certificates of deposit, derivatives, etc.); foreign exchange; exchange, interest rate and index instruments; transferable securities; or commodity futures trading;
  • Individual and collective portfolio management; or
  • Otherwise investing, administering, or managing funds or money on behalf of other persons.

Professionally managed

An entity is considered as professionally managed when a financial institution or an independant advisor or a professional trustee provides financial services to the entity such as discretionary mandate, trading…).

Active Non Financial Foreign Entity

A non US entity meeting the following criteria :

  • less than 50% of growth revenues are passive income and ;
  • less than 50% of its assets are assets generating passive income

For example : a bakery, a real estate company…

Passive income

Income generated by investing, reinvesting or trading in financial assets such as dividends, interests, capital gains on sales of financial assets, nets revenues from interest swaps…

Passive Non Financial Foreign Entity:

A non US entity meeting the following criteria:

  • more than 50% of growth revenues are passive income or;
  • more than 50% of its assets are assets generating passive income
  • and financial assets are not professionally managed by a financial institution or an independant advisor

For example a BVI company dedicated to a family for their financial investments without any discretionary mandate.

Owner Documented Entity

    A non US entity meeting the following criteria
  • more than 50% of growth revenues are passive income or ;
  • more than 50% of its assets are assets generating passive income
  • and financial assets are professionally managed by a financial institution or an independant advisor
For example a UK Trust which has signed a discretionary mandate with the bank.

Important notice

Piguet Galland & Cie SA does not provide any advice on any tax issues. You areadvised to obtain individual independent counsel from your financial advisor, auditor or legal counsel with respect to tax implications of FATCA.

This information can be used as a brief explanatory guide to assist in thedetermination of whether the Form W-9, W-8BEN-E or W-8IMY, or any additional documents, must be filed with the Bank. This information does not constitute tax advices. For your information reporting to IRS which is a requirement of FATCA law only relates to US persons.