WHEN TO REPORT THE INFORMATION?

The FATCA came into force on July 1, 2014, but its implementation was made gradually. In this sense, the first report of the US Accounts and Recalcitrant Accounts was made up to March 31, 2015 (referring to the year 2014) and should contain the following information: name, address, TIN, number and account balance of the US Persons (or, if the account has been closed after the entry into force of the FFI agreement, the amount withdrawn or transferred therefrom); the name, number and account balance of the Passive NFFEs with substantial US owners, as well as the name, address and TIN of each of the substantial US owners; the amount and aggregate number of recalcitrand accounts.

The second report, referring to the year 2015, should have been made until March 31, 2016. In addition to the information above, the second report should include the gross amount of interest, dividends and other income credited to each US account, except for gross proceeds. Information on the latter should be included in the third report.

Payments of non-US origin paid to nonparticipating foreign financial entities should only be made in 2016 and 2017, by reference to the years, until March 15.

Finally, US FDAP (US source fixed, determinable, annual, periodical payments) paid to recalcitrant accounts and non-participating FFIS (foreign financial entities) and their withheld tax, began to be reported in 2015, and by March 15, for reference to the previous year, whereas the US gross proceeds and their withholding tax will only have to be reported from 2018, by reference to 2017, since it is only this year that the withholding tax on these income begins.

WHAT INFORMATION SHOULD BE REPORTED?

Foreign financial entities affected by the FATCA shall periodically report to the American IRS information regarding:

  • US Accounts (accounts opened in the name or on behalf of one or more US Persons or by a foreign company owned by US Persons);
  • Recalcitrant Accounts (account holders or beneficial owners whose recognition as US Person is not possible);
  • Payments subject to tax withholdings made to Recalcitrant Accounts and non-participating foreign financial entities.

Portugal is subject to Model 1 of the Intergovernmental Agreement, so financial institutions will have to send to the Tax Authority the necessary information on the US Persons accounts, required by the FATCA, in XML format.

BASEL III AGREEMENT

The international financial crisis has exposed the weaknesses of the regulatory system of financial markets and demonstrated inefficiencies in risk management procedures in the financial sector. In this context, the Basel Committee on Banking Supervision (BCBS) has defined the new rules, known as Basel III, in order to improve the ‘rules of definition of global capital and liquidity to increase the stability of the sector’.

Basel III is based on three pillars defined in the Basle II agreement and adjusts the agreement to the current challenging reality of the financial markets, namely:

  • A more rigorous definition of capital in order to ensure a greater quantity, quality, transparency and coherence of the capital base;
  • The introduction of new capital buffers (Capital Conservation Buffer and Countercyclical Capital Buffer);
  • The strengthening of risk coverage, including counterparty credit risk (CCR Counterparty Credit Risk);
  • Leverage ratio implementation, in order to complement the Basel II framework, based on risk;
  • The implementation of new short- and long-term liquidity ratios (LCR Liquidity Coverage Ratio and NSFR Net Stable Funding Ratio);
  • The introduction of the concept of systemically important institutions (Systemically Important Financial Institution).

CAPITAL REQUIREMENTS REGULATION AND CAPITAL REQUIREMENTS DIRECTIVE

The CRR Capital Requirements Regulation and the CRD Capital Requirement Directive constitute the European transposition of Basel III: the legal basis approved by the European Parliament and the Council of the European Union, which defines a set of prudential requirements for credit institutions and investment firms. Regulation applies from 1 January 2014, but a transition period is anticipated, until the year 2019. During this period the new requirements will be phased in.

STANDARDIZATION OF REPORTS – COREP / FINREP

With the standardization of regulation, there was also a need to implement reports with uniform requirements and definitions through the Common Reporting Guidelines (COREP), a defined model for reporting information of a prudential nature, and Financial Reporting (FINREP), a model defined for reporting financial and accounting information.

WHO IS AFFECTED BY FATCA?

FATCA applies to all foreign financial and non-financial operating entities. This means that FATCA has an impact on all non-US entities receiving payments from the US source, directly or indirectly.

Also, US entities, financial or non-financial, that make payments to foreign entities, are subject to the new FATCA rules, and must therefore make a formal commitment to the IRS, maintain documentation about these foreign entities and determine their classification within the framework of FATCA.

 

 

WHAT IS FATCA?

The FATCA (Foreign Account Tax Compliance Act), approved on March 18, 2010, by the US Congress, is a legal document aimed at preventing US Persons who use non-US resident financial institutions to protect their income. In this sense, foreign (non-US) financial institutions are required to report to US tax authorities the holders of US bank accounts.

US Persons are described as:

  • US citizens or residents of the United States;
  • Individuals born in the USA;
  • Individuals with current address of residence or correspondence in the USA;
  • Individuals with at least one current telephone number of US origin;
  • When there are indications of instructions to make payments from the policy (s) to bank accounts held in the US;
  • When there is evidence of power of attorney or other form of empowerment granted to a person with a US address;
  • Individuals who provide a postal address with characteristics of “care of …” as the only address available.

Any new customer that matches at least one of these characteristics is considered a potential US Person;

In the case of corporate entities, they are considered US Persons, companies whose registered office is in the United States and companies in which one or more owners are US Persons.