FATCA Regulatory Update

What is FATCA?

The Foreign Account Tax Compliance Act ("FATCA") is a law that is intended to target tax non-compliance by U.S. taxpayers with foreign accounts. FATCA focuses on reporting:

  • By U.S. taxpayers regarding certain foreign financial accounts and offshore assets and;
  • By foreign financial institutions (FFI's) regarding financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest.  

FATCA requires that SVB:

  • Collect, review and monitor client information related to FATCA,
  • Report certain account balances and income on certain types of accounts to the IRS, and
  • Withhold and remit 30% on U.S. sourced income as a tax for non-compliance by clients who do not provide supporting documentation to SVB.

FATCA also requires FFI's headquartered outside the U.S. to register with the IRS to be compliant and not be subject to mandatory withholding on U.S. sourced income such as interest and dividends.

Non-Financial Foreign entities (NFFE's) must disclose the identity of U.S. owners or certify non-U.S. ownership to the withholding agent beginning in July 2014. This includes venture firms with foreign LPs and/or foreign limited partnerships which must register with the IRS or be subject to withholding of 30% on income, which may include any proceeds from the liquidation of fund investments.

What dates do I need to know about?

July 2014

  • New individual clients as of July 1, 2014 will be subject to FATCA regulations and will need to provide appropriate documentation to avoid withholding.
  • Certain clients with existing non-U.S. financial accounts will be subject to FATCA regulations and may be asked to provide more information on those accounts.

January 2015

  • New business entity clients as of January 1, 2015 will be subject to FATCA regulations and will need to provide appropriate documentation to avoid withholding.

March 2015

  • Additional FATCA reporting on certain foreign clients is required for the 2014 calendar year through IRS Forms 1042, 1042-S, and 8966.

July 2016

  • SVB to begin withholding on all undocumented pre-existing entity accounts.

January 2017

  • Withholding on gross proceeds and pass thru payments begin.
  • Reverse FATCA reporting under Intergovernmental Agreements begins for pre-existing accounts as of June 30, 2014.

March 2018

  • SVB to include U.S. gross proceeds for year-end 2017 subject to withholding on Forms 1042 and 1042-S.

How will this impact my business relationship with SVB?

SVB is in the process of conducting FATCA due diligence which includes collecting and reviewing account holder information and documentation, so that an account can be classified as a U.S. or a non-U.S. account. We are relying on the information and documentation previously provided by our clients to complete this effort. However, to ensure SVB client accounts have been properly classified under the FATCA regulations, clients may be requested to provide additional information. This may include having to provide a new W-8 or W-9 form.

What should my business do to prepare for FATCA?

To prepare for FATCA we recommend that clients:

Familiarize yourself with the final IRS regulations under FATCA.

Consult with your legal and/or tax advisors to assess legal entity classifications, business activities, sources of income and internal policies and procedures to understand the impact FATCA will have on your organization;

Here are some suggestions to assist you in completing the appropriate Form W-8 for your organization:

  • Your permanent address and mailing address on the form should match those on record with SVB.
  • Be sure to select a Chapter 3 and Chapter 4 Status on the Form W-8 appropriate to your organization.
  • Review your W-8 form for completeness. Selections under Chapter 3 and Chapter 4 may result in additional parts to be completed within the W-8 form.
  • If you are completing a Form W-8IMY: an associated withholding statement may be required along with the necessary tax certification form for each underlying payee(s) contained in the withholding statement.
  • Along with the signature, printed name and date being required in Part XXIX of the Form W-8BEN-E, please ensure that the appropriate person checks the certification box to certify that the signer has the capacity to sign for the organization identified on line 1 of the form.
  • If you have a registered GIIN with the IRS, review your completed W-8 forms to ensure the GIIN is listed in the appropriate fields.

Please consult with your tax and/or legal adviser for any questions specific to your company in completing your Form W-8.

For any general account questions related to FATCA please call your Relationship Manager.