The United States estimates a loss of approximately US$100-billion through tax evasion every year. In an effort to improve compliance of US taxpayers with foreign financial assets and offshore accounts, the Foreign Accounts Tax Compliance Act (FATCA) was enacted by the US Government. This Act essentially requires non-US financial institutions to identify and report on US individuals or entity account holders.
Recently the South African government agreed to and signed an inter-governmental agreement (IGA) with the US Internal Revenue Service (IRS) allowing for FATCA to be directly incorporated into local governmental law. The local FATCA laws have been phased in from July 2014 in order to comply with the timelines set out in the IGAs.
Any financial institution that does not comply with FATCA will have a 30% withholding against any US sourced income imposed upon them.
To enforce compliance, FATCA requires financial institutions such as banks to report information to their local Tax Authority about financial accounts held by US taxpayers and entities, in which US taxpayers hold a substantial ownership interest (this will be aligned to the AML/KYC requirements which are set per jurisdiction).
The FirstRand Group, Rand Merchant Bank(RMB) and its various franchises, branches and subsidiaries, as well as our African and international subsidiaries are required to report on all our US citizen account holders (both individual as well as entities), and to disclose the account holders' names, tax identification numbers (TINs), addresses and accounts balances.
As a consequence, RMB will be required to identify potential US persons (individuals, financial institutions, entities incorporated in the US, as well as entities with substantial US owners) and obtain IRS forms/documents as applicable. Failure to supply the requested FATCA documentation may result in RMB being obliged to report clients’ information to the South African Revenue Service (SARS) and the United States Tax Authority (The IRS). In addition, clients’ organisation(s) may have a 30% withholding penalty imposed on any US Sourced Income in jurisdictions that have not entered into an IGA.
To ensure we make every effort not to inconvenience our clients, we will be aligning the FATCA information gathering exercise as part of our normal KYC review process.
With effect from 1 July 2014, RMB is required to ensure that all new clients are FATCA compliant. The additional information as required by FATCA will be integrated into the existing KYC process to minimise touch points with our clients.
We wish to assure our clients of our continued service and support. Should you have any questions kindly contact your Relationship Manager.
For further information on FATCA you can visit the website at www.irs.gov/FATCA and/or consult with your tax advisers.
Should you require our RMB FATCA Status as a Financial Institution or The FirstRand Groups’ GIIN number, please forward these requests to Fatca@firstrand.co.za.