US Foreign Account Tax Compliance Act Intergovernmental Agreement Frequently Asked Questions
US Foreign Account Tax Compliance Act Intergovernmental Agreement Frequently Asked Questions
US Foreign Account Tax Compliance Act Intergovernmental Agreement Frequently Asked Questions
Intergovernmental Agreement
Frequently Asked Questions
Q 1:
What is FATCA? Does this US tax legislation have any implication for
Hong Kong?
A 1:
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Q 2:
A 2:
The US Treasury announced in June 2012 its intention to sign IGAs under
FATCA with other jurisdictions, in order to simplify due diligence and
disclosure requirements, reduce or eliminate conflicts with local
legislation, and eliminate certain withholding requirements.
The US has developed two Model IGAs to simplify the implementation of
FATCA.
Model I establishes a framework of reporting account
information on US persons by financial institutions to the relevant
domestic authority which in turn provides the information to the US IRS.
As at 1 July 2014, 34 jurisdictions including Australia, Canada, France,
Germany and the United Kingdom have signed Model I IGA with the US.
Having regard to our tax legislation, Hong Kong has opted for a Model II
IGA with the US. Austria, Bermuda, Chile, Japan and Switzerland have
signed Model II IGAs with the US. Model II establishes a framework of
enabling relevant financial institutions in Hong Kong to seek consent for
disclosure from US clients, and to report relevant tax information of such
clients to the US IRS. This model of IGA will be supplemented by the
operation of a tax information exchange agreement.
Q 3:
Why does Hong Kong have to enter into an IGA with the US
A 3:
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Q 4:
A 4:
Q 5:
A 5:
All financial institutions meeting the criteria of FFIs under FATCA such
as banks, investment entities, insurance companies, custodial institutions,
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and unless otherwise exempt, must register with the US IRS and comply
with the terms of FFI agreement. Otherwise they will be subject to a
30% withholding tax on relevant US-sourced payments to them.
Q 6:
A 6:
Q 7:
A 7:
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Q 8:
How does an IGA between Hong Kong and the US help minimise the
compliance burden of FATCA ?
A 8:
According to the IGA reached in substance between Hong Kong and the
US (a) financial institutions in Hong Kong complying with the respective
FFI Agreements will not be subject to a 30% withholding tax in
respect of relevant US-sourced payments by institutions in the US or
other FFIs owing to their own FATCA obligations. This will
certainly help safeguard the interest of all depositors, insurance
policy holders, investors and other clients of Hong Kong financial
institutions in Hong Kong;
(b) the US IRS will waive the requirements under the relevant US
Internal Revenue Code for financial institutions in Hong Kong to
withhold tax on payments to recalcitrant accounts (i.e. accounts of
which the holders do not consent to FATCA reporting and disclosure
to the US IRS) or close those recalcitrant accounts;
(c) for group institutions with worldwide operations, their Hong Kong
operations shall continue to be treated as FATCA-compliant despite
any non-compliance of a related entity operated in a jurisdiction that
prevents its compliance with FATCA;
(d) financial institutions in Hong Kong may rely on a set of streamlined
due diligence procedures as stated in Annex I to the IGA to screen
and identify US indicia in order to locate US accounts and clients for
reporting purposes. This will minimise compliance burdens of
financial institutions in Hong Kong and inconvenience for other
account holders who are not the targets of FATCA; and
(e) A wide range of entities, financial institutions and products
including, among others, mandatory provident fund schemes, other
retirement products that fall within the specified criteria, institutions
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Q 9:
A 9:
Q 10:
A 10:
Unless the financial institutions are exempt from registration under the
IGA, such as exempt beneficial owners and certified deemed-compliant
foreign financial institutions, all other financial institutions treated as FFIs
under the IGA have to register with the US IRS at the specified US IRS
website. A Global Intermediary Identification Number (GIIN) will be
assigned by the US IRS to a financial institution completing the
registration process for identification. The US IRS has provided a list of
all participating FFIs at a specified date at its website since 2 June 2014
and will update the list every month.
Please refer to the relevant US IRS website for details:
http://www.irs.gov/Businesses/Corporations/FATCA-Registration
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Q 11:
A 11:
According to the consensus reached by Hong Kong and the US, the
following entities, institutions and financial products would be exempt
from a wide range of or certain compliance obligations under the IGA to
be signed by Hong Kong and the US
(I)
(II)
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A 12:
Apart from MPF schemes, certain retirement funds are exempt from
registration and reporting obligation under the IGA. These retirement
products include all ORSO schemes that are registered with the
Mandatory Provident Fund Schemes Authority (MPFA) in accordance
with the ORSO (i.e. the ORSO registered schemes) and satisfy certain
specified criteria.
The specified criteria, in essence, include
All other ORSO schemes that could not satisfy the said criteria including
ORSO exempted schemes, i.e. ORSO schemes which are granted
exemption certificates by MPFA, would not be exempt from FATCA
registration and reporting. (For information regarding registration with
the relevant authority of the US, please see Q.10)
Q 13:
A 13:
Unless the financial institutions are exempt from registration under the
IGA, such as exempt beneficial owners and certified deemed-compliant
foreign financial institutions, all other financial institutions treated as FFIs
under the IGA have to register with the US IRS at the specified US IRS
website. A GIIN will be assigned by the US IRS to a financial institution
after completing the registration process for identification. The US IRS
has provided a list of all participating FFIs at a specified date and tools for
searching and identifying participating FFIs and their GIINs from the list
at its website since 2 June 2014. The US IRS said that the list will be
updated every month.
Please refer to the relevant US IRS webpage for details:
http://www.irs.gov/Businesses/Corporations/FATCA-Foreign-Financial-Institution-ListSearch-and-Download-Tool
A 14:
Q 15:
A 15:
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