MORE than 140 professionals from the financial services industry attended a seminar provided by KPMG for a technical evaluation of the implications of the USA’s FATCA regulations.
The highly popular event, titled ‘FATCA: Are you ready?’ was held at The Claremont Hotel last Monday morning and featured presentations by Greg Jones, Sinead O’Connor and David Parsons of KPMG as well as guest speaker Iain McDonald, the Isle of Man Data Protection Supervisor.
FATCA, or the Foreign Account Tax Compliance Act, encompasses a set of amendments to the US Internal Revenue Code aimed at minimising tax avoidance by US persons.
Business News exclusively revealed the first details of FATCA in a front page lead last month.
Whilst three sets of preliminary guidance regarding FATCA have been released since 2010, the IRS issued the first copy of the proposed regulations only on February 8.
This event offered one of the first comprehensive reviews of that document, which is several hundred pages long.
OVERVIEW
After an introduction by tax director Greg Jones, associate director David Parsons provided an overview of the regulations and their scope.
The new regulations will impose withholding taxes upon non-compliant foreign financial institutions (FFIs) which invest into the US and/ or have US customers.
As a result, it was suggested that most financial institutions – including banks, funds and insurance companies - with any exposure to the US market would want to comply, and that this would include most institutions in the Isle of Man.
Sinead O’Connor, a senior manager in KPMG’s advisory practice, then outlined the requirements in terms of data capture and reporting which FFIs would need to meet in order to become a ‘participating’ FFI (PFFI), and thereby avoid the punitive measures.
While the compliance burden was deemed considerable, Sinead stressed the importance of leveraging existing AML procedures and information in order to limit the impact on your business and provided a broad outline of how a business might phase in new FATCA compliance processes over the next few years.
David then returned to look in more detail at the implications for Isle of Man based funds, insurance and trusts. Greg Jones then provided a brief overview of the ‘Government to Government’ compliance option, whereby local jurisdictions could collect FATCA information on behalf of local FFIs for reporting to the IRS.
While he did not feel that this would reduce the overall compliance burden, he suggested that it may be necessary simply in order to comply with Isle of Man and European data protection legislation, which is considerably more restricting than its US counterpart.
Indeed, Jersey has already approached the IRS to look into this possibility.
Iain McDonald also commented on this aspect of the regulations.
He summarised the topic by saying that the US does not have a sufficiently robust data protection regime, but that FATCA was too much of a ‘moving target’ for there to be any solid answers to that challenge as yet.
The audience were then given the opportunity to question all of the morning’s speakers.
Greg Jones commented on the outcome of the seminar: ‘FATCA is going to be an issue for financial institutions everywhere including of course those in the island.
‘The regulations will impose a significant additional compliance burden on institutions with investments in the US, or who have US customers, and where they do not comply they will be subject to new withholding taxes of 30 per cent on interest and sales proceeds.
‘That is quite a significant incentive to comply, so this morning we have tried to appraise the local marketplace of the current state of play in this area and to look at possible next steps for Manx financial institutions.’
He added: ‘I would particularly like to thank Iain McDonald for coming and providing a specialist data protection perspective for this morning’s attendees, as that is a crucial area of concern regarding the new regulations.’