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Foreign Account Tax Compliance Act (FATCA) – Update Intergovernmental Agreement México – U.S.A. to improve International Tax Compliance with respect to.

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Presentation on theme: "Foreign Account Tax Compliance Act (FATCA) – Update Intergovernmental Agreement México – U.S.A. to improve International Tax Compliance with respect to."— Presentation transcript:

1 Foreign Account Tax Compliance Act (FATCA) – Update Intergovernmental Agreement México – U.S.A. to improve International Tax Compliance with respect to FATCA April, 2013

2 Why is relevant the fulfillment of FATCA for the Mexican Stock Exchange Market?? Monthly Average Securities Custody Vs. Monthly BMV’s Operability International Quotation System Monthly Average Securities Custody Vs. Monthly BMV’s Operability International Quotation System In addition to foreign issuers, local titles in foreign investors hands accumulate more than $ 500 billion dollars

3 México (SHCP) – E.U.A. (Treasury Departament) On November 19, 2012, the Department of the Treasury of the United States of America (the “U.S. Treasury Department”) and the Ministry of Finance and Public Credit of México (“S.H.C.P.”) signed an Intergovernmental Agreement to improve international tax compliance including with respect to FATCA, based on domestic reporting and reciprocal automatic exchange and subject to the confidentiality protection. Foreign Account Tax Compliance Act (FATCA) – Update Intergovernmental Agreement México – U.S.A. to improve International Tax Compliance with respect to FATCA The parameters of the Agreement are not different from those set forth in the final regulations released by the U.S. Treasury in February Obligations are now explained in greater detail and more clearly. (a) The Mexican Financial Institutions will not be subject to any withholding tax and are not required to carry out the Withholding on payments made to Recalcitrant Account Holders (b) Nevertheless it maintains the obligation to carry out a due diligence procedure for data collection and reporting. (c) This agreement is related to IGA Model I, "Model of Intergovernmental Agreement with Reciprocity" which was released by the U.S. Treasury Department in July 2012, and includes the following characteristics:

4 Features Date of Implementation : The Agreement is in effect from January 1, 2013 The Agreement covers all financial institutions that are residents of Mexico, including branches from Foreign Financial Institutions. In this respect if an entity is considered as a "Reporting Mexican Financial Institution" under FATCA, will be required to be registered with the National Tax Authority as well as with the IRS and to and comply with all the requirements (identification, data collection and report, unless it can be identified as a “Non-Reporting Mexican Financial Institution”. In the event that a "Reporting Mexican Financial Institution" fails to comply with its obligations under the IGA Agreement, the U.S. authorities will notify this situation to the authorities of S.H.C.P. for the purposes to implement the Mexican laws that are in force. In the event that after 18 months, the Financial Institution continue without fulfilling their obligations, will be considered a "Non- Participating Institution" and will be subject to 30% withholding In the event that a "Reporting Mexican Financial Institution" fails to comply with its obligations under the IGA Agreement, the U.S. authorities will notify this situation to the authorities of S.H.C.P. for the purposes to implement the Mexican laws that are in force. In the event that after 18 months, the Financial Institution continue without fulfilling their obligations, will be considered a "Non- Participating Institution" and will be subject to 30% withholding Date of Implementation & Coverage Coverage: Foreign Account Tax Compliance Act (FATCA) – Update Intergovernmental Agreement México – U.S.A. to improve International Tax Compliance with respect to FATCA

5 Features According to Annex II of the Agreement, the Mexican Financial Institutions that are not Subject to Report are: A.The Mexican Government and any of its political subdivisions, or any wholly owned agency or instrumentality of any one or more of the foregoing, including: a.Nacional Financiera, S.N.C (NAFIN) b.Banco Nacional de Comercio Exterior, S.N.C. (BANCOMEXT) c.Banco Nacional de Obras y Servicios Públicos, S.N.C. (BANOBRAS) d.Sociedad Hipotecaria Federal, S.N.C. (SHF) e.Financiera Rural A.The Mexican Government and any of its political subdivisions, or any wholly owned agency or instrumentality of any one or more of the foregoing, including: a.Nacional Financiera, S.N.C (NAFIN) b.Banco Nacional de Comercio Exterior, S.N.C. (BANCOMEXT) c.Banco Nacional de Obras y Servicios Públicos, S.N.C. (BANOBRAS) d.Sociedad Hipotecaria Federal, S.N.C. (SHF) e.Financiera Rural Mexican Financial Institution not subject to Report B.Central Bank Banco de México or any of its subsidiaries B.Central Bank Banco de México or any of its subsidiaries C.Pension Funds I.Exempt Beneficial Owners A.Any exempt organization resident of Mexico entitled to the benefits provided in Article 22 of the Convention between the Government of the United States of America and the Government of the United Mexican States for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and paragraph 17 of its Protocol B.A Fideicomiso (trust), to the extent that the trustee of the Fideicomiso is a Reporting Mexican Financial Institution II.Deemed-Compliant Financial Institutions C.A Fideicomiso (trust) that serves solely as escrow for a debt or purchase obligation of the settler. D.A Fideicomiso (trust) the assets of which consist solely of real property. E.In the case of an Investment Entity that is a collective investment vehicle regulated under the laws of Mexico. Foreign Account Tax Compliance Act (FATCA) – Update Intergovernmental Agreement México – U.S.A. to improve International Tax Compliance with respect to FATCA

6 The information that each of the financial institutions must obtain and report under the Agreement IGA is practically the same as FATCA. The only difference now is that reporting will now be made to the Mexican Tax Authority instead of the IRS The information that each of the financial institutions must obtain and report under the Agreement IGA is practically the same as FATCA. The only difference now is that reporting will now be made to the Mexican Tax Authority instead of the IRS Each Financial Institution shall identify "U.S. Reportable Accounts” (Financial Account maintained by a Reporting Mexican Financial Institution and held by one or more Specified U.S. Persons or by a Non-U.S. Entity with one or more Controlling Persons that is a Specified U.S. Person) and “Nonparticipating Financial Institution Accounts” The IGA Agreement includes an Appendix I, which basically provides to procedures that financial institutions must follow to carry out the due diligence of financial accounts held in the Institution. Accounts Not Required to Be Reviewed, Identified, or Reported: - Preexisting Individual Accounts with a balance or value that does not exceed USD $50,000 dollars as of December 31, 2013 (in the case of insurance companies a balance less of USD $250,000 per year). - Preexisting Entity Accounts with account balances that do not exceed USD $250,000 as of December 31, 2013 Each Financial Institution shall identify "U.S. Reportable Accounts” (Financial Account maintained by a Reporting Mexican Financial Institution and held by one or more Specified U.S. Persons or by a Non-U.S. Entity with one or more Controlling Persons that is a Specified U.S. Person) and “Nonparticipating Financial Institution Accounts” The IGA Agreement includes an Appendix I, which basically provides to procedures that financial institutions must follow to carry out the due diligence of financial accounts held in the Institution. Accounts Not Required to Be Reviewed, Identified, or Reported: - Preexisting Individual Accounts with a balance or value that does not exceed USD $50,000 dollars as of December 31, 2013 (in the case of insurance companies a balance less of USD $250,000 per year). - Preexisting Entity Accounts with account balances that do not exceed USD $250,000 as of December 31, 2013 Under the IGA Agreement, each of the financial institutions in the Mexico, will be considered as “Deemed Compliant" and therefore will not be subject to withholding as provided in Section 1471 of the U.S. Internal Revenue Code (which requires a withholding on payments to foreign financial institutions) whether they meet several requirements provided therein. Reporting, Due Diligence and Withholding Requirements Features Foreign Account Tax Compliance Act (FATCA) – Update Intergovernmental Agreement México – U.S.A. to improve International Tax Compliance with respect to FATCA

7 In General 1.- Enter into force on 2.- Consultation in good faith to amend this Agreement FATCA Portal FATCA Portal available Allocation of Global Intermediary Identification Number (GIIN) Exchange of Information 1.- Beginning Reporting Information related to Relevant information of year 2014 and thereafter Incorporation of New and Preexisting Customers 3.- Implementing procedures for New Customers 4.- Preexisting Accounts and Payees 1° January 30 Sept Fecha Inicio de Reportes Fechas Máxima para identificación January 1st., 2014 High Value Accounts Low Value Accounts Time and Manner of Exchange of Information July 15th, 2013 October 15th, 2013 Features Foreign Account Tax Compliance Act (FATCA) – Update Intergovernmental Agreement México – U.S.A. to improve International Tax Compliance with respect to FATCA

8 Information to be Exchange From 2013 & 2014 No. 1), 2), 3) y 4) From 2015 No. 1) a 7) except for gross amounts according to 5 (B) From 2016 and thereafter No. 1) a 7) 1° Enero Information to be Exchange Information to be exchanged 5)Custodian Account: A.Total gross amount of interest, the total gross amount of dividends, and the total gross amount of other income generated with respect to the assets held in the account, B.Total gross proceeds from the sale or redemption of property paid or credited to the account during the calendar year or other appropriate reporting period with respect to which the Reporting Mexican Financial Institution acted as a custodian, broker, nominee, or otherwise as an agent for the Account Holder; 6)Depository Account.- Total gross amount of interest paid or credited to the account during the calendar year 7)Account not described in subparagraph 5) or 6).- Total gross amount paid or credited to the Account Holder with respect to the account during the calendar year Information to be exchanged 1)the name, address, and U.S. TIN of each Specified U.S. Person that is an Account Holder 2)The account number (or functional equivalent in the absence of an account number) 3)The name and identifying number of the Reporting Mexican Financial Institution; 4)The average monthly account balance or value (including, in the case of a Cash Value Insurance Contract or Annuity Contract, the Cash Value or surrender value) during the relevant calendar year or other appropriate reporting period or, if the account was closed during such year, the average monthly balance for the calendar year up to the time of closure; Features Foreign Account Tax Compliance Act (FATCA) – Update Intergovernmental Agreement México – U.S.A. to improve International Tax Compliance with respect to FATCA

9 FATCA – BMV Project A.Establishment of BMV´s Interdiciplinary Group 1.Identification and Classification of the BMV Group’s Companies involved with FATCA. 2.Analysis in the effects of FATCA Regulations in each of the BMV’s Companies 3.Inventory, Analysis, Evaluation and Identification of Systems, Applications, Policies and Manuals affected by FATCA Regulations A.Establishment of BMV´s Interdiciplinary Group 1.Identification and Classification of the BMV Group’s Companies involved with FATCA. 2.Analysis in the effects of FATCA Regulations in each of the BMV’s Companies 3.Inventory, Analysis, Evaluation and Identification of Systems, Applications, Policies and Manuals affected by FATCA Regulations Activities have been done 4.Redesign of processes and Implementation of the IGA Agreement into the BMV Group operations 5.Preparation of information and Responsible Officer for the entire BMV Group to obtain the GIIN 6.Fill out the Registration in the FATCA Portal 4.Redesign of processes and Implementation of the IGA Agreement into the BMV Group operations 5.Preparation of information and Responsible Officer for the entire BMV Group to obtain the GIIN 6.Fill out the Registration in the FATCA Portal On going Activities FATCA Portal QI – 2013 JFMAMJ a) Certification as a: “QUALIFIED INTERMEDIARY (QI)” Implementation of FATCA – BMV Project Entry into force

10 April, 2013 ¡¡¡THANK YOU!!!


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