1. Foreign Account Tax Compliance Act Copyright NZ US Tax Specialists

2.  Disclaimer: The contents of this document are intended to be general information only and are current as at 15 March 2012. Absolutely no reliance should be placed on the information contained herein; specific advice should be sought in relation to any FATCA-related issues. NZ US Tax Specialists accepts no responsibility whatsoever for any loss or damages arising out of any error, omission or otherwise resulting from reliance on this document. Copyright NZ US Tax Specialists

3.  Strategy is about aligning oneself with the environment Copyright NZ US Tax Specialists

4.  W-8BEN Copyright NZ US Tax Specialists

5.  Nonresident or  Non-resident? Copyright NZ US Tax Specialists

6.  FATCA is out to catch big fish, not little ones Copyright NZ US Tax Specialists

7.  Regulations do not have the full force of the law –  The Treasury and the IRS are still in negotiations with stakeholders  The Treasury regulations just released are proposed regulations, not final regulations Copyright NZ US Tax Specialists

8.  The 388-page February 2012 Regulations significantly modify and add to the guidance provided in the FATCA notices released to date. Copyright NZ US Tax Specialists

9.  United States Government debt on March 4, 2012 $15,508,868,376,565.43  The debt has grown on average at 4,002,000,000.00 per day since September 28 th 2007 Source http://www.brillig.com/debt_clock/

10. Picture from Democracy.info Copyright NZ US Tax Specialists

11. After 3 rounds of a tax amnesty on undisclosed international accounts the IRS reported in January 2012 that they had raised a total of 4.4 billion Copyright NZ US Tax Specialists

12. Estimates of the number of United States citizens living overseas range from 4 to 10 million people In 2006 Only 334,861 copies of Form 2555 were filed to exclude foreign earned income Copyright NZ US Tax Specialists

13. The United States reserves the right to tax its citizens on their worldwide incomes regardless of where they are residing at the time the money is earned. The United States has tax exclusions and credits that will result in a zero US tax liability for many taxpayers who have foreign income. Many of the major reforms in international taxation were made to pay for war debt. Major foreign tax credit reforms came into existence due to World War I. Copyright NZ US Tax Specialists

15. Accepts deposits in the ordinary course of a banking or similar business. Holds, as a substantial portion of its business financial assets for the account of others. Is engaged primarily in the business of investing, reinvesting, or trading in securities, partnership interests commodities, notional principal contracts, insurance or annuity contracts, or any interest (including a futures or forward contract or option) in such security, partnership interest, commodity, notional principal contract, insurance contract, or annuity contract. Is an insurance company (or the holding company of an insurance company) that issues or is obligated to make payments with respect to a financial account. The term financial institution means any entity that Copyright NZ US Tax Specialists

16. Depository accounts Custodial accounts Equity accounts Debt interest in an FFI Mutual Funds Hedge Funds Insurance Companies Trust Companies Institutions and Accounts Copyright NZ US Tax Specialists

17. In general an entity is considered to be engaged in a banking or similar business if, in the ordinary course of its business with customers, the entity engages in one or more of the following activities: Accepts deposits of funds; Makes personal, mortgage, industrial, or other loans; Purchases, sells, discounts, or negotiates accounts receivable, installment obligations, notes, drafts, checks, bills of exchange, acceptances, or other evidences of indebtedness; Issues letters of credit and negotiates drafts drawn thereunder; Copyright NZ US Tax Specialists

18. Provides trust or fiduciary services; Finances foreign exchange transactions; Enters into, purchases, or disposes of finance leases or leased assets; or Provides charge and credit card services. Entities engaged in a banking or similar business include, but are not limited to, entities that would qualify as banks under section 585(a)(2) (including banks as defined in section 581 and any corporation to which section 581 would apply except for the fact that it is a foreign corporation). Copyright NZ US Tax Specialists

19. FFI Qualification Exception For Pensions Certain savings accounts--(A) Retirement and pension accounts. A financial account does not include an account that satisfies the conditions of paragraph (b)(2)(i)(A)(1) or (2) of this section. The rules for qualifying for the pension exemption are very specific. In the past most international retirement plans have been considered to be non qualifying for US tax purposes. Before assuming that a foreign pension is exempt from FATCA please read all of the available interpretations of this section of the proposed regulations and or consult a FATCA professional. Copyright NZ US Tax Specialists

20. The Nuclear Part of FATCA Section 1471(b)(1)(D)(i) requires a participating FFI to withhold 30 percent of any passthru payment to a recalcitrant account holder or to a foreign financial institution that does not meet the requirements of section 1471(b) (nonparticipating FFI). Copyright NZ US Tax Specialists

21. A withholdable payment is defined in section 1473(1) to mean, subject to certain exceptions: any payment of interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income (FDAP income), if such payment is from sources within the United States; and any gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources within the United States. Copyright NZ US Tax Specialists

22. A passthru payment is defined in section 1471(d)(7) as any withholdable payment or other payment to the extent attributable to a withholdable payment. Copyright NZ US Tax Specialists

23. There is a grandfather clause that requires no withholding on payments on U.S. obligations entered into before the FATCA regime's effectiveness date of January 1 st 2013. (The original date was March 18, 2012.) For FFIs this means that no payments made in 2012 will ever require withholding under the current proposed rules. There are however two qualifications. The first is that these rules are still in the proposed stage and subject to change. The second is that if the instrument is significantly modified in a way that transforms it into a new financial instrument, the grandfather treatment is lost. Copyright NZ US Tax Specialists

24. Any account holder that fails to: Provide the information required to determine whether the account is a US account, or The information required to be reported by the FFI, or That fails to provide a waiver of a foreign law that would prevent reporting. Copyright NZ US Tax Specialists

25. Account holders name Account holders address Account holders taxpayer identifying number (TIN) (For individuals this will generally be their Social Security number) Account holder’s account number Account holder’s account balance or value The gross receipts and gross withdrawals or payments from the account (determined for such period and in such manner as the Secretary may provide). Copyright NZ US Tax Specialists

26. Reporting on income will be phased in beginning in 2016 (with respect to the 2015 calendar year). Reporting on gross proceeds will begin in 2017 (with respect to the 2016 calendar year). Proposed regulations provide that FFIs may elect to report information either in the currency in which the account is maintained or in U.S. dollars. Copyright NZ US Tax Specialists

27. Beginning on January 1, 2014, FFIs, like U.S. withholding agents, will be required to withhold on passthru payments that are withholdable payments. FFIs will also be required to report annually on the aggregate amount of certain payments to each nonparticipating FFI for the 2015 and 2016 calendar years. Beginning no earlier than January 1, 2017, the scope of passthru payments will be expanded beyond withholdable payments and FFIs will be required to withhold on such payments pursuant to and in accordance with future guidance. Copyright NZ US Tax Specialists

28. Manual review of paper records is required for accounts with a balance or value that exceeds $1,000,000. Caveat (unless the electronic searches meet certain requirements, in which case manual review is not required). Copyright NZ US Tax Specialists

29. Accounts with balances between $50,000 and $1,000,000 will require electronic scanning to satisfy the due diligence requirements. Preexisting accounts, individual accounts with a balance or value of $50,000 or less, and certain cash value insurance contracts with a value of $250,000 or less, are excluded from the due diligence procedures. Copyright NZ US Tax Specialists

30. With respect to new accounts, the proposed due diligence rules rely extensively on an FFI’s existing customer intake procedures. Accordingly, the proposed regulations generally do not require an FFI to make significant modifications to the information collected on customer intake, other than with respect to account holders identified as FFIs, as passive investment entities, or as having U.S. indicia. However it is advisable that new client intakes ask if the client or beneficiaries are US citizens. Copyright NZ US Tax Specialists

31. The Treasury has indicated in the past that they may withhold 30 percent on any transfers that they deem non compliant, that pass through the international transfer computers in the United States. As the United States banking system is a critical link in the international transfer system, by passing this system will be almost impossible. Copyright NZ US Tax Specialists

32. Refunds If withholding on a payment under chapter 4 exceeds the beneficial owner’s underlying U.S. tax liability, the beneficial owner may claim a refund for the over withheld amount. Nuclear Alert No refund is available for payments beneficially owned by nonparticipating FFIs, except to the extent required under an income tax treaty. Copyright NZ US Tax Specialists

33. Liability If an FFI complies with the obligations set forth in an FFI agreement, it will not be held strictly liable for failure to identify a U.S. account. No word yet on potential penalties if the firm fails to comply with the policies. Copyright NZ US Tax Specialists

34. Registering to become FATCA compliant “Tara Ferris, an attorney in Branch 2 of the IRS Associate Chief Counsel (International), stressed that the government is working to provide the guidance and agreement as quickly as possible. Ferris says the draft agreement and procedures that financial institutions can use to sign up to participate in FATCA will be available in the first half of 2012.” Copyright NZ US Tax Specialists

35. Recap of Compliance Timeline 2013: Some basic identity reporting on account holders Electronic Applications due by June 1 2014: Withholding on new accounts to begin 2015: Withholding on passthru payments begin 2016:Begin reporting on income payments 2017: Begin reporting on specific transactions Copyright NZ US Tax Specialists

36. Currently the agreement is between the US and FranceGermany ItalySpain UK Copyright NZ US Tax Specialists

37. Other countries are in negotiations to join the agreement, however no word yet on whether New Zealand has entered into such negotiations. Copyright NZ US Tax Specialists

38. The agreement will require FFIs in signing countries to register with the IRS rather than entering into an agreement with it. FFIs will report on U.S. accounts through their national governments. It will also eliminate the penal withholding requirement on passthru payments. Copyright NZ US Tax Specialists

39. However the agreement does include reciprocity of information so the United States will be required to supply the account information of citizens in the signing countries. Considering that the US does not currently charge tax on bank interest to foreign citizens and that it will normally not disclose the account holders identities unless specifically asked under the pretext of a tax treaty this will prove a powerful incentive for nations to sign on to the agreement. Copyright NZ US Tax Specialists

40. Because the information is reported through to the home government of the FFI the agreement is perceived to eliminate the privacy argument. Privacy Argument Copyright NZ US Tax Specialists

41. Senator Carl Levin publically stated that he believes that $100 billion in tax revenues are lost annually through offshore tax abuse. US Congress Joint Committee on Taxation expects FATCA to generate $870m annually for the next 10 years. The Senator is also moving to have tax havens treated the same as terrorist countries for tax purposes. Copyright NZ US Tax Specialists

42. How to deal with panicked US clients who have not done their U.S. tax returns and who think they may go to prison, because you are going to start reporting information to the IRS Copyright NZ US Tax Specialists

43. Refer them to NZ US Tax Specialists! We can help them resolve their tax problems and keep them out of jail. Copyright NZ US Tax Specialists

44. NZ US Tax Specialists is a Limited Liability Company and is based in Auckland, New Zealand. We are the specialists in New Zealand and United States tax issues for individuals and businesses. From returns to audits and planning to return compliance, we are the premier specialists in the area. Copyright NZ US Tax Specialists

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