FATCA Compliance

The importance of FATCA regulation for the BFS industry

It has been estimated that the U.S. Treasury loses as much as $100 billion annually to offshore tax non-compliance. To address this vital issue, the US congress enacted Foreign Account Tax Compliance Act (FATCA) to recoup their federal tax revenues and to make sure having stringent guidelines for the U.S. taxpayers so that they find it almost impossible to conceal their assets held in their offshore accounts. As a part of FATCA compliance, United States persons including individuals (who live outside the United States) and foreign financial institutions need to report their financial accounts related to American business to the US Internal Revenue Service (US IRS) department. In addition, FATCA also requires foreign financial institutions to report information related to the ownership of U.S. persons on assets held overseas. FATCA has been designed to increase compliance rather than to enforce collection from foreigners.

In order to make the processes compliant to FATCA, financial institutions are looking to partner with organizations with demonstrated experience and extensive knowledge on FATCA regulation. This helps these companies to focus on their core business while catering to their customers in a better manner.

A typical FATCA compliance solution covers three areas namely; Client Identification, tax withholding and reporting.

Typical FATCA compliance solution

Typical FATCA Compliance Solution

VirtusaPolaris' FATCA compliance solution - From identification to filing

VirtusaPolaris' FATCA compliance solution helps financial institutions from the initial client identification process till the final report filing process. The solution also provides robust compliance framework which not only helps the financial institutions become FATCA compliant but also helps their internal functions like operations, legal, finance and tax to adhere to FATCA norms.

VirtusaPolaris' FATCA compliance solution is built on an open-source framework, which allows clients to customize the solution as per their compliance needs with little or no development efforts. VirtusaPolaris' suite of FATCA compliance solution has been classified under two categories.

  • VC-FATCA - VirtusaPolaris' classification module
    • VR-FATCA - VirtusaPolaris' reporting module

Why VirtusaPolaris' FATCA compliance solution?

  • Built on an open-source technology which allows easy customizations for clients based on their FATCA needs.
  • No licensing cost
  • Integrated use-case pack to jump start the build/testing of a FATCA solution
  • Based on industry’s best practices and standards
  • Easy integration with existing systems
  • Consulting team with functional and technical expertise to guide you through the process
Initial Registration

January 1, 2014
Registration portal opens
May 5, 2014
Final day to be included in the first FFI List
June 2, 2014
First registered FFI list published
Client Identification

July 1, 2014
New accounts due-diligence procedures effective
(Deadline based on the starting date of FFI agreement)
December 31, 2014
Pre-existing entity due-diligence deadline that are Prima Facie FFIs
(Prima Facie FFIs: a qualified/non-qualified intermediary status or financial industry status based on any standard industry-type code e.g NAICS)

July 1, 2014
30% Withholding on FDAP income begins exception applies for registered institutions,Recalcitrant NFFEs.
(FDAP: Fixed, Determinable, Annual, Periodical income)
Client Identification

June 30, 2015
pre-existing high-value individual due-diligence deadline

January 1, 2015
FATCA withholding on pre-existing high-value individual accounts and preexisting entity account holders that are Prima Facie FFIs.

March 15, 2015
1042-S Reporting for CY 2014
March 31, 2015
8966 Reporting: FFIs in non-IGA jurisdictions and FFIs in Model 2 IGA jurisdictions– Except info on income paid, Gross proceeds paid to custodial accounts
September 30, 2015
8966 Reporting: FFIs in Model 1 IGA jurisdictions – Except info on income paid, Gross proceeds paid to custodial accounts
Client Identification

June 30, 2016
complete due-diligence procedures should be in place for pre-existing low-value individual & pre-existing entity accounts not previously identified as Prima Facie FFIs

July 1, 2016
FATCA withholding on pre-existing low-value individual accounts and pre-existing entity accounts not identified as Prima Facie FFIs.

March 15, 2016
1042-S Reporting: FATCA reporting for CY 2015
March 31, 2016
8966 Reporting: FFIs in non-IGA jurisdictions and FFIs in Model 2 IGA jurisdictions – Except info on
( Gross proceeds paid to custodial accounts)
September 30, 2016
8966 Reporting: FFIs in Model 1 IGA jurisdictions – Except info on
(Gross proceeds paid to custodial accounts)

January 1, 2017
Withholding on non-compliant, foreign pass-thru accounts/ complete withholding for CY16 - All

March 15, 2017
1042-S Reporting: FATCA reporting for CY 2016
March 31, 2017
8966 Reporting: Full FATCA reporting for CY 2016/ complete reporting for CY16 - All

March 31, 2018
Complete reporting - All